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Compliant CBD Banking in 2020

MMJ FinSol
Feb 19, 2020 · 5 min read

As most CBD business owners can attest finding a bank to accept their business can be a challenge. Or perhaps better said getting an account that is fully transparent and secure can be daunting and time-consuming, if not impossible, to accomplish on your own.

Isn’t is Supposed to be Getting Easier?

We often hear CBD business owners asking questions based on the belief that this should be getting easier. Whether it was the headlines about SAFE Banking, the directive for Credit Unions, the Federal guidance for all banks, or the mere fact that The Farm Bill made growing hemp legal — it all led to the idea that getting a bank account should not be an arduous task. The fact remains that hemp and CBD derived from hemp are still considered “marijuana-related” business. As such for any banks that elect to open CBD business accounts, they have a significant regulatory burden. Therefore, most banks fall into three distinct categories when it comes to banking CBD businesses.

Compliant, Transparent, and Secure Bank Accounts

There are a limited number of banks across the country that are comfortable opening and maintaining CBD business accounts. What you can count on with these banks is that they have a commitment to serve this community and they are comfortable with the associated risks to them within the banking community including state and federal oversight. More often than not these banks are going to have a monthly maintenance fee for these high-risk accounts, however, these accounts are not subject to disruption. This is in part because the bank is clear about its intentions to bank CBD and has full support from the corporate office down to the front line managers. They are also fully engaged with meeting all the standards of the Bank Secrecy Act (BSA) and its related Anti-Money Laundering (AML) policies and procedures.

2. Somewhere Between Entertaining the Idea and Don’t Ask, Don’t Tell

The second category that banks fall into is a murky middle. Some group within the bank is championing opening CBD accounts but this may still go directly against what is public corporate policy. Sometimes they are opening CBD accounts one minute and closing them down the next. Some of these banks will allow hemp farmers and topical products but not ingestible. Others will welcome brick-and-mortar but not eCommerce. Still, others will tell CBD business owners that as long as the terms “CBD” and “hemp” are not in their company name or URL they are okay to bank with them. It is a hodgepodge of ever-changing policies, limitations, and transparency. These accounts can be relatively easily obtained but are subject to account closure that can happen with or without notice. In most of these cases when an account is closed, it is with a polite letter asking the customer to take their business elsewhere and a final check with the remaining balance is mailed.

3. Absolutely No Way; Not Here

The majority of both major and smaller banks are going to fall into this category. They consider CBD to be a derivative of marijuana (and they are correct that in banking terms it still is) and don’t want anything to do with it. You can talk to corporate and management about it and they will be clear in their communication that they will not open a CBD business account. However, when CBD companies do end up with bank accounts at these banks it is usually because they have hidden the intention of their company. They tell the bank that they are doing “Health and Wellness” or “Supplements”. Every so often a sympathetic bank rep goes out of their way not to ask too many questions knowing full well what business the customer is in. In any case, when CBD accounts are opened at these banks they are subject to immediate closure and risk of having the funds in the account seized for violating bank policies. The risks of doing business here are very high. It is also limiting for many CBD business owners when it comes to several popular domestic credit card processing solutions which are now requiring complaint CBD bank accounts as part of the merchant processing application. For example, if a merchant needs to move from Square to another solution, they may also be finding themselves not only with a processing challenge but also a banking one.

What is a CBD Business Owner to Do?

Honesty truly is the best policy. If you are willing to talk to ask industry colleagues for referrals and talk to several banks you are likely to run across a bank that falls into that murky middle category. If the limitations and the risks are workable, that might be a good, albeit potentially temporary home for your CBD business banking. The first category is the gold standard. The problem is that most of these banks do not advertise their CBD programs. Moreover their customers are under NDA not to disclose the name of the bank. This is because the banks don’t want to be rushed. They typically partner with bank brokers (such as ourselves) who bring them completed applications from customers that are ready for underwriting review and approval. This assistance in gathering the necessary paperwork for high-risk accounts makes it a seamless process for the customer and the bank. Although these services have a fee, they guarantee a compliant account. The professionals who offer these services know the best banks to recommend based on the location of the business, the types of products sold, the history of the business or if they are a start-up, and the various fees for different banking options to make the best recommendation to their client for banking. They then bring the pre-qualified applicant to the appropriate bank to open the account.

If you would like to learn more about obtaining a secure, transparent, and compliant account please schedule a call with a member of our team.

As most CBD business owners can attest finding a bank to accept their business can be a challenge. Or perhaps better said getting an account that is fully transparent and secure can be daunting and…

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