There is a lot of green tied up in the cannabis industry, and we’re not just talking about the plant, but also the kind of green that folds.
The US saw 25 billion in legal cannabis sales According to Bank of America in 2021 State officials anticipateThe industry is expected to reach $30 billion by the close of the year. New Mexico officials have reported $78million in revenues since April when adult-use sales began.
Naturally, banks and credit unions across the country hope to get some of this business. But it’s a complicated landscape: Marijuana remains illegal at the federal level, and banking tends to be an interstate enterprise. So there’s plenty of confusion about what’s allowed and fear of running afoul of the law for bankers and the cannabis industry alike.
That’s why New Mexico Regulation and Licensing Department Superintendent Linda Trujillo and Financial Institutions Division Director Mark Sadowski attended the 2022 Cannabis Banking Symposium in Denver on June 14—part of an initiative to provide banks and credit unions with information on how they can accept business from cannabis companies, despite the federal prohibition. The pair discovered what’s preventing banks from taking the leap, how dispensaries and producers are navigating the new market and the steps needed to make banking easier for all.
Cannabis is still a mainly cash industry, and it doesn’t sound like much will change unless Congress acts, Sadowski tells SFR. Major credit card companies must allow cannabis businesses to use their plastic to make transactions. “They seem to say probably not until it’s legalized will we actually get the majority of the cash out of the retailers. That’s going to be the first big step of making cannabis sales generally just a little safer,”He says.
The proposed SAFE Banking ActThis bill is designed to provide security for institutions and protect them from harsh penalties from federal regulators if they serve state-licensed marijuana businesses. The bill passed six times in the US House of Representatives, most recently in April. However, it was blocked in the Senate. Legislators may callTo move forward with the legislation.
According to the National Cannabis Information Center, dispensary robberies have increased in states with medical and recreational marijuana programs. Published reports. A dispensary in Albuquerque was actually founded. broken into ahead of the state’s first day of adult-use sales on April 1. Trujillo says that New Mexico could pass its own version of SBA, but that federal action would make it safer overall for businesses looking to exchange goods, cash, and services.
Officials also cite the Cole MemoAs a source to protect. The Obama-era guidance, which was rescinded by former Trump attorney general Jeff Sessions, urged federal prosecutors to practice discretion on cannabis cases in states where it’s legal. Trujillo stated that she would love to see the old guidance reinstated.
“There’s no doubt in our minds that some of these measures would, in fact, bring some safety to the business and to the people who work in the business,” Trujillo says.
Because of the risk of losing assets, banks are reluctant to accept cannabis clients. The possibility of criminal charges is a secondary concern, Sadowski says, adding that if credit unions don’t perform due diligence, federal examiners or the state could shut down operations.
Accepting cannabis-related dollars requires a significant investment. For deposits exceeding $10,000, they must complete currency transaction reports. They also need to file suspicious activity reports and use anti-money laundering software. The state’s Financial Institutions Division is hoping to streamline information to banks and credit unions so they can automate that process and potentially drive down the cost of expenses, making it easier for them to offer cannabis-banking solutions. Just two organizations in New Mexico—US Eagle Federal Credit Union’s cannabis division, Aery Group, and Southwest Capital Bank—accept cannabis bucks.
“Those two institutions are located in Albuquerque and that really doesn’t do much for outlying, more rural areas of the state,” Sadowski says. “So where are you going to get banking services in Portales, or Silver City, or even down in Las Cruces?”
Dispensaries and producers are trying to make the industry less cash-intensive. Officials state that licensed businesses have tried cashless ATMs across the country, which can be used to conceal cannabis purchases from cash withdrawals.
“So it’s a risk for the cannabis businesses to try to do some of that creative financing that really is under scrutiny,” Trujillo says.
At EndoSanta Fe’s dispensary uses software that allows authorized PIN-based transactions. While it could charge the customer a small fee for using a debit card, technical director Alex Costello says the company chose to eat the fees so customers wouldn’t have to pay them.
“Debit was something we had been looking into well before we even got this building,” he tells SFR from the dispensary’s location at 2903 Agua Fría St. “We’re trying to stay on top of the new innovations in the industry. Some people claim they can do credit card transactions, but that’s not truly legal.”
Businesses must still arrange cash shipments from armored vehicle companies for deposits. Sadowski says that in one case, a bank in another country charges $10,000 per month for cannabis entities. He says that only the biggest retailers can afford such fees.
“They’re holding inordinate amounts of cash in their properties,”He says. “They try to cycle it through somewhere, I can only imagine. Some own the ATMs that are in their institutions, so they just recycle the cash through that, but there’s only so much cash that those machines can hold.”
Employees in the cannabis sector can have similar difficulties to their bosses. They may also have difficulty accessing services and getting mortgages or car loan approvals. Officials believe that banks are reluctant to finance weed workers due to the possibility of their employers being shut down.
“That’s the thing with money earned through a cannabis-related business, it’s kind of sticky,” Costello says. “Anything earned in the retail side of things, like if it’s through a dispensary, it cannot be tax deducted, it cannot be put into the stock markets, it cannot be put into federally-backed loans or anything like that.”
Sadowski states that he hopes he can provide guidance to employees, financial institutions, and businesses so they can access banking services. It’s an issue Trujillo also says needs attention in the Legislature.