It's a digital world - but legal cannabis firms remain lodged in the dark ages of cash-only transactions.
Although legal cannabis is a multi-billion dollar industry in the U.S., many banks are still shy about working with state-legal marijuana businesses. With cannabis still on the federal list of controlled substances, that a financial institution could be implicated in money laundering remains a real concern.
As if the safety issue created by millions of dollars sitting, unbanked, in homes and businesses weren't enough, the risk banks perceive in working with cannabis firms complicates employee payrolls and taxes. Without the paper trail left by accounts, credit card, or wire transfers, cannabis businesses can be impossible to audit.
As Fiona Ma of the California Board of Equalization points out, "medicinal cannabis operations do not have access to checking accounts, ACH transactions or credit lines to finance their day to day operations or opportunities to expand. The all-cash nature of MCD operations includes employees, which exposes them to liability for federal and state tax withholding errors, and prevents them from participating in the Social Security program."
Guidelines released last year by the federal government were intended to ameliorate some of those issues - however, they fell short of expressly protecting banks that work with cannabis firms.
For Ma, the solution is clear: "the federal government needs to prioritize and proactively work on this banking inequality. If we are truly concerned with illicit activities and homeland security breaches, we need to get cash off of the streets and track all financial transactions - and that means allowing legal state businesses to access services from banks and credit unions."