The challenge of banking and payment processing in the legal cannabis industry is well-documented, but less known is the plight of ancillary cannabis businesses. These businesses, providing essential support to the cannabis industry, often struggle with banking access due to their categorization as Marijuana Related Businesses (MRBs).
Defining Marijuana Related Businesses (MRBs)
MRBs extend beyond the direct cannabis growers, processors, or sellers. They encompass a range of support services like legal, medical, packaging, lighting, real estate, and consultancy firms that cater to the cannabis industry. Despite not handling the plant directly, these businesses face penalties and restrictions due to their association with the cannabis sector.
For MRBs, being classified as high-risk by financial institutions has profound implications. Banks categorize them under a special designation, reflecting their service to a federally illegal industry, which increases their risk exposure significantly.
Many of these ancillary businesses, once operating smoothly with traditional payment methods, find themselves suddenly reclassified as high-risk due to their cannabis clientele. As a result, obtaining and maintaining a merchant account becomes a more complex and stringent process.
The Payment Processing Challenge for Ancillary Cannabis Businesses
The crux of the issue lies in the payment processing mechanism, involving entities like acquiring banks, card brands, card-issuing banks, and Interchange networks – all regulated by the federal government.
Due to stringent federal laws like the Bank Secrecy Act and the Money Laundering Control Act, financial transactions involving proceeds from perceived criminal activity are criminalized. This complicates matters for ancillary cannabis companies, as their revenues are indirectly derived from an industry considered illegal at the federal level.
Even though these businesses do not directly engage with cannabis, their financial transactions are deemed high-risk due to the source of their income. This creates a dilemma for banks and payment processors, who must adhere to enhanced reporting requirements and risk prosecution for federal crimes like money laundering.
Navigating Federal and State Law Disparities
The conflict between federal and state laws puts ancillary cannabis companies in a challenging position. While the Financial Crimes Enforcement Network (FinCEN) provides guidance to banks, it’s not a foolproof shield against federal regulations.
Banks serving MRBs face a rigorous process of customer due diligence, continuous monitoring, and frequent filing of Suspicious Activity Reports (SARs) for each transaction, increasing compliance costs and legal risks.
Hope on the Horizon
Despite these challenges, progress is being made towards equitable banking access for the cannabis industry. The SAFE Banking Act, for instance, represents a promising development in this regard.
Thankfully, some financial institutions, equipped to comply with FinCEN guidelines, are stepping up to provide merchant accounts for ancillary cannabis businesses. These MRBs, ranging from legal advisors to packaging manufacturers, can find reliable merchant accounts if they approach the right service providers.
Finding a Reliable Ancillary Cannabis Merchant Account
Choosing the right high-risk merchant account provider is crucial for ancillary businesses. These providers must not only understand the high-risk payment processing landscape but also the regulatory nuances of the cannabis industry.
At Bankcard International Group, we’ve been advocating for fair banking and payment processing services for the cannabis industry since 2006. Our deep understanding of industry regulations, coupled with strong banking relationships and innovative technology, enables us to offer stable payment solutions for MRBs.
We specialize in high-risk payment processing, ensuring comprehensive underwriting and support for our clients. Our alternative payment solutions, like eCheck and ACH processing, provide a backup to traditional credit card processing, ensuring uninterrupted payment acceptance.
Our commitment is to our clients’ success and longevity. We believe in building long-term partnerships, focusing on your growth and stability. Contact us to experience the difference in service and support we provide to the ancillary cannabis industry.
