As cannabis businesses expand, they require banking services. Unfortunately, federal law makes it challenging for banks to work with cannabis businesses as it remains an illegal controlled substance.
The SAFE Banking Act seeks to change that by providing bankers serving cannabis-related legitimate business with safeguard protections that reduce cash-only operations, an unsafe and costly practice. This may help businesses reduce the need to operate under such conditions.
Community Engagement
Cannabis legalization continues its rapid spread worldwide, providing banks with an opportunity to offer services to an emerging industry while raising a number of ethical concerns.
Ethics are at the core of cannabis banking, and you should strive to do what’s right. Ethical banking will bring value both to yourself and your clients.
Community engagement is one of the key ingredients to ensure equitable growth in the cannabis industry. Many states have established social equity programs designed to increase participation from communities that have been adversely impacted by cannabis prohibition.
These programs typically provide education and training for individuals interested in entering the cannabis industry. Courses focus on financial literacy, business plan creation, administrative skills development, regulatory compliance issues and cultivation practices – many are available both online and on site – helping dispel stigmas while inspiring community members to take control of their financial futures.
Transparency
Transparency is an integral element of banking ethics. This includes providing customers with accurate information and ensuring cannabis businesses comply with regulations to reduce product recalls, label suits, and consumer class actions.
Ethical banks avoid investing in tobacco, alcohol, fossil fuels and other industries that engage in unethical practices; they provide support to women, minorities and the environment.
Ethical banks also foster pay equity by offering realistic salary ranges and making the information transparent to their consumers, helping to avoid discrimination while drawing candidates whose compensation expectations align with those available salary options.
Social Equity
As legalization spreads, ensuring all businesses can access financial services will become increasingly crucial to the industry. Upholding ethical considerations in banking practices will help level the playing field for cannabis-related business (MRB) owners who rely on cash rather than mainstream bank services.
As the industry expands and risks associated with product contamination and label claims increase, access to funding and capital will become even more essential for small businesses looking to develop, test and market their products.
Some states, like Oakland, offer verified social equity applicants licensing priority and startup support such as incubator space and funding to reduce entry barriers and promote racial and economic diversity within the industry. Furthermore, lawmakers are currently working on solutions like SAFE Banking Act which has attracted 38 additional cosponsors in the Senate that would encourage banks to work with cannabis-related businesses; providing any nervous lenders the confidence they need to enter this new and developing sector.
Environmental Impact
As cannabis cultivation and consumption become more widespread across the nation, its environmental impacts should be taken into consideration. Unfortunately, many cannabis businesses must use cash-only transactions or use questionable loopholes to open basic bank accounts – making them targets of violent crime and leading to stigma against this emerging industry that must be overcome through banks partnering ethically with cannabis businesses.
Cannabis cultivation can be resource-intensive and create issues surrounding land-use changes, water usage, pesticide application and energy consumption. Robust agricultural research programs are essential in mitigating these effects and are the key to mitigating any detrimental outcomes from growing marijuana.
ICBA endorses federal legislation to create an effective safe harbor from federal banking sanctions for banks that choose to provide services to cannabis-related businesses (CRBs) where such activity is legal under state law. The SAFE Banking Act would prevent federal financial regulators from taking corrective supervisory action against a bank for providing banking services or lending real estate or equipment loans directly to these CRBs, or from imposing sanctions against loans designed specifically to serve these CRBs.