2 minute read
Happy Accounting:
from Munkey Biz Issue 20
by HAPPY MUNKEY
If you’ve ever had trouble getting a loan or bank account for your cannabis business, you’re not alone. Even though recreational use is legal in 18 states and medical use is legal in 36 states, cannabis is still illegal at the federal level, and that puts banks in a tough position.
What Are the Risks for Banks?
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The American Bankers Association has said that because cannabis is still illegal under federal law, any contact with funds from cannabis sales “could be considered money laundering and expose a bank to significant legal, operational and regulatory risk.”
This applies to all banks, including those in states where cannabis use and sale is legal. Even if those banks do business with licensed cannabis companies, they’re accepting federally illegal money and mixing it with regular money. If regulators trace those "illegal" funds back to them, they could get into serious trouble.
How the SAFE Banking Act Works
The SAFE Banking Act was created to prevent federal retaliation against banks that serve “cannabis-related legitimate businesses,” or CRLBs. Under the Act, regulators would be forbidden from discouraging or penalizing banks from dealing with CRLBs.
Under the SAFE Banking Act, your cannabis business could have an easier time doing things that other businesses do without thinking twice—things like getting loans and opening checking accounts.
When You Can Expect to See Changes
In 2019, the House of Representatives overwhelmingly voted to pass the SAFE Banking Act. It then moved to the Senate, where it’s languished ever since.
There’s a lot of debate going on about whether the SAFE Banking Act will ever pass. And if big banks are still going to resist admitting that they do business with cannabis companies, even if the SAFE Banking Act becomes law. To protect their interests, a lot of banks will simply choose not to do business with cannabis entities. Banks will still need to go through a lengthy process and pay certain costs to become and stay compliant with the law. Some banks may not feel that it’s worth the trouble, especially when they don’t understand the industry or laws surrounding it.
The Takeaway
The SAFE Banking Act is a huge step forward for the cannabis industry, but it’s not going to fix everything overnight. You can expect to face banking challenges for a while.
In the meantime, know that you’re not alone. There are companies like My Cannabis Accountant that are experienced in working with businesses like yours and can help you develop financial solutions that work!
