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April 11, 2022   /   K. Lee Graham
  • Cannabis banking is legal. However, banks still face the challenges of mitigating risk, meeting compliance standards, and delivering a positive customer experience for cannabis businesses.
  • A few key characteristics indicate a financial institution’s dedication to the industry and the kind of experience you can expect when banking there.
  • It may get easier to find a cannabis bank if/when new legislation passes. The most significant is the SAFE Banking Act.

It’s no secret that the cannabis industry is growing. In fact, the global legal marijuana market size was estimated to be worth $70.6 Billion USD in 2021. With so much innovation in the space, one might expect banking services for cannabis businesses would also be growing. If only that were the case.

Most banks either shy away from the industry or bank cannabis businesses “behind closed doors” without having a dedicated program. Some banks are so scared of working with cannabis that they have been known to drop all a business owners’ accounts for even a loose association between one of the businesses and the cannabis industry.

You’ve put tons of work into your company so that you can legally operate as a cannabis business. Why is it so hard to find a bank that will work with you?  

High Risk Industries Need Dedicated Banking Programs

It’s legal to bank cannabis businesses, but that doesn’t make it easy for the average banker to get on board.

Cannabis is still classified as a Schedule I drug by the DEA even though it’s been legalized recreationally in 18 states with another 38states offering medical marijuana. This label means that cannabis friendly banks must take additional steps to comply with the already cumbersome Bank Secrecy Act, a law in place to prevent money laundering and illegal activity. This law states that banks are required to report any suspicious or criminal activity.

Large national banks have the staff and resources to take on the risks associated with the industry. However, these banks are not deploying their resources to serve cannabis businesses because of the regulatory uncertainty. And the banks that are servicing cannabis businesses are doing so behind closed doors.

But you can’t sweep an entire industry under the rug and expect it to prosper.

Like other emerging industries, the cannabis sector has a particular set of banking needs which are constantly evolving. One-size-fits-all banking just won’t cut it. Cannabis businesses need access to open lines of communication with their bankers, personalized account management, solutions for cash deposits, streamlined payment processing, and up to date compliance monitoring.

Getting a program like this off the ground takes a big investment upfront, and it may not always be smooth sailing as the industry continues to develop. However, banks must dedicate the right resources to truly become cannabis-friendly banks. Otherwise, they put both themselves and their customers at risk.

Solution: Look for a community bank with a commitment to the industry, proven by the resources, staff, and time they dedicate to developing their cannabis banking program.

Bank Regulations & Compliance Standards Are Actively Changing

As the cannabis industry grows the risks involved aren’t necessarily being reduced. They are changing. In 2021, dozens of cannabis laws were introduced in Congress. But banking cannabis businesses is only risky if you don’t understand the industry.

Compliance isn’t optional for banks or businesses. With so much changing at so many different levels, it can be hard to keep track of every cannabis related update.  That’s why regulatory monitoring must be a core part of the program, not an afterthought.  

Banks must understand the shifting landscape of the industry at a national level and the climate from state to state. Each state has different regulations and license requirements for cannabis businesses, and the laws are ever changing. If your bank doesn’t understand the current standards and can anticipate how they’ll change in the future, it could cost you the stability of your banking relationship in the long run.

Solution: Look for a bank with a team who makes it their job to know best banking practices and compliance in the changing landscape. Your bank should provide its cannabis customers the same stability that any other business expects from their bank.

Banks Must Develop a Solution for the Cash Intensive Nature of Cannabis Businesses

One of the biggest obstacles cannabis business owners face is what to do with all this cash.

The major credit card companies have deemed that it is still illegal for payment processing companies to process credit card transactions for purchases related to cannabis. Often, a cannabis business’s employees, vendors, and contractors are paid in cash, too.

Unlike cannabis businesses, banks aren’t cash intensive. This business is made of credits and debits, not safes filled with paper. It’s rare to find a bank functioning with a vault big enough to accommodate the amount of cash that a cannabis business would bring in. Banks have to get creative with solutions for deposit accounts.

For example, our bank leverages cash courier systems in multiple states to handle our customers’ cash needs. This enables us to serve cannabis businesses even if they aren’t near a branch location. Many banks may hesitate to set this up because it’s expensive and time intensive, but it was the best solution for providing our cannabis customers across the country with convenience and security.

Solution: Look for a cannabis bank that makes dealing with cash safer, easier, and more reliable.

Onboarding Is (and Should Be) Extensive for Both Parties

Bringing a new business into the bank is a finely detailed process.  When a bank also needs to understand and service a newer industry like cannabis, onboarding must be even more thorough.

A good bank should make sure that you’re a reliable and completely compliant cannabis business before working with you. They will probably ask for almost every document you have during the onboarding process. Our team at West Town Bank & Trust keeps this as painless as possible for cannabis banking customers through our partnership with RiskScout. The online platform helps us collect all the documentation we need from cannabis businesses while vetting for compliance, too.

Due diligence (or lack thereof) on the part of a bank is a quick way to determine whether an institution is taking you seriously, or if it is a place where you could be at risk of having your accounts shut down simply for being in the cannabis industry.

Solution: Just as critical as a bank may be of cannabis businesses, owners in the cannabis space should be equally critical of the services offered by institutions where they choose to do business. Look for a bank that asks for everything but makes it as easy as possible to go through the process.

The Future of Cannabis Banking: The Law to Watch

The SAFE Banking Act was introduced in March of 2021 and aims to reduce the red tape for banks servicing the cannabis industry. It’s already passed through the House of Representatives, but it still has to make it through the Senate and office of the President to officially become law.

If it passes, the Act will offer more protection to banks with cannabis customers. The changes could make it easier to find a cannabis-friendly bank. Until then, we hope you find a bank that’s got your back through it all.


About West Town Bank & Trust | Our most important goal is to understand what’s important to you, what’s getting in your way, and what you hope to achieve, so we can help you get there. Since 1922, we’ve been creating long-lasting relationships with our customers based on old-fashioned values and future-thinking ideas. Whether solutions come from surprisingly innovative tools or trusted products you’re familiar with, our single-focused purpose is your financial well-being. If you’re in a cannabis-related business and need a bank that understands your needs and your industry, we’re ready to help you bank cannabis safely. Contact us using the form below to get started.