One of the few banking options for Oklahoma medical marijuana businesses says financial challenges have forced it to back out of the industry less than a year after taking on its first cannabis-connected clients.
Tulsa-based Encentus Federal Credit Union last month sent a letter to its clients that “we are not equipped to service the business accounts of our Medical Marijuana businesses.”
Encentus board chair Jana Hallman told the Tulsa World on Friday that nine business accounts will be closed by Oct. 31 due to the change.
“Upon significant review and research, we have come to realize that we do not have the staff nor the software sufficient to maintain the business activity,” Hallman wrote in the Aug. 26 letter.
Because of federal law recognizing cannabis as illegal, options are limited for state-licensed marijuana businesses to handle things such as payroll and cash deposits, though some financial institutions have been willing to help the industry.
Misty Potter, president and CEO of Encentus, said in a previous interview that she was affected by a dispensary owner’s request for banking services. “We can’t let these poor guys flounder around with a bunch of cash in their back closet,” she said then.
About 400 institutions in the U.S. are serving the medical marijuana industry, though it can be expensive to work with cannabis-connected businesses because of tighter restrictions and regulations.
Potter said she was told by her federal examiner that the credit union was free to work with businesses in the industry as long as it follows the Financial Crimes Enforcement Network — or FinCEN — Guidelines set forth in 2014.
Those guidelines basically turn bank staff into auditors, Hallman told the Tulsa World. She said cannabis banking accounts can never have a penny not accounted for at any given time, and reporting is incredibly arduous.
“It takes a lot of time and software to really be able to keep up with it like we need to,” Hallman said, “and at least right now we’re not in the position that we can pour those kinds of dollars into software (and staff).”
Hallman said she is sorry that even after charging fees, the cost burden of continuing to serve cannabis-connected clients necessitated Encentus’ departure from the industry.
“It’s just we cannot financially continue to do it. We’re sorry, but we are held responsible for keeping our financial institution in good standing.”
Abaca, a financial technology company based in Arkansas, works with banks that want to serve the cannabis industry. The company partners with a state-chartered bank to offer deposit accounts and other financial services to cannabis businesses in Arkansas and Oklahoma. Abaca handles the compliance and online banking interface for the banks it works with, and provides dispensaries the ability to take electronic payments.
“Unfortunately, it’s not uncommon to hear of a bank or credit union that has to sever its ties with the cannabis industry,” Abaca CEO Dan Roda told the Tulsa World. “Banking cannabis properly is labor intensive, and the cost of compliance can be prohibitively high without the right tools.”
This week the U.S. House passed a bill seeking to ease the industry’s problems with banking access. Its future in the Senate is unclear.
The bill would allow businesses legitimately operating under state laws to access loans, lines of credit and other banking services, while sheltering financial institutions from prosecution for handling marijuana-linked money. However, Roda and Hallman said it won’t be a panacea for cannabis-connected businesses.
“It’s important to note that the SAFE Banking Act ... makes the existing regulatory guidance permanent,” Roda said. “So, if it becomes law, there will still be a compliance cost for banks and business owners, just like in other cash-intensive industries like casino gaming.”