For the past five years, I’ve worked in a business development role in the cannabis space. As a result, I have been fortunate to gain a unique, front-line perspective on what is really happening. One of the most surprising things I’ve learned in that time is how much misinformation is out there. My job has been just as much about educating potential partners as it has been about working toward solving their problems. With so much confusion about the cannabis industry, let me take a moment to dispel some banking myths.

Marijuana-related businesses (MRBs) can’t get bank accounts.

This is one of the most widespread myths that I hear. The overwhelming majority of licensees across the country that I've worked with are banked. From coast to coast, MRBs are banking with reputable institutions. This is not a crisis. In some cases, banking “issues” within a state have been self-inflicted. In the case of a state like California, banks and credit unions were not as likely to bank the cannabis industry prior to January 1, 2018, because the state-legal program was not as clearly defined (paywall). I expect that many more will enter soon and believe that the “crisis” is resolving itself.

Banks and credit unions can’t bank this industry.

This is the flip side of the myth above. In fact, banks and credit unions can bank cannabis as long as they comply with the 2014 FinCEN guidance. They should also develop a robust regulatory compliance program. The issues with banking cannabis are similar to issues banks face in other highly regulated industries. Federal versus state legalization isn’t necessarily the issue here. Industries like check cashers, payday loans, pawnshops and guns and ammo have reportedly lost their bank accounts despite being federally legal. These sectors all pose massive banking challenges regardless of their legal status because of their high regulatory compliance burden under legislation like the Patriot Act. Banks are risk-averse by nature, so they may not want to bank industries that will put their portfolios at risk.

The SAFE Act is going to solve this.

Under the SAFE Act, a bank cannot be penalized solely for banking cannabis. While this sounds promising, most issues do not exist purely in the cannabis industry. If an examiner sees someone doing something that they shouldn’t with their cannabis accounts, they could also have any number of Bank Secrecy Act (BSA) or anti-money-laundering (AML) violations.

At this point, I view the SAFE Act as more symbolic than anything. I believe the bill would need significant modifications to have teeth and be effective. Plus, much of the industry is already banked. So, is the SAFE Act trying to solve a problem that doesn’t exist anymore? Keep in mind that the big-name banks may not bank other high-risk industries, either. So, if a well-known bank isn’t willing to bank guns and ammo businesses or pawn shops, it’s unlikely that they will take on the risk of cannabis. Despite the impressive growth of the cannabis industry, I believe it’s shortsighted to think that the big banks are just waiting for this law to start banking the industry.

I can offer debit or credit card transactions.

Dispensaries are often under the impression that once they have a bank account, they can accept credit or debit card transactions. At this time, this is simply not the case. Branded card networks reportedly prohibit cannabis transactions on their networks.

Plenty of businesses use workarounds to accept these transactions, though. Some use third-party processors that lie about the nature of the business: They might claim the dispensaries are flower shops or health food stores. Once a business does this, it is lying to a financial institution and can face serious consequences – the punishment could reportedly be as severe as a $1 million fine or 30 years in prison.

Businesses looking for acceptable payment methods at the moment should stick with cash or transparent electronic transfers. Cash will likely always be a payment option in the cannabidiol (CBD) and cannabis spaces. Businesses that opt for transparent payment solutions (my company and Square, which announced a payment-processing program for CBD sellers, are a couple of examples) can offer convenient electronic payments. Then, if the branded card networks allow cannabis transactions on their rails, the business has already been underwritten and can more easily "flip the switch" to offer card payments.

Once I have an MRB account, I can deposit my legacy cash.

Legacy cash is the cannabis income some businesses earned before establishing relationships with banks or credit unions. For example, an operator I met had been running a cannabis business for years and had millions in cash. That was a lot of money to keep under his mattress. Once he established a banking relationship, he was excited to deposit those funds. However, the bank doesn’t know that the bags of cash are legitimate (paywall) – cash deposits in any industry could just as easily be money from a terrorist organization. If you can’t prove the provenance of your cash, it may not get into the financial system. It doesn’t matter what industry that cash was derived from; financial institutions need to be able to prove it isn’t related to terrorism or money laundering.

In the future, I predict that more financial institutions and the branded-card networks will start working with the cannabis industry. However, they may only do so after federal legality is a reality, and they'll probably do so in a limited capacity at first. As a result, that's something that is still years away.

I am excited to see how the cannabis industry continues to grow and evolve. The banking and regulatory environments have changed so much in the five years I’ve been a part of this unique market that I can only imagine what the myths and realities will be in another five years.

The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.