More banks and credit unions are offering checking and savings accounts, wire transfer services, and even loans to marijuana companies — and, so far, regulators have been watchful but accepting.
What's going on: Since marijuana is considered a criminal substance under federal law, banks that handle marijuana-linked money risk of being charged with money laundering. So they charge high fees for the privilege.
The Treasury Department's Financial Crimes Enforcement Network — FinCEN — tracks banks that serve what it calls MRBs (marijuana-related businesses).
- Banks that do serve pot businesses — after completing due diligence to make sure a company isn't involved in illicit activity —must keep tabs on every single transaction and report customer activity to regulators.
- Banks pass on the cost of all that paperwork — in theory, charging these customers whatever they want.
- If a regulator says the bank isn't being thorough enough, fines can be levied.
- Even so, there are still few options for marijuana companies that need a place to store cash, pay bills and so forth.
What we're hearing: "A cannabis operator can count on [paying] several thousand dollars a month in banking fees. It'd probably be in the hundreds of dollars for [a non-cannabis] company," Chris Call, CEO of North Bay Credit Union, which offers banking services for marijuana companies, tells Axios.
What to watch: The SAFE Banking Act — a bill in Congress that would shield banks from federal penalties for serving marijuana business customers — is gaining momentum. But in the meantime, states are trying to take matters into their own hands.
- Nevada is testing a Venmo-like system that would allow marijuana businesses to transfer money.
- California lawmakers are mulling a bill that would create state-sponsored, marijuana-friendly banks.
Higher taxes: Not only do marijuana companies pay higher banking fees, the illegality of marijuana means they pay more in federal taxes.
- One tax regulation prevents most cannabis companies from deducting the business expenses that non-marijuana companies can.
- One study found that the effective tax rate of MRBs was more than double the rate paid by “similarly situated” non-marijuana businesses.
Bonus: Cannabis companies don’t get a charitable deduction for any gifts they make. And charities are wary about accepting money from weed-affiliated businesses.