Committee Blog: Banking Guide for Cannabis Industry Veterans

Published by NCIA’s Banking & Financial Services Committee (BFSC)

As a veteran of the cannabis industry, you’re already familiar with the regulatory complexities and operational risks that come with running a legal cannabis business. But even as the industry matures and expands—projected to reach $52 billion by 2026—banking remains one of the most persistent and misunderstood challenges.

Despite being legal in many states, cannabis remains a federally prohibited substance. That means financial institutions must follow federal laws, including the Bank Secrecy Act (BSA), Anti-Money Laundering (AML) protocols, and FinCEN guidance, if they choose to work with cannabis-related businesses. This legal conflict results in higher compliance costs, greater documentation requirements, and fewer financial services available to cannabis operators.  

Still, legitimate banking options are becoming more accessible. Businesses that operate transparently and work with proper compliance systems can secure reliable financial partnerships—without resorting to risky workarounds that often lead to frozen funds or account closures.  

Understanding the Rules of the Game  

Cannabis business owners must understand that banks operate under an entirely different set of rules. Even if your business is licensed and fully compliant at the state level, banks must verify that you also meet federal standards. This includes full  documentation of your business structure, licensing, tax status, and ownership—especially for individuals holding 25% or more equity in the company.  

Financial institutions also require evidence that you follow local rules, such as zoning approvals and municipal permits. The banking industry takes particular interest in ownership transparency, as previous cannabis operators have attempted to hide  beneficial ownership behind shell companies or layered corporate structures. While these tactics may have delayed scrutiny in the past, they are now seen as high-risk and typically result in terminated accounts.  

Laying the Groundwork: Due Diligence and  Documentation 

Before engaging with a financial institution, be prepared to undergo a deep due diligence process. Banks will expect to review your business formation documents, operating agreements, state and local cannabis licenses, tax filings, SOPs for compliance and security, and detailed financial statements. They may also request proof of your inventory tracking system, insurance coverage, and even video footage or plans related to your cash-handling procedures.  

The more organized and transparent your records are, the more confident a bank will feel in your business. This includes having an accurate and up-to-date organizational chart, verifying all ownership interests, and providing supporting evidence for your  business’s revenue, investments, and cash flow.  

Proving Your Controls: AML and Seed-to-Sale Integration  

Because cannabis remains a cash-intensive industry, banks are especially concerned about your ability to prevent money laundering. You’ll need to demonstrate that you have systems in place to document and trace every major transaction, identify  suspicious activities internally, and track the movement of cash throughout your business. Written policies, transaction logs, and surveillance data are all important tools in meeting these requirements.  

An essential part of building banking credibility is aligning your financial statements with your seed-to-sale inventory tracking system. If a bank asks how your product movement matches your reported income, you should be able to demonstrate a direct  connection. Inconsistencies raise red flags, while tight integration builds trust.  

Financial Discipline and Tax Transparency  

Using cannabis-specific accounting software and experienced CPAs is no longer optional—it’s expected. Your records should be clear, professional, and separated from any non-cannabis revenue streams you might have. Maintaining excellent tax compliance is also crucial, particularly around IRS Section 280E, which restricts the deductions cannabis businesses can claim. Banks want to see not only that you’re filing taxes properly, but that you understand and proactively manage your tax obligations.  

Relationship Management: Treat Your Bank Like a  Partner 

Just as you would with a supplier or regulator, maintaining a proactive relationship with your financial institution is key. Assign specific team members to handle banking communications. Keep your bank informed about changes in your business—whether  that’s a new owner, a license renewal, or a change in address. Fast, accurate responses to information requests demonstrate your professionalism and commitment to compliance.  

By contrast, businesses that open multiple accounts under vague business names, change banks frequently, or misrepresent their activities inevitably find themselves blacklisted. Several operators have lost access to funds or even shut down entirely due to deceptive practices.  

Modern Solutions for a Modern Industry  

Fortunately, the cannabis banking landscape has evolved. Today, more credit unions and state-chartered banks are stepping forward with programs designed specifically for cannabis operators. These institutions typically charge higher fees to cover the  added compliance workload, but they offer transparency and predictability in return.  

Additionally, cannabis banking platforms now exist to connect businesses with financial institutions that understand the industry. Some of these platforms also include tools for compliance documentation and reporting. New payment technologies are also emerging that reduce the need for cash handling while still staying within banking regulations.  

All of these options represent a shift away from outdated and dangerous practices— such as disguising cannabis income, running funds through unrelated businesses, or relying on holding companies to open accounts.  

Yes, It’s More Expensive—But It’s Worth It  

Cannabis businesses must accept that they will pay more for banking services. Monthly fees often range from a few hundred to several thousand dollars. These charges cover the cost of suspicious activity report (SAR) filings, KYC verification, and ongoing  account monitoring required by federal law.  

While expensive, these fees are far less costly than dealing with frozen assets, last minute bank changes, or operating entirely in cash. The predictability and legitimacy that come with compliant banking relationships more than justify the investment. 

Understanding SARs and Staying Ahead  

Every cannabis-related account triggers SAR filings. Banks file one of three types: a Marijuana Limited SAR for compliant businesses, a Marijuana Priority SAR if the institution suspects a violation of state law, and a Marijuana Termination SAR if the  account is shut down for compliance reasons. Trying to avoid SAR filings by obscuring  your business type is a red flag and virtually guarantees eventual termination. It’s better to work with institutions that understand these requirements and have built  programs to manage them.  

Partnering with the Right Providers  

You don’t have to navigate all of this alone. Specialized platforms can help manage your documentation and connect you with cannabis-friendly banks. When choosing a provider, confirm they understand both banking and cannabis regulations, check their  track record, and make sure they offer strong data protection protocols.  

The Payoff: Long-Term Stability and Growth  

The benefits of strong compliance go beyond simply keeping your account open. Banks often lower fees over time for trusted partners, and access to services like lending and  merchant processing expands as your relationship matures. Businesses with stable banking relationships are better positioned to grow, raise capital, and scale without constant operational disruptions.  

Final Thoughts  

As a cannabis industry veteran, you already understand regulation. But banking requires a deeper level of documentation, consistency, and strategic communication. Avoid shortcuts. Invest in compliance. Be transparent with your financial partners.  While the process may be more rigorous than what other industries face, it’s navigable—and increasingly essential for sustainable growth.  

In today’s environment, legitimate banking relationships aren’t just possible—they’re a  competitive advantage.

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