You’ve worked hard and gotten your cannabis business off the ground. After overcoming the hurdles of getting up and running, you’re ready to make some money and find more and more success. Hypur has been around since 2014, and we’ve seen many businesses like yours become the next big thing, while others have vanished. Here are 5 things that could ruin your business, some of which might surprise you.
Getting a DUI
It’s obviously never a good idea to get a DUI. Driving under the influence is dangerous for you and the people in your community. What you might not realize is that it’s also dangerous for your cannabis business.
Marijuana-related businesses (MRBs) are considered high-risk businesses by banks and credit unions. They generally use large quantities of cash, opening the door for potential money laundering or fraud. As a result, banks are held to higher standards of compliance when banking the cannabis industry. This includes monitoring business owners’ activities and assessing any additional risks that they might pose to the financial institution.
Part of this includes reputational risks that you might pose to the bank or credit union. Part of the vetting process for getting an MRB bank account includes checking that you aren’t convicted of any crimes. Should you get a misdemeanor or felony DUI, you may no longer qualify for your bank account.
Similarly, depending on when and where you got your dispensary or cultivation license, a criminal background check might have been part of the application. Getting a DUI could make you ineligible to hold a dispensary license in your county, city, or state. Depending on how your business is structured, this means that you may need to step down as a business partner or face losing your ability to operate as a licensed dispensary, cultivator, or distributor.
Using a Shady Payment Method
Shady payment schemes are inherently risky. They can send your money overseas where you’ll have limited recourse to try and get your money back. We even heard of a case where a business had $1.3 million in overseas reserves in Russia. Recently, another executive at a large cannabis business told us that sum was a fraction of what he had heard about another multi-state operator’s payment issues.
While many cannabis businesses are looking for cannabis credit card processing, the reality is that dispensaries that accept credit cards are setting themselves up for future problems. You could be breaking the law, lose your merchant account, get sued, or lose access to your money. If you’re worried, here are some signs of a shady cannabis payment scheme.
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Having an Illicit Side Hustle
Many people who get involved in the state-legal cannabis industry were also a part of the legalization process. You might have been an activist for cannabis legalization and continue to work towards the de-criminalization or legalization of other banned substances. But selling illegal product at your state-legal dispensary could get your cannabis business shutdown.
It is always important to follow the rules and regulations in your state, city, and county. While upholding the law is vital for all citizens, it’s particularly necessary for operators in the cannabis industry. You will be under greater scrutiny from your local regulators as well as your financial institution because of the risky nature of the industry. As a result, even minor infringements could result in serious penalties.
Lying to Your Financial Institution
It can be frustrating for cannapreneurs to maneuver the process required to get an MRB bank account. Some of these entrepreneurs end up trying workaround solutions, claiming that they run a health food store or flower shop. While this might expedite the process of getting a bank account, it also means that you’ll be lying to your bank or credit union. That is a federal crime with fines up to $1 million and up to 30 years in prison.
The consequences for lying to your financial institution could also include losing your cannabis merchant account forever, making it impossible to accept electronic payments. If that happens, you might end up on the TMF, MATCH, and other databases which banks and credit unions use to determine if someone should get a merchant or bank account. As a result, it might be harder for you to get a bank account in the future, even if marijuana is legalized at the federal level.
Slacking on Your Paperwork
It’s vital during the application process to become a successful cannabis business to have all your documentation. You’ll need your entity documents, licenses, and other paperwork depending on your local requirements. Once you start doing business, you’ll need impeccable, transparent transaction reporting so that your financial institution can accept your large cash deposits without worries about money laundering or fraud.
Some businesses were already operating cannabis dispensaries before state-level legalization. Many of them have what is called legacy cash. Legacy cash is money from business operations before legalization or before your MRB bank account was opened. Without a detailed forensic audit, that money cannot be deposited into your bank or credit union, even if you have an MRB bank account. They simply cannot accept that money without a clear trail showing that the money came from legitimate transactions and not something like terrorism or other criminal activity.
If you start slacking on your paperwork and fail to keep clear and transparent records of your transactions, even your state-legal cannabis business cash could become legacy cash.
Hypur can help you avoid these cannabis business risks. While we can’t keep you from getting a DUI or breaking local rules or regulations, we can provide you with a transparent and sustainable electronic payment solution. This will ensure that your money doesn’t get stuck overseas and you won’t be lying to your financial institution.