Although cannabis was legalized for recreational use last year by California voters, businesses that produce the plant and service the industry still face challenges when deciding how to bank their money.
The announcement last month by North Bay Credit Union that it had been taking some deposits from cannabis companies for roughly a year was notable because while there are financial institutions that handle the industry’s money, many avoid the limelight as cannabis is still outlawed at the federal level.
In 2014 the federal government laid out how banking services could be provided in the cannabis industry in the so called “Cole Memo,” named after former U.S. Deputy Attorney General James M. Cole. But in 2018, the memo was rescinded.
As a consequence many cannabis companies that are directly involved with cultivating and processing cannabis plants conduct their businesses largely in cash, while ancillary operations that service the industry like Fumé, a cannabis consulting and advisory company based in Napa, face strict vetting and fees from their banks.
Fumé CEO Eric Sklar said his company is not directly involved with producing the plants but still pays a bank $1,000 monthly for an account, on top of an additional setup fee plus $500 for any additional accounts, because Fumé services the industry.
“The problem for a bank is that enhanced due diligence is really complicated and time consuming,” Sklar said, referring to the vetting of cannabis and cannabis connected businesses performed by banks to ensure they were not engaging in money laundering or other illegal activities.
That due diligence included submitting to site visits, divulging the ownership structure of a company, tracking of cash, and other requirements, he said.
Sklar, who declined to name his company’s current or previous financial service providers, said he was dropped by a bank in November because