February 06, 2019 Articles

Cannabis Cash: Tips for Financial Institutions

A growing number of financial institutions are providing services to MRBs—despite uncertainty about future DOJ actions.

By Wade A. Thomson and E.K. McWilliams

According to a recent poll by the Pew Research Center, 62 percent of respondents, including 74 percent of millennials, favor legal cannabis. This popularity is reflected in the fact that 33 states plus Washington, D.C., have legalized cannabis for recreational or medical use. In terms of sales, the U.S. cannabis industry generated nearly $9 billion in 2017. And an analysis by New Frontier Data shows that if marijuana were fully legal in all 50 states, it would create at least $131.8 billion in federal tax revenue between 2017 and 2025.

Despite these numbers, legal marijuana-related businesses (MRBs) such as medical marijuana dispensaries and cannabis cultivators and distributors remain relatively underserved by the banking and financial services industry. Indeed, there are numerous anecdotes, which would be comical if not presenting public safety concerns, of MRBs trying to store, transfer, and protect the vast amount of cash that they are not allowed to deposit in banks. This is because financial institutions that provide banking services to MRBs, even in states where marijuana is legal in some capacity, could be held liable for violating the federal Bank Secrecy Act (BSA). The BSA prohibits financial institutions from accepting the proceeds of illegal activity, including funds derived from cannabis sales, which are illegal under the federal Controlled Substances Act (CSA). Accordingly, under the BSA, financial institutions that provide banking services to MRBs, including banks that provide depository services to MRBs and casinos that allow players to game with funds derived from cannabis sales that are legal under state law, may have exposure under the BSA. 

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