The Strong Public Policy Reasons for Banking Cannabis Businesses
Quite apart from increasing your financial institution's revenue, providing banking services to cannabis businesses makes a lot of sense for a number of public policy reasons.
First and foremost, your financial institution is enhancing its community's safety by providing a secure place for these businesses to deposit their money. Cannabis businesses are cash intensive, making them ripe targets for robbery or employee theft. If getting into the canna-banking space, I would recommend being open with your local police department about your program. They will likely thank you for making the community safer and easing their burden. There is a good chance your branches may even benefit from a few more local police drive-bys.
Second, as we all know, it is very difficult for any business to function without a bank account. Operating on a cash-only basis is not only dangerous, but time-consuming and inefficient. By providing financial services to these businesses, your financial institution is creating a more business-friendly environment. Therefore, your decision to bank cannabis will be entirely consistent with state and local initiatives to support businesses.
Furthermore, by following the 2014 FinCEN guidance, your institution is providing valuable data to regulators and law enforcement agencies. Following the money trail is often the key to a successful regulatory or law enforcement investigation. The filings your institution makes and the financial records it has, provide regulators and law enforcement with key tools in their investigations. Related to this, by banking cannabis, your financial institution is incentivizing these businesses to be more fiscally accountable by creating a money trail of their revenues and expenses.
Many financial institutions are worried that cannabis banking will bring reputational risk. It is important to remember that, if a financial institution decides to bank cannabis, it is not taking a position "for" cannabis itself. Rather, it is taking a position in favor of greater public safety, assisting law enforcement investigations, and sound regulation. A financial institution can be "for" cannabis banking while not necessarily being "for" cannabis. These are talking points to have with your employees and have ready at hand if any customers ask why your financial institution has decided to get into this space. At the financial institution where I previously worked, we found that banking cannabis was a reputational enhancement, not only with our cannabis customers but also with our non-cannabis customers.
Chris Van Dyck is a partner at Cogent Law Group. He provides external general counsel services to financial institutions and specializes in cannabis banking. He may be reached at cvandyck@cogentlaw.co and at