In the cannabis industry, access to banking services remains a challenge for businesses. Safe Harbor Financial, a company providing access to cannabis-friendly banking solutions, has been at the forefront of addressing this issue. Just one year after Colorado legalized cannabis, Sundie Seefried (CEO) saw an opportunity. "I was already a long-term banker and had a friend who was a lawyer. They asked me why I didn't go into cannabis banking. I thought the regulators wouldn't allow us because cannabis is not federally legal." But what changed Sundie's mind was learning how the lack of banking services was putting the safety of cannabis companies at risk. "Once I learned about the safety concerns arising from cash transactions in the industry, I couldn't turn a blind eye," Sundie says.
Sundie Seefried
Cannabis banking
Concerning the current state of cannabis banking in the US, Sundie notes a significant shift since her entry into the market. "Initially, it was all about survival for us. As long as the regulators allowed, we were able to provide cannabis companies with banking services. Regulatory compliance was stringent and establishing trust with regulators was very important," she says. Over time, Safe Harbor gained that trust and paved the way for other financial institutions. As a result, access to banking services for cannabis businesses improved. However, Sundie emphasizes that compliance requirements remain high, making banking services expensive for the industry. "It's the same for casinos. It's not easy to get a bank account because of the illicit market activities existing and doing business in plain sight. Yet I believe that eventually, banking will actually help regulators find the bad actors; they will be the ones without bank accounts," she says.
Access to cannabis-friendly banking services has a major impact on businesses, Sundie shares. "Banking with us, while I was with Partner Colorado Credit Union, and now as a Fintech Service entity, allowed businesses to operate more efficiently and securely. For example, we helped a company with over 500 employees that was handing out their staff's payroll in cash. These people are walking home with lots of cash in their pockets, which is putting their safety at risk. Another time, we onboarded a large MSO. These companies, when unbanked, could have lots of money in the vault, maybe even over a million dollars. The company got robbed and called us to thank us. Since working with us, they didn't need as much cash anymore. They would have lost a lot more if they still had all that cash lying around," Sundie says.
SAFER Banking Act
That is exactly what the SAFER Banking Act is hoping to help with as well. Yet Sundie expresses cautious optimism. "It's going very slowly, and it's not looking very promising. Yet, the upcoming election might be a potential catalyst for change. At some point, this big industry is looking at the legislators and choosing to whom to give their vote. The industry is too large to ignore anymore. That might speed up the process," Sundie says.
But even if it does pass, it does not solve all challenges, she explains. "As long as cannabis is still listed as a Schedule I drug, the current guidelines and regulations will require that banks and credit unions continue to fulfill BSA obligations outlined in the 2014 FinCEN guidance, which can be quite extensive. Financial institutions will be required to file regular reports, requiring substantial resources to ensure compliance."
The impact of rescheduling
In August of last year, the HHS recommended the DEA reschedule cannabis to Schedule III. While no further update on this has been given, if it does happen, Sundie anticipates significant impacts on both banking and the industry at large. "Rescheduling would open up greater opportunities for banking services, including lending, as well as alleviate tax burdens for businesses," she explains. "For example, rescheduling cannabis to Schedule III would eliminate the 280E tax burden that currently applies to cannabis businesses. This will improve cannabis companies' bottom line, which will, in turn, help them qualify for lending. Once cannabis is rescheduled, we're expecting to also see increased interest from investors."
Therefore, Sundie sees rescheduling as having the most impact on the industry. "It doesn't concern just banking, it will be a huge boost for the whole industry. Moreover, it will be interesting to see if rescheduling cannabis could impact international treaties and how it will position the US in the global cannabis market," Sundie adds.
For more information:
Safe Harbor Financial
www.shfinancial.org