Woman in front of bank learning how to get and keep a cannabis bank account

The Definitive Guide to Cannabis Banking

When it comes to banking, there is a lot of confusion and frustration for business owners across the CBD and cannabis industry. Cannabis banking is often mischaracterized on the news, with reporters focusing on legalization issues and falsely saying that businesses can’t get bank accounts. Even banks that accept CBD business face regulatory issues despite hemp being federally legal. Let’s clear up some of the confusion, and showcase how you can enjoy sustainable, reliable CBD and cannabis banking.

Why is it so hard to get a marijuana-related business (MRB) bank account? Why are they so expensive?

The reason it is so hard to get a bank account for your CBD or cannabis business is because of the inherent risk and compliance burden that your financial institution will need to manage. This isn’t only because cannabis is federally illegal. CBD is federally legal and faces the same challenges. The issue is that these are cash-intensive industries and face higher risks of money laundering or other forms of criminal activities.

Your bank or credit union will need to develop comprehensive marijuana banking policies and procedures to protect against those risks. For example, they need to determine their requirements for initial enhanced due diligence, ongoing due diligence, activity monitoring, risk analysis, and risk ratings. Not only will their rules need to vary depending on the MRB Tier, they will also need to make sure that they have the technological and human resources available to manage compliance while banking these high-risk businesses.

It certainly is viable and lucrative for financial institutions that are willing to take on the risk and compliance burden. But it means that many banks and credit unions are unwilling to openly bank the industry, opting instead for referrals of businesses from other known operators. Hypur works closely with financial institutions, and built the technology that they need to transparently bank the industry. As a result, we are able to play matchmaker, introducing MRBs to an ideal financial institution partner so that you can get transparent, reliable cannabis banking.

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Will the SAFE banking act make it easier to get a bank account?

In a word, no. Even federal cannabis legalization will not automatically make it easier to get a bank account.

The Patriot Act requires financial institutions to know their customers, ensuring that funds aren’t being used to fund terrorism or other criminal activities. Even if activities are federally legal and aren’t suspicious, financial institutions are required to file a Currency Transaction Report (CTR) for deposits over $10,000 as well as initial and recurrent Suspicious Activity Reports (SARs) for ongoing MRB activity.

While the SAFE banking act could eliminate penalizations for doing business with MRBs, banks and credit unions will still need to comply with the high compliance burdens. Well-known banks aren’t offering bank accounts to Money Services Businesses (MSBs) like check cashers or payday loans, and cannabis or CBD would fall into a similar, high-risk category.

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How to get and keep a cannabis bank account

If you need a cannabis bank account, you’ll need to get some information together. This will obviously include your business documentation, identification documents, and tax records. If you don’t have tax records yet, a business plan can show the bank or credit union that you’ve anticipated your income and expenditures.

You will also need to know who your vendors and suppliers will be, so that the financial institution can predict where transactions will be coming from or going to, and their approximate size. This is part of their alert system, red flagging any unexpected transactions that could be the result of criminal activities. You’ll be expected to submit similar documentation when you apply for underwriting so that you can accept electronic payments.

Click here for more details about how to get a cannabis bank account.

Keeping your bank account is just as important. While it’s never a good idea to get a DUI, it can have even more of an impact on your life when you run an MRB. Your cannabis bank account could be contingent on certain reputational risk elements. Engaging with controversial associations could be enough of a risk that your bank account gets closed.

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Advice for banking your legacy cash

One of the most common questions that we’re asked is how businesses can bank their legacy cash. Legacy cash is money from business operation before legalization or before your MRB bank account was opened. Once you have a bank account with a cannabis-friendly bank or credit union, you might think that you can simply deposit all your bags of cash. It’s not that easy.

Without a clear transaction history, or a detailed forensic audit, that money cannot be deposited into your account, even if you have a transparent MRB bank account. The financial institution simply cannot accept legacy cash without a clear trail showing that the funds came from legitimate transactions. Otherwise, that large cash deposit could theoretically have come from something like terrorism or other criminal activity.

If you have legacy cash that you’d like to deposit, you could speak with your bank or credit union. They may be able to recommend a forensic auditor to help or give you advice on missing documentation from your existing transaction history. It’s always best to be transparent with your financial institution. They want to help.

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