Alaskan cannabis companies can now access basic banking services, thanks to new pilot program launched by the financial cooperative Credit Union 1. In a press conference announcing the launch of the pilot today, Credit Union 1 CEO James Wileman said the program was a response to the cash crisis facing marijuana-related businesses in Alaska.
Alaska legalized adult-use cannabis in 2014 and enacted the law in early 2015. This year, analysts project retail sales will top $200 million. Without banking services, companies have to find a way to store and protect all that cash. But they also have to be able to use it to cover expenses, pay employees and even pay taxes. In several states, community credit unions have stepped in to fill the gap. And now, Credit Union 1 will do the same for cannabis companies in Alaska.
Pilot Program will Offer Alaska’s Cannabis Industry Limited Banking Services
Credit Union 1’s pilot program won’t offer a full suite of financial services to the state’s marijuana businesses. Initially, the bank is only offering the essentials: checking and savings accounts and deposit and withdrawal services. Once clients set up their accounts and funds are flowing, Credit Union 1 hopes to offer payroll services. The reason for the slow rollout, according to Wileman, is caution, “to ensure that our processes are in regulatory and good legal standing.” From there, Wileman says, Credit Union 1 will open up more banking services as quickly as possible. The credit union will also donate at least one percent of its proceeds from the pilot program to its #CU1LUV Community Fund. The fund supports local nonprofits that serve Alaskans in need.
All marijuana-related businesses, or MRBs, will be able to access CU1 services. The credit union is open to all Alaskans, and currently serves over 84,000 members. And the simple ability to deposit all the cash companies handle will go a long way toward improving the safety of everyone involved with the MRB industry. But services like credit lines, mortgages, and merchant services would allow companies to leave the cash economy behind completely.
Credit Union 1 Wants to Fight “Cash Crisis” Facing Cannabis Companies
Both the Alcohol and Marijuana Control Board and the State of Alaska Tax Division support Credit Union 1’s new pilot program. Officials with both agencies agree with Wileman that the cannabis industry’s cash crisis is a serious community safety concern. For regulators, the cash problem creates additional concerns about lack of transparency. And for tax officials, having to deal with multi-million dollar tax payments in cash is a costly, time-consuming process, not to mention how nerve-rattling it is for companies.
In fact, as the state-legal industry continues to grow, so does its cash problems, which are now effecting organizations that have nothing to do with cannabis. Even the Internal Revenue Service says it’s overwhelmed by cash payments from marijuana businesses. The IRS has even contracted a company to help it count all that cash—for $1.7 million. In 2017, legal cannabis companies paid roughly $4.7 billion in taxes, and nearly all of it was in cash.
It’s an impressive feat, handling all that dough. But also one fraught with serious risks. “My hat is off to those [weed] businesses making it work,” Wileman said at today’s press conference, “but they deserve better.”
Thanks to credit unions like CU1 and other small banks, cannabis companies are having an easier time opening bank accounts. The U.S. Treasury Dept. says there are nearly 400 banks and credit unions across the U.S. working with MRBs, a number that has tripled since 2014. Additionally, other companies like CanPay have found workarounds to establish cashless systems for commerce.
Banks court federal prosecution when they work with cannabis businesses. But as the industry continues to establish itself, more financial institutions are willing to take the risk.
