Michigan’s cannabis industry is blooming, and local banks are beginning to bank cannabis funds to help the industry reach new heights.
The State of Michigan has been developing its cannabis regulations for over a decade, starting with legalizing medical cannabis in 2008 and continuing in 2018 by legalizing adult-use cannabis and at-home cultivation. Though acceptance has been growing, banks have been slow to get on board.
Acceptance is slowly growing
More and more are opening their doors every day, but you won’t hear about banking cannabis on the radio or see an ad in the paper. Even though working with cannabis-related businesses isn’t illegal in states where a regulatory framework is in place, there is still a lot at risk for banks by being public about welcoming cannabis customers. There is also concern that a bank could lose credibility or desirability amongst certain demographics if they announce they are banking cannabis.
Financial institutions may not be publicly broadcasting that they offer this service, but there is one important entity they do tell: the federal government.
Though federal prohibition keeps away many of the national bank chains, there are recently crafted guidelines from the U.S. Treasury’s Financial Crimes Enforcement Network (FINCEN) that show banks how they can bank cannabis without violating federal law (although it could be clearer). Some community banks and credit unions have been stepping up to provide cannabis banking services after a 2018 bill to create a state-run bank was unsuccessful. Any bank that takes this on will be required to keep records of every transaction and send it to the federal government for review.
Working in cash increases risk for cannabis businesses
Extra paperwork isn’t the only hurdle that financial institutions face when banking cannabis. The same reason having large amounts of cash increases risk for cannabis businesses, it also increases risk for banks. So additional measures must be taken that other banking customers don’t require. One big safety factor is the physical banking of cash: many banks are opting to have an armored vehicle schedule pick ups instead of having dispensary employees walk through the bank’s doors with duffle bags of bills.
Some companies have developed innovative solutions to meet the needs of Michigan’s cannabis industry. Companies like PayQwick seem to cut out the bank middleman while also being the middleman. It works like this: a cannabis company signs up and gets a PayQwick safe installed. Inside the safe is a bill verification device that scans every incoming bill. As each bill is scanned, that amount of money is added to the cannabis company’s checking account via direct wire. The safes are later opened by PayQwick’s armored car service, picking up the cash and delivering it straight into the Federal Reserve Bank.
Cannabis companies are looking for solutions and are eager to find financial institutions that can provide them with the safety and security of a bank account. While banks that are willing to work with them have to complete more paperwork, banks that do not work with cannabis companies also have more work ahead of them to stay compliant–they must be sure that none of their customers is secretly making deposits for a cannabis company. That means more monitoring overall.