Financial Banking Services & what it means for cannabis businesses in the US

5 min read

The topic of conversation around financial banking institutions and the cannabis industry is heating up.

A new bill called The Secure and Fair Enforcement Regulation Banking Act (SAFER) was introduced by a bipartisan group last week. This bill, if passed, will aim at establishing protection for financial institutions serving cannabis businesses.

Banking remains an ongoing issue for many cannabis businesses as banks will not service their business as cannabis remains illegal at the federal level. Operating a cash-only cannabis business poses several significant risks and challenges, both to the businesses themselves and to the broader community. In recent times, cash-only cannabis businesses have become targets for robbery and theft due to the large amounts of cash they handle & carry in their everyday operations putting both the business and employees at risk.

It’s important to note that these risks could be mitigated or eliminated if federal cannabis policies change to allow legal cannabis businesses access to traditional banking services, as proposed in the SAFE Banking Act and other similar legislation. Access to banking services could significantly improve the safety, transparency, and legitimize overall business operations for cannabis businesses operating in the US.

If this Act is passed into law, the SAFE Banking Act would provide several key benefits:

Access to Banking Services: Since cannabis remains illegal under federal law, many financial institutions are hesitant to work with these businesses. The SAFE Banking Act would explicitly allow financial institutions, including banks and credit unions, to provide banking services to cannabis-related businesses operating in compliance with state laws.

Reduced Reliance on Cash: With access to banking services, cannabis businesses could conduct transactions electronically, reducing the need for large cash holdings and associated security concerns.

Enhanced Financial Transparency: The bill would promote greater financial transparency within the cannabis industry. Businesses that access banking services would be subject to financial regulations and oversight, including anti-money laundering (AML) and know your customer (KYC) requirements. This would help ensure that financial transactions within the industry are more transparent and compliant with federal standards.

Improved Tax Compliance: Legal cannabis businesses often struggle with tax compliance because of their cash-based operations. With banking access, these businesses would have better records of financial transactions, making it easier to calculate and report income accurately.

Business Efficiency: Banking services offer many benefits in terms of business efficiency. Legal cannabis businesses could access loans and lines of credit to fund expansions or improvements, manage payroll more easily, and streamline their financial operations.

Risk Mitigation: By bringing cannabis transactions into the banking system, the SAFE Banking Act could help mitigate the risk of money laundering and other illicit activities associated with cash-based industries.

Investor Confidence: Improved access to banking services and increased financial transparency could attract more investors to the cannabis industry. This infusion of capital could help legal cannabis businesses grow and thrive.

If the bill is passed, The SAFE Banking Act would represent a significant step toward providing practical & safer solutions for the cannabis industry within the existing legal framework.

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