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A Maryland community bank is one of few American banks to open accounts with cannabis companies. According to The Washington Post, Severn Savings Bank has been allowing cannabis companies to open bank accounts while other banks across the U.S. refuse cannabis businesses despite their legality.
Severn account holders who operate cannabis-related businesses are unable to write checks or seek loans. What’s more, businesses have to pay large fees and must go the extra mile to prove they’re doing nothing illegal.
However, compared to other banks, Severn is a miracle for cannabis-related businesses. Up to 70% of those in the marijuana industry in states such as California, Colorado, and Oregon run solely on cash.
The legal hoops cannabis-related businesses have to leap through in order to operate as normal with a bank is due to marijuana’s Schedule One drug status. The status places marijuana on par with heroin and cocaine despite marijuana being used medically for cancer, anxiety, and in some cases poison ivy which effects 85% of the human population.
As a result, state-chartered banks need to report to the Federal Deposit Insurance Corporation and other federal regulators simply to work with cannabis companies.
Sahar Ayinehsazian, who works for the law firm Vicente Sederberg and specializes in cannabis banking problems, says the loss of FDIC insurance for working with cannabis-related businesses isn’t a rational fear. However, it may be worrisome for a bank should one of their account-holders run afoul of state law.
“It could lead to potential liability [for the bank] depending on how much they knew,” said Ayinehsazian. Due to the potential for liability, banks who do open accounts to cannabis-related businesses keep a close eye on their account-holders.
Many cannabis businesses who use bank accounts are unable write checks, accept checks, accept credit cards, use wire transfers, or even take out business loans. What’s more, businesses are required to email their bank daily to provide inventory and financial logs.
“We have to account for every penny,” said Allegany Medical Marijuana owner Sajal Roy, “every piece of product, to prove that there is no diversion of anything.”
The intensity of the process may be too much for some businesses. However, Roy says the ability to use Sever’s automated transfer system to buy supplies and pay employees is worth the sweat.
What’s more, printing expenses for many businesses can often run between $600 to $1,300 every year. By using an automated transfer system, cannabis companies save on paper waste and reduce the risk of mistakes that may come from handling cash alone.
It can also be dangerous to handle cash on-site. Cannabis companies say keeping thousands of dollars locked in vaults at their business sites make them sitting ducks for criminals. However, the on-site cash is necessary to pay vendors and employees.
Employee recognition programs have been said to improve worker happiness in 86% of companies. However, the simple act of being able to transfer money to employee bank accounts is what would make employees the happiest at cannabis businesses. By having access to banking services not only would cannabis-related businesses have a sense of legitimacy but they would also be safer.
“We want that recognition that cannabis is not a back-alley business,” said Time for Healing owner Terri White. “We’re here to help people, and make a financial impact on the community.”