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ORION GROUP NYC
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Even so-called ‘ancillary’ companies which are neither licensed nor ‘touch-the-plant’, find that financial institutions across the US have been nearly universally unwilling to knowingly provide bank accounts or services to companies that disclose or are discovered to be engaged even tangentially or secondarily involved in the legal marijuana industry.
As a result, those whose apparent business or profession is not cannabis-related have often opted not to disclose their involvement with licensees and are likely to avoid detection by the bank depending upon the extent of their public profile in the industry. However even in these instances, banks under pressure from regulators are taking advantage of ever more rigorous software and detection tools now available to more effectively detect and identify this unwanted activity.
Of course, those ancillary providers of goods and services who advertise or disclose their interaction with the industry are at much greater risk, especially now, of having their accounts closed.
The primary issue is that although the ancillary business does not ‘touch the plant’ nor hold a state license, by both regulation and written guidance
(FinCen, Cole and Rohrbacher/Blumenauer) the banks are required by Federal and State examiners, as well as the US Depts of Justice and Treasury (FinCen) to undertake rigorous and effective measures to assure the following:
The primary responsibility for this falls on the first bank to accept licensee proceeds. So if an ancillary accepts payment from a licensee in cash or for large amounts (five figures +)substantial due diligence and ongoing verification of compliance is required prior to their bank being able to accept the deposit(s) with the consent of their examiners.
Even if the payment amount is relatively small and/or payment is made electronically (credit/debit card, ACH, check, wire, et.al.) a less rigorous protocol is indicated to assure approval by the bank’s examiners.
Given the currently limited bandwidth of ‘cannabis-friendly’ financial institutions, and the likelihood that full disclosure may result in account closings, limited transparency and risk mitigation may be the most practical short-term strategy. However, if your licensed clients wish to pay for goods and services with cash (especially large sums of cash), the ‘red flags’ raised at your bank may mandate moving at least that portion of your business to one of our compliant,
Nonetheless, best practice to assure a stable banking relationship in any event would be to direct all revenue from licensees into a compliant, transparent bank account. If preferred, the balance of your business could compliantly remain with your current financial institution.
ORION GROUP NYC can now introduce ancillaries to compliant, transparent stable local banking in California, Nevada, Florida, Louisiana, Maryland, DC, Pennsylvania, Ohio, Michigan, New Jersey, Massachusetts, Alaska, Colorado, Oregon, Washington, Arkansas, and Arizona. A few of the financial institutions in our network are also willing to conditionally welcome ancillaries from outside their home state, so we can often provide service to companies located in other states as well.
Since we are committed to building our bandwidth of cooperating compliant banks across the country to provide service to the entire industry by 3/Q 2018 at the latest, additional financial institutions are coming on board all the time.
ORION GROUP NYC can help you navigate the appropriate ‘risk vs cost’ analysis that’s best for your business, providing both expert guidance and negotiation.
Costs and fees for ancillaries seeking compliant stable bank accounts are considerably less than for licensees. The primary cost is between a few hundred to a few thousand dollars to complete required due diligence and compliance accounting for each licensed client or customer before accepting their deposit(s). Then ongoing due diligence and compliance costs are relatively modest.
Once a compliant bank account is established, ORION GROUP NYC can provide a variety of (now-compliant) electronic (cash-free) payment solutions, including MasterCard, Visa, American Express, Discover & JCB, as well as electronic ‘wallet’ programs and electronic check apps, including shopping cart integration which you can use to accept payment compliantly from licensed customers and clients. Reducing the amount of cash you receive will also reduce your compliance and security costs. We’ll work with you to implement the optimal package for your specific circumstances, especially since market pricing currently ranges from roughly 2.9% to 8.4% with 3-6 month rolling reserves of between 0% - 10%.