“There’s no longer a banking problem in cannabis,” says Nathaniel Gurien, the CEO of Fincann, a consulting firm that helps provide legal marijuana and CBD businesses with bank accounts and merchant services via its exclusive Cannabis Banking Financial Network of nearly 200 federally insured banks across the United States.
Through their partnerships with Fincann, these banks offer a full suite of services that are often difficult for cannabis-related companies to find, including business checking accounts, loans and payment processing. Fincann also offers cannabis retailers fully compliant and transparent merchant processing to accept MasterCard and Visa debit cards just like traditional businesses.
Gurien has spent the last five years developing the Fincann network and convincing financial institutions that traditional banking is not only a viable, legal option for the cannabis industry, but also a valuable public service needed in communities where cannabis is legal.
“We crossed the Rubicon and now can definitively state that anybody running a compliant business in any sector of the cannabis economy, across all 50 states, now has access to transparent, compliant banking through Fincann,” Gurien says. “Fincann is the only company in the country right now that can provide that to everybody without carve-outs or exceptions.”
Many cannabis companies have heard promises over the years about third-party solutions to banking challenges, and many more have opened bank accounts, only to have the account shut down with little to no notice, and often, without any specific explanation. Other solutions involve shell accounts to disguise the nature of the business.
But with Fincann, Gurien says there are no loopholes or smoke-and-mirrors tricks. The process is completely transparent, and the company’s real name — no matter how directly it’s associated with marijuana — is the name listed on the account and the statements.
“There’s nothing funny about it and there’s no weird disclosures,” Gurien says. “It’s not an interim solution.”
Through Fincann, cannabis-related businesses can establish hassle-free merchant accounts, allowing them to accept payments from customers by credit cards and debit cards. They can also set up bank accounts with a full range of important features for businesses, such as B2B electronic payments, employee payroll and employee accounts, asset-based lending and working capital loans, among others.
For cannabis retailers that already have a compliant bank account, it takes about two weeks through Fincann to get a merchant account.
For THC licensees starting from square one, Gurien estimates it would take one to three months to get a compliant bank account set up; cannabis ancillaries are generally much quicker all around. Fincann facilitates the entire process from start to finish to help ensure the applying company passes the bank’s approval process, which is similar to what financial institutions already do to approve loans, Gurien says.
“The bank is responsible for making sure everything is correct and in line and stays that way,” he says. “If you were getting a mortgage, an appraiser has to look at the property. If you are getting a cannabis-friendly bank account, you’ve got to send an inspector out to take a look at the operation — although nowadays many banks in our Cannabis Banking Financial Network are turning to Zoom or FaceTime for virtual inspections.”
Fincann also connects banks who support the cannabis industry with pre-qualified cannabis businesses from all sectors, eliminating the guesswork on both sides of the banking equation.
Q: It’s been widely reported that more than 700 U.S. financial institutions are currently banking the cannabis industry. If that’s true, why is there an access problem?
A: This 700+ financial institution figure is a misinterpretation of a memo issued by FinCEN in September 2017. This memo reported that 700+ banks filed marijuana-related suspicious activity reports, which is true. However, nearly half of those filed were “marijuana-terminated” SARs, meaning the bank discovered a marijuana-related business account and closed it. Many others were from similar scenarios, such as banks filing marijuana SARs upon discovering that a commercial real estate loan portfolio contains a lease to a licensed dispensary.
In reality, only a few dozen financial institutions around the country are transparently, sustainably and successfully banking THC licensees, and another few dozen providing “quiet” service to one or a few pre-existing customers.
Q: Do you see the “big banks” taking cannabis accounts anytime soon?
A: Unlikely. Why should they? Say you’re a big bank regional director and have 500 subordinates managing the many moving parts in your marijuana banking program. A few significant screw-ups, and you can say goodbye to that corner office you’ve been eyeing. Plus, after federal prohibition ends, the “big banks” figure they’ll snap up at least 50% of the market within a year anyway.
Q: How does U.S. Attorney General Jeff Sessions’ rescission of the 2014 Cole Memo affect the cannabis industry?
A: Since it remains undisputedly illegal under federal law, the state-licensed legal marijuana industry currently primarily operates under a presumption of prosecutorial forbearance and perceived, rather than actual, risk.
The Cole Memo is a “feel-good” U.S. Department of Justice guidance that does not actually restrain local U.S. attorneys general from enforcement, but sets department priorities with regard to marijuana. Sales to minors or diversion of products out of state are of higher priority, for example.
The Rohrabacher-Blumenauer budget amendment prohibits the use of federal funds for DOJ enforcement of federal marijuana laws against state-sanctioned medical marijuana licensees. However, it is politically unfeasible and therefore unlikely that the amendment will be changed to include “recreational/adult-use” licensees, setting up the possibility of battles between legal states and the federal government.
Nonetheless, the genie is out of the bottle for this industry, especially in light of now-historical evidence of substantial generated tax revenue, and there’s no turning back. It is inevitable that there will be casualties, speedbumps and hiccups as this industry grows up, and this is an example.
At first, getting banks on board seemed impossible. Many were reluctant to open the floodgates to cannabis businesses or invest substantially in learning the ins and outs of cannabis compliance, since they believed it was a shady and disreputable industry, Gurien says.
