Wednesday, September 12, 2018
The state-legal U.S. cannabis industry now has $9 billion in annual sales but some 70 percent of companies in the industry have bank accounts, according to a recent story in Forbes.
Although medical marijuana is legal in most states, it remains illegal, listed as a Schedule 1 drug, under the federal Controlled Substances Act. The federal prohibition is what makes banks unwilling to touch this industries money. As we've noted in the past, Any bank that provides services to a legal marijuana business faces possible criminal prosecution for “aiding and abetting” a federal crime along with money laundering.
The banks that are brave enough to risk such daunting penalties are met by a mountain of red tape and stipulations, such as requiring banks to file Suspicious Activity Reports for transaction involving the marijuana business. And when I say every transaction, The filing of suspicious activity reports even extends to legal businesses that also do business with the marijuana business, such as accountants, cleaners, you name it. With such harsh penalties and expensive requirements necessary to provide financial services to the cannabis industry, most banks simply choose not to deal with it.
The Forbes article quotes financial services firm Cowen & Co. as estimating that the industry is set to grow $50 billion within the next few years, and botes that with such explosive growth on the horizon, many in Congress have taken notice. However, at the moment, cannabis businesses are stuck in limbo. Business owners cannot accept credit cards, make wire transfers to other businesses, or even pay their payroll taxes by check. Many of these businesses operate strictly with cash and even deliver their taxes to the IRS in cash.
Although money is green, it seems that some money may be too green for the banking system's comfort.