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Some use third-party processors that lie about the nature of the business: They might claim the dispensaries are flower shops or health food stores. Once a business does this, it is lying to a financial institution and can face serious consequences – the punishment could reportedly be as severe as a $1 million fine or 30 years in prison. Businesses looking for acceptable payment methods at the moment should stick with cash or transparent electronic transfers.

Cash will likely always be a payment option in the cannabidiol (CBD) and cannabis spaces. Businesses that opt for transparent payment solutions (my company and Square, which announced a payment-processing program for CBD sellers, are a couple of examples) can offer convenient electronic payments. Then, if the branded card networks allow cannabis transactions on their rails, the business has already been underwritten and can more easily "flip the switch" to offer card payments. Once I have an MRB account, I can deposit my legacy cash. Legacy cash is the cannabis income some businesses earned before establishing relationships with banks or credit unions. For example, an operator I met had been running a cannabis business for years and had millions in cash.

That was a lot of money to keep under his mattress. Once he established a banking relationship, he was excited to deposit those funds. However, the bank doesn’t know that the bags of cash are legitimate (paywall) – cash deposits in any industry could just as easily be money from a terrorist organization. If you can’t prove the provenance of your cash, it may not get into the financial system. It doesn’t matter what industry that cash was derived from; financial institutions need to be able to prove it isn’t related to terrorism or money laundering. In the future, I predict that more financial institutions and the branded-card networks will start working with the cannabis industry. However, they may only do so after federal legality is a reality, and they'll probably do so in a limited capacity at first. As a result, that's something that is still years away. I am excited to see how the cannabis industry continues to grow and evolve. The banking and regulatory environments have changed so much in the five years I’ve been a part of this unique market that I can only imagine what the myths and realities will be in another five years. The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation. Federal laws hamper medical marijuana banking options. Share This: share on facebook share on twitter share via email print. (AP) — With more than 150 investors contributing a total of $27 million to his company, Phil Goldberg still couldn’t get a loan from a bank. It’s not because the banks didn’t want to provide a loan. Goldberg is chief executive officer of Green Leaf Medical, a grower of medical marijuana that is distributed by dispensaries. The company has three locations, including a 45,000-square-foot site in Frederick. “Most banks would be willing to loan (money) to you with those kinds of numbers, but not a cannabis business,” Goldberg said.

“That’s still a big problem.” Medical marijuana businesses may be legal in Maryland, but they have a significant hoop to jump through in order to be successful. Banks typically cannot offer financial services to marijuana-related businesses because marijuana is still federally illegal. The Bank Security Act (BSA) requires banks to report any suspicious behavior of illegal activity, which would include any transaction with a marijuana business, and banks can be prosecuted for violating this federal law. There has been no official legislation to help banks around this issue in states where marijuana is at least partially legal. The Financial Crimes Enforcement Network (FinCEN) has issued some guidance to help banks — but it’s limiting and strict. That means that growers and dispensaries usually have to operate as cash-only businesses.

Customers must pay in cash, and the businesses themselves usually cannot open a credit card or apply for loans. Therefore, Goldberg couldn’t access any of the lines of credit that are typically available to businesses of Green Leaf’s size. He had to put together a private placement memorandum (PPM), an extremely detailed business plan, to present to potential investors. It’s not just business owners who wish banks could serve medical marijuana companies more fully. Kathleen Murphy, president and CEO of the Maryland Bankers Association, has been working with several other bankers associations to address the issue from a legislative standpoint.


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