To convince banks to serve the cannabis industry, Gurien needed to immerse himself in research. He’s spent the better part of the last five years learning everything he possibly could about how state and federal rules and regulations affect cannabis banking. His accumulation of knowledge and data made him a reliable source on cannabis banking for local and national media, which in turn opened the doors to meet with more financial institutions on his journey to launch Fincann.
But it seemed every time he answered one question, 20 more arose. He eventually became more accepting of his role as a student, constantly traveling a path to knowledge, happy to share his accumulated and evolving experience and perspectives.
“Every two months I look back and realize that I’ve learned so much from where I was,” Gurien says. “And that’s from 2015 to the present.”
Not wanting his in-depth research and extensive experience to go to waste, and in light of pervasive misinformation and a lack of reliable data, Gurien archived everything on the Fincann website, creating a free community resource of important information and documents, including original guidance memos from the Department of Justice, Food and Drug Administration and Financial Crimes Enforcement Network (FinCEN). The site also features the industry’s first cannabis-friendly bank counter, a real-time state-by-state interactive map of marijuana and hemp regulations with many original source documents, including court cases and litigation, real-time industry news filtered by category and even Gurien’s personal correspondence with FinCEN.
In fact, Gurien’s correspondence with FinCEN, years of hands-on, practical experience in the field and FinCEN’s 2014 guidance on the Bank Secrecy Act for financial institutions interested in banking marijuana-related businesses serve as cornerstones for his assertion that there hasn’t been a significant federal restriction on cannabis banking for several years.
But despite the FinCEN guidance, most bankers weren’t willing to take the risk of working with cannabis companies. Gurien found that bankers, for the most part, didn’t trust cannabis businesses. Many people involved with financial institutions were still convinced that cannabis was a gateway drug and that it was a contemptible industry, wrought with criminal elements, he says.
Without the support from financial institutions, cannabis professionals went on believing the official pretext that banking was still under federal prohibition.
So Gurien set out to change how bankers feel about cannabis by detailing the potential harms they are doing by not allowing cannabis businesses access to banking.
Building the Infrastructure
In his early days of making presentations to convince banks of the legality of taking on cannabis clients, Gurien would focus on the stringent regulations that presided over the legal industry and the caliber of the professionals participating in the marijuana business — to no avail.
“We tried that and failed,” he says. “We needed to understand that this had nothing to do with logic or facts and that having a logical and factual presentation and argument was going to go nowhere.”
Fincann started to adopt a different approach. Rather than making presentations for or against cannabis, Gurien focused on banking as a way to improve safety in the community because the cannabis industry is awash in cash, thereby increasing the potential to attract organized crime or violent crime. Not having access to traditional banking services was presented as a threat to public safety.
“It creates all kinds of corrosive influences in the business and the general community at large,” Gurien says, “and banks could step up to take care of that problem, as well as to have a profitable business. We also focused on talking to the bank’s younger middle management teams who were more open and less conservative than the institution’s C-level executives and directors.”
That change in tactics started closing deals. A lot of deals.
The new approach took Gurien across the country to meet with bankers in different markets, to get them signed on to bank cannabis businesses and eventually to set the businesses themselves up with the banking services they sorely needed.
The best practices outlined in the FinCEN guidance memo remain a core part of what Fincann does. The memo says “a financial institution should consider whether a marijuana-related business implicates one of the Cole Memo priorities or violates state law. This is a particularly important factor for a financial institution to consider when assessing the risk of providing financial services to a marijuana-related business.” An outline of the bankers’ compliance obligations for the various industry “compliance tiers” is available on Fincann’s website under the Regulatory tab.
Fincann provides financial institutions with a profile on the business applying for a bank account or merchant account to show they are compliant with state law and do not violate the Cole Memo priorities.
“We build a profile on the cannabis or CBD business and then we say, okay, this is the bank we think that has the best mix of services and pricing in accordance with your requirements, so with your permission we are going to start an application with them,” Gurien says. “Then we guide you through the process, get a certification that they have the bank account, and then include that with their merchant processing application.”
Although the Cole Memo was rescinded by Jeff Sessions when he was the U.S. attorney general in 2018, the priorities set forth in that document continue to be the guiding principles of the legal industry today — preventing the distribution of marijuana to minors, preventing the diversion of marijuana from states where it is legal to other states and preventing the sale of marijuana from benefiting criminal organizations, among other priorities.
Now, with Finncann’s exclusive Cannabis Banking Financial Network in place, marijuana, hemp and CBD businesses all across the country, as well as ancillary companies serving the greater cannabis industry, can access the compliant banking that was so difficult to find even just a few years ago.
“Thank goodness the federally regulated electric utilities didn’t invoke the same arbitrary prohibition as the banking industry,” Gurien says. “Without access to power, our industry would still be wandering in the wilderness. Without access to traditional commercial banking and financial services, we’ve stumbled along as best we can until now.”
Gurien says Fincann’s dual mission is to resolve the cannabis industry’s irrational banking challenges and to be the community’s first resource for dependable, actionable cannabis banking and payments information and data. The wait for banking solutions, he says, is over.
“With our help, you can once and for all end the uncertainty, risk and expense of workarounds and quick fixes and concentrate on openly growing your business and opportunity.”