Growing Number of Banks & Credit Unions Catering to Cannabis Industry, But Challenges Remain

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The lack of access to traditional banking services is a constant concern in the cannabis world, but the narrative is finally starting to change.

An increasing number of banks and credit unions have opened their doors to the industry or are preparing to provide services to medical and recreational shops, growers and other types of cannabis companies. Multiple ancillary cannabis firms also are working actively to establish relationships with financial institutions to provide new alternatives.

But there’s still a long way to go.

Only a fraction of U.S. financial institutions work with cannabis companies, and many remain wary of the marijuana industry because it deals with a federally banned substance.

Insiders also warn that some companies are possibly breaking the law by touting cashless ATM services but not informing banks that those accounts are tied to marijuana companies, which could result in federal money laundering charges against both the businesses offering the services and the cannabis shops that use them.

Still, the banking situation has improved noticeably in just a few short months and could get even better in 2015.

“This year, I think we’ll see more banks coming in, because the other banks that are operating now… were the first ones in the water, and they’re not drowning,” said Chris Mills, owner of Greenhouse Payment Solutions. “So I think there will be some other smaller banks that will jump in. But as far as the brick-and-mortar banks, there’s still a lot of timidity.”

Slow, Steady Progress 

Many in the industry see reason to be hopeful, saying it’s only a matter of time before banking troubles are a thing of the past.

“I’m exceptionally optimistic,” said Paula Givens, a principal at Industry and Assurance Oversight LLC. “In the next several months, I’ll have banks working with cannabis in every state where it’s legal.”

Givens’ company runs a risk management program that several banks are using to ensure that they don’t run afoul of federal regulators while providing ordinary business services to marijuana companies. The firm is currently working on securing deals with banks in Illinois and California, Givens said.

She’s not alone. Financial institutions are increasingly partnering with payment processing, technology and compliance companies in the cannabis space to offer banking services.

Portland, Oregon-based MBank, which recently partnered with Guardian Data Systems, is FDIC-insured for up to $250,000 and is offering services to marijuana companies in Oregon, Washington and now Colorado. Those services include checking accounts, bill pay, debit cards, payroll accounts, Internet banking, and even scheduled cash pickups by armored cars.

MBank has set a limit for itself of 420 accounts to open for the first year, according to The Denver Post, which is far less than the number of marijuana companies in those three states. But it’s still significant progress.

First Security Bank of Nevada is another established institution that is already working with marijuana companies, even though the first MMJ dispensary in the state has yet to open. First Security President and CEO John Sullivan said his institution is providing accounts to roughly 100 marijuana-related companies, mostly applicants who received initial permission from the state to operate cultivation sites and dispensaries.

Sullivan said that based on his conversations with other banking professionals, it seems that the industry is warming to the idea of helping out cannabis companies.

“I have received phone calls and emails from several banks seeking information and guidance on how to implement banking services from Florida, Illinois, Colorado, New Mexico, Arizona and California,” Sullivan said. “I believe that there will be a legitimate banking solution available in just about every state by late summer 2015.”

Other Players Jumping In

Credit unions are also getting into the mix across the west.

In Colorado, Fourth Corner Credit Union was established as a cannabis-centric financial business to aid as a workaround for companies looking for accounts. It’s even leased a space to open in Denver, but the latest word is it’s still waiting on approval on a master account from the Federal Reserve.

And in Washington State, O Bee Credit Union began offering marijuana companies accounts in September – so far, it has around 30 marijuana clients.

Salal Credit Union, another Washington institution, has been granting accounts to companies in the marijuana arena for about nine months, said Chief Lending Officer Bob Schweigert. So far, Salal has around 25 marijuana-related companies as clients, including rec shops, cultivators and ancillary firms, and will likely be doubling that number in coming months, Schweigert said.

The credit union also offers loans to cannabis businesses, and so far has doled out about $7 million, Schweigert said.

“About the only service we can’t offer right now is Visa or Mastercard products,” Schweigert said.

He added that Salal has more business than it can handle from the marijuana industry.

Alternatives on the Rise

Meanwhile, the industry is seeing a spike in alternative solutions to the banking problem.

One is being spearheaded by a new service called Link to Banking, and should be up and running within a month.

The service – established by executives from Agrisoft Development Group and C4Ever Systems – uses on-site kiosks to accept either cash or debit cards (but not credit cards) in exchange for purchases. The kiosks are directly connected to bank accounts that the company helps set up, and armored cars pick up deposits straight from the machines, so employees never have to touch the money.

The network’s kiosks are necessary to set up bank accounts, said Mikey Margolin, vice president of operations for C4Ever Systems. The service will be rolled out in multiple Colorado markets, as well as in Oregon, Washington, California, Nevada, and Arizona in coming months. Margolin said company representatives also are “working closely with Alaska.”

Risks Still Exist

Some alternative banking services have raised concerns, however.

One insider who requested anonymity said the FDIC is keeping a close eye on both peddlers and users of cashless ATMs. According to the source, some companies that set up the machines mislead banks – or outright lie to them – about the type of businesses using these accounts. In other words, they don’t tell the banks that the businesses are in the cannabis industry.

That can open the door for federal money laundering charges for MMJ dispensary or rec shop owners, even if they’re ignorant of the deception. That doesn’t mean all merchants who supply cashless ATMs are crooked, but there are some bad actors in the industry.

“Banks are going to have to be very, very wary of what’s coming through,” said George Burns, commissioner of Nevada’s Financial Institutions Division. “It would be considered fraudulent activity…if they’re trying to disguise the source and use of the funds.”

That’s probably at least partially what happened last October, when hundreds of cashless ATMs across the country were suddenly shut down without warning.

It’s an ongoing problem in the industry, said Mills of Greenhouse Payment Solutions.

“There’s still some smoke and mirrors going on. The guys setting up the accounts know that, too, but it’s all about greed sometimes,” Mills said.

An FDIC spokeswoman did not return calls for comment regarding cashless ATMs. But Marijuana Business Daily’s source suggested that the agency may have an ongoing investigation into the machines and companies that use them, since deliberately misleading financial institutions on the nature of marijuana transactions is a federal offense.

John Schroyer can be reached at