Merchants and consumers in the cannabis community will say that they dream of the day that cannabis is federally legal. Federal marijuana laws have been a topic of discussion for years, with the idea that once cannabis achieved federal legalization, all the banking and payment issues of state-legal cannabis would be resolved. But would that actually happen?
Would Federal Cannabis Legalization Make It Cheaper and Easier to Get a Bank Account?
It can be complicated and costly to get and keep a bank account when you’re a marijuana related business (MRB). As explained in this guide to getting and keeping an MRB 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.
As a result, MRB bank accounts have high compliance burdens. Banks and credit unions are expected to keep track of their clients’ financial activities, particularly if anything seems suspicious. Even if transactions 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 activity.
Even if federal cannabis laws changed, the Bank Secrecy Act and Patriot Act would still be in place. This means that financial institutions would still be required to report any large cash deposits. Cannabis is inherently a cash-intensive industry, much like check cashing businesses or guns and ammo retailers. These industries also face higher banking costs due to high compliance requirements for financial institutions.
As a first step towards federal legalization, some supporters of the SAFE Banking Act believe that it will make it easier for financial institutions to bank the cannabis industry. Proponents of the legislation believe that larger, more well-known banks will start banking cannabis if the SAFE Banking Act passes.
However, even if banks or credit unions can’t be penalized for doing business with MRBs, they will still need to comply with the high compliance burdens. Those well-known banks aren’t offering bank accounts to Money Services Businesses (MSBs) like check cashers or payday loans, because they are risky businesses and require an enhanced level of due diligence and monitoring. Cannabis would be the same, adding risk to the bank’s portfolio.
Need an MRB Bank Account?
Would Federal Legalization Make Cannabis Credit Card Processing an Option?
Cannabis dispensaries that take credit cards are currently breaking the rules. That’s because the branded card networks have specifically excluded cannabis transactions on their rails. In fact, cannabis credit card processing could put your business in danger.
If cannabis became legal at the federal level, this policy from the branded card networks might change, but it wouldn’t be automatic. They would need to review the rules about transactions on their network and decide if they wanted to open up payments for the cannabis industry.
Much like the concerns that banks have about cash-intensive businesses explained above, the branded card networks are wary of certain industries. For example, they pulled out of the cryptocurrency market and some foreign exchanges. There is even some pressure to limit credit card processing for firearm sales, regardless of legalization.
At this point, it’s hard to know what the branded-card networks would decide if federal marijuana legalization became a reality. But consumers and merchants need to stop assuming that cannabis credit card processing will instantly become an option. That said, if your business is already vetted and using Hypur for cannabis payments, it will be easy for us to “flip the switch” so that you can start accepting debit and credit card payments for cannabis.