The cannabis industry still has a banking problem. Although a growing number of states have legalized medical and/or recreational marijuana, it is still illegal under federal law. This makes most banks apprehensive about serving pot businesses.
While some major banks have marijuana clients--and tax revenue collected by state governments sit in banks--the majority of the companies have trouble keeping an account open before the bank issues a suspicious activity report that forces them to take their cash and leave.
Kind Financial, a California-based provider of software and financial services for pot businesses, is trying to address the problem. The firm on Tuesday announced a new partnership with financial compliance consultancy Link to Banking that could help banks become more comfortable accepting cash from growers, manufacturers, and dispensaries.
The partnership is based on data from Kind Financial's "seed-to-sale" software, called Agrisoft, which makes it easier for pot companies to comply with state regulations. Each plant is issued a barcode and an RFID tag so it can be tracked while it grows. The information in the system must correlate with what's in the grow house, or the state can revoke the company's license. Agrisoft also tracks the plant as it is trimmed, packaged as flower or made into a concentrate, placed on the shelf, and bought by a customer.
Link to Banking's software evaluates a bank's Bank Secrecy Act/Anti-Money Laundering program and suggests how to improve their methods when dealing with cannabis companies. The software is now integrated with the Agrisoft software so banks can monitor a client's point-of-sale system for any discrepancies or suspicious activity. The banks also can monitor whether their clients' bank deposits match up to their sales and to their total yield, ensuring that no one is trying to launder money.
Robert Casares, president of Link to Banking, said in a press release that the partnership has created a practical program for banks to keep watch over the highly scrutinized industry. "Coupled with customized reports, this system will provide banks with all the necessary tools they need to keep a pulse on their cannabis-related customers' day-to-day activity," he said.
Kind Financial co-founder and CEO David Dinenberg told Inc. clients will begin beta testing in the next several weeks, but declined to name the pot businesses or the banks his company will be working with.
Earlier this month, a bipartisan group of senators from Colorado and Oregon, where recreational marijuana is legal, proposed a bill to prohibit the federal government from going after banks for working with cannabis companies. This is the first bill that would legalize banking for the industry.