Greater scrutiny of regulations is making cannabis banking more difficult for Maine operators that want to avoid keeping cash under their mattress.
“There has essentially been no change to the law, but we’ve been notified by our banking regulators that they’re going to do stricter oversight. They’re interpreting the FinCEN (Financial Crimes Enforcement Network) guidance more extensively,” said Jen Burke, spokesperson for the Maine Credit Union League. “We’re not entirely sure why, but there’s a more strict interpretation of the law now. This is what we’ve been told as an industry.”
This change in regulation comes amid a U.S. First Circuit ruling that the federal government can investigate medical cannabis operators as long as their business activity exceeds the limits of the state laws that allowed cannabis businesses in the first place.
Maine’s Bureau of Financial Institutions, which governs state banks and credit unions, recently informed lenders that there would be a greater level of scrutiny in report data from cannabis businesses.
“There have been some interpretation changes that are actually going to make it more difficult for any financial institution in the state to offer MRB (marijuana-related business) accounts,” said Burke.
cPort Credit Union, which offers banking services to cannabis businesses announced recently that it was enacting a moratorium on new cannabis business members.
In a mass emailed to cannabis customers, the bank suggested that increased attention to legal cannabis had driven regulators to take a closer look at financial institutions, compared to when cPort Credit Union entered that market in 2014.
“During that time, the state and national cannabis market has expanded substantially,” said the notice. “This expansion has resulted in a new, more rigorous interpretation of federal guidance by our banking regulators and a significant increase in regulatory requirements and expectations to both your business and to us, your financial service providers.”
Burke noted that financial institutions were in a bind, regardless of their intention to serve the cannabis industry.
“The problem here is that these businesses deserve access to financial institutions and you’ve got banks and credit unions that want to serve these numbers, but the laws just haven’t kept up,” said Burke.
There are also new account reconciliation requirements for the businesses. Basically, the cannabis business must submit their sales records to the bank in addition to their financial reports, in order to verify that all incoming revenue is above board. The increase in reporting requirements is compelling some financial institutions to suspend banking services for cannabis operators.
“Credit unions and banks must do more compliance, more paperwork,” said Burke. “It’s causing more time on the end of the financial institution, limiting these legal businesses that need access to financial services.”
Operators active on the private Maine Cannabis Coalition social group were critical of the regulatory change.
“When they do not allow us to bank, are people going to resort back to all cash? do they anticipate the disappearance of the black market or expansion?,” said one poster. “We pay so much more than a typical business to operate in Maine’s largest cash crop. The constant battle to meet regulation is exhausting.”