In all discussions, messaging and corporate communications, FUSION BANK emphasizes a strong and consistent message, “We Work Exclusively with State-licensed, City-permitted Cannabis Operators”. Our mission is to provide the safe, legal, fully compliant financial services that are economically beneficial for licensed cannabis operators. By adhering to all government compliance and strictly enforcing ongoing reporting and procedures above and beyond federal guidelines we can effectively help our clients move into traditional banking methods and eliminate the risks associated with operating in cash.
FUSION BANK supports the position that medical marijuana research continues to show efficacy and to legitimize the industry efforts…safe, legal, compliant banking is an absolute necessity.
Though often compared to prohibition, one major difference is that alcohol has never been prescribed as a viable medicinal alternative. The growing number of legitimate medical patients as well as progressive research study findings have created a powerful movement toward full legalization despite rumblings in the oval office and those against cannabis.
In 2014, the Cole Memo issued guidance to federal prosecutors concerning marijuana enforcement by:
On January 4, 2018, the Cole Memo was rescinded by Jeff Sessions, Attorney General for the DOJ. Though no longer in force, FUSION BANK continues to support these eight priorities. It is critical that as an industry, we collectively uphold the above marijuana-related conduct regardless of the DOJ rescission.
In other news, there are several bills and initiatives that run the gamut to protect the cannabis industry.
BAI Banking Strategies points out that, “While many banks don’t want to publicly discuss their service of the industry, Numerica Credit Union in Spokane Valley, Wash., has been accepting marijuana cash since April 2014. It even has a dedicated Cannabis Business Account Team. The credit union entered the market after a “lengthy discussion” with its board of directors and receiving approval from the Washington State Department of Financial Institutions, says spokesperson Kelli Hawkins.
“We felt it was vital to the safety of our community that legitimate, licensed businesses be able to deposit their funds in a safe and secure institution,” Hawkins says.”
Like any other credit union in the cannabis space, Numerica requires a recreational or medical marijuana business license from the state of Washington and the appropriate municipality in which the company operates. Lengthy applications undergo compliance and due diligence with an approval process that can take up to 10 days.
Numerica Credit Union currently has 270 marijuana business members and limits deposits to $5 million at a time. Accounts are also limited to deposits, ACH transfers and checks, and do not include bill pay, mobile banking, credit cards or loans.
States like California are extremely motivated to provide a solution as California State Treasurer John Chiang announced in late January, “The reliance on cash paints a target on the bank of marijuana operators and makes them and the public vulnerable to violence and organized crime.”
As medical marijuana continues to move out of the shadows, we believe there are 4 legs to the table that will support ethical industry standards:
2. Compliance/ Banking
3. Public Safety
4. Taxes and Reporting
Currently, there are 30 medically approved States. Within each State are the specific licensing requirements and permits needed for legal operation. This number is not shrinking. More municipalities and local governments are recognizing the benefit to creating licensing requirements to regulate operations in their districts.
In January 2018, just after the rescission of the Cole Memo, CNN reported that, “federal prohibition hasn’t stopped the marijuana industry from growing like a very profitable weed.” “The industry has also been creating jobs and opportunities. There are 9,397 active licenses for marijuana businesses in the U.S., according to Ed Keating, chief data officer for Cannabiz Media, which tracks marijuana licenses.”
Licensing means government agencies are starting to get control of this increasing revenue potential but more importantly, regulate operating limits such as who, when, where and how much can be cultivated, manufactured, sold, distributed and delivered.
As an example, in Florida, there are currently just over a dozen licensed operators that have already submitted a lengthy application, completed a background check and provided certified financials to be approved for a license. “In order to become a licensed Medical Marijuana Treatment Center, each applicant is required to submit audited certified financials, which are financial statements that have been audited in accordance with Generally Accepted Auditing Standards (GAAS) by a Certified Public Accountant, licensed pursuant to Chapter 473, F.S. An applicant’s certified financials must have been issued within 12 months from the date they are submitted to the Department.”
Licensing makes it easy for FUSION BANK to easily identify low-risk, long-term banking clients. If they don’t have a license, they won’t get a bank account.
We recognize that the ultimate authority on compliance is the Financial Crimes Enforcement Network (“FinCEN”.) They have provided written guidance to clarify Bank Secrecy Act (“BSA”) expectations for financial institutions seeking to provide services to marijuana-related businesses. This directive from the Financial Crimes Enforcement Network (FinCEN, a division of the U.S. Treasury) provides some clarity on the issue: Banks can serve those businesses, as long as they follow strict anti-money-laundering procedures outlined clearly and specifically in the 2014 FinCen Guidelines.
December, 2015, Leafly wrote and article stating that, “DFI director Scott Jarvis spent more than a year working with federal regulators to make legal cannabis banking happen. His agency now posts specific guidelines and documents to help businesses and bankers make their way through the thicket of regulations to bank legally. They give financial institutions some assurance that FinCEN won’t come after them for handling cannabis-related accounts provided they follow a stringent set of rules.”
“FinCEN said, essentially, that it will allow banks and credit unions to handle state-legal cannabis cash as long as the banks report it to the agency and conduct extraordinary initial and ongoing due diligence on those clients.”
These workarounds are becoming more cumbersome and varied. However, we are seeing a clear distinction between those businesses that are in it for the short run and those that are here to stay. Any operator that is licensed, fully compliant, wants public safety for their customers, employees and community AND is looking for a banking solution, no longer has a target on his back.
As we study the industry, much of our analysis comes from continued extensive research on current market trends including the The State of Legal Marijuana Markets – 5th Edition report published by Arcview, the go-to expert on investing in this emerging market.
Arcview points out that in 2014, only 51 banks and credit unions worked with cannabis companies and now there are over 500 as this upward momentum continues. Legitimate, licensed operators have a strong desire to bank their cash. They want to have the same financial services available to them as the furniture store down the street. In short, they want to be able to:
• Pay their employees without using cash
• Allow customers to use debit or credit cards for purchases
• Pay vendors with wire transfers or debit cards
• Minimize the risk of employee theft using cash
• Pay taxes
• Eliminate the need for cash storage
• Use standardized electronic reporting instead of manually counting cash
The lack of banking options is the single largest obstacle that keeps the Black Market alive in the world of cannabis. We are confident FUSION BANK has solved this barrier.
“The emerging industry took in nearly $9 billion in sales in 2017, according to Tom Adams, managing director of BDS Analytics, which tracks the cannabis industry. Sales are equivalent to the entire snack bar industry, or to annual revenue from Pampers diapers.” Cannabis is a massive cash business, which creates a huge public safety issue for customers, employees and communities.
In spite of the rescission of the Cole Memo setting some US banks and credit unions on edge about cannabis, we have seen very positive support from the White House addressing the need for banking.
In a recent Forbes article, “The Trump administration’s top fiscal official appeared to voice support for letting marijuana businesses store their profits in banks. I assure you that we don’t want bags of cash,” Treasury Secretary Steven Mnuchin testified on Tuesday during an appearance before the House Financial Services Committee.
Mnuchin, in a series of responses to questions from lawmakers who raised concerns about the public safety implications of preventing cannabis businesses from accessing banks and forcing them to operate on an all-cash basis, said the Treasury Department is currently considering how to deal with the issue.”
There is no debate about the increase in crime for this burgeoning market.
In late 2017, University of Pennsylvania’s Public Policy Initiative addressed this very issue, “Mitch Morrissey, district attorney of Denver, notes a direct increase in crime cases related to the marijuana industry, and sees the reasoning behind the robberies stating: “You hit a 7-Eleven, you’ll get 20 bucks. You hit a dispensary, you’ll get $300,000 on a good day.””
Getting cash off the streets is the responsible thing to do and well worth pursuit of public safety. FUSION BANK provides the only reasonable alternative that is completely legal from seed to bank.
“By 2021, BDS Analytics predicts California will rake in up to $1.4 billion from taxes on recreational marijuana purchases.” That’s if they can get their hands on it before it goes underground.
Banking creates data capture where deposits initiate reporting which in turn require taxes to be paid. Government agencies can experience the increase in tax revenue when they are able to collect the data needed to keep track of businesses. The software that FUSION BANK uses to collect the data and generate reports is extremely sophisticated. Tax guides for cannabis businesses are not easy to understand. It can take hundreds of hours to prepare the paperwork for cash-based businesses, which is what often drives them underground.
As an example, California has a complex tax structure that is enough to demand a full time CPA.
Here are just a few of their requirements:
• Your sales of cannabis and cannabis products are generally subject to sales tax, unless your customer provides you with a valid Medical Marijuana Identification Card indicating they are a qualified patient or the primary caregiver for a qualified patient, along with a valid government-issued identification card. Please refer to the heading, Proposition 64 Exempts Certain Medicinal Cannabis Sales from Sales and Use Tax, below for more information.
• Effective January 1, 2018, a 15 percent cannabis excise tax applies to the average market price of the retail sale. The average market price is determined by the type of transaction (either “arm’s length” or “nonarms’ length”) that occurred when the seller (cultivator, manufacturer or distributor) sold the product to you.
• The cannabis excise tax is 15 percent of the average market price of the retail sale and the sales tax is based on your gross receipts. The examples below provide sample scenarios and guidance on how the cannabis excise tax and sales tax due are computed.
• Some cities have enacted measures requiring that cannabis businesses located in their jurisdictions pay a cannabis business tax. If you add a separate amount to your customers’ invoices or receipts to cover your cannabis business tax, sales tax applies to the business tax amount.
• Distributors use a mark-up rate to compute the average market price of cannabis and cannabis products sold or transferred in an arm’s length transaction. The mark-up rate is not intended to be used to determine the amount for which you sell your cannabis and cannabis products. You may use any mark-up you would like to establish your selling price.
• Effective November 9, 2016, certain sales of medicinal cannabis are exempt from sales and use tax.
• You are responsible for obtaining a seller’s permit and reporting and paying the sales tax on the retail selling price of consignment sales.
• When you purchase a product that will be resold, you can purchase it without paying sales or use tax by providing the seller a valid and timely resale certificate. Sales tax will apply when you sell the product at retail. However, when you purchase a product for resale without paying sales tax but, instead of selling it, you consume or use the product, then you owe the use tax based upon the amount of the purchase price.
• You are required by law to keep business records so that we may verify the accuracy of your sales and use tax return and determine how much tax is due, when a return has not been filed.
Banking software that creates the reports necessary to comply has been a great enticement for the licensed, compliant operators who simply do not have the time for checks and balances and to audit their sales. It frees them from the risk of missing a step that may ultimately cost their license.
FUSION BANK is dedicated to supporting the success of fully licensed cannabis operators that are legal, ethic and beneficial to their communities.
FUSION BANK believes that compliance and banking are the key to legitimate cannabis operations.
FUSION BANK promotes public safety by providing a legal means to get cash off the streets.
FUSION BANK audits all revenues paid to tax authorities and supports tax revenue that stimulates community growth.
FUSION BANK is an innovative cash management solution exclusively offered to licensed MMJ community members and is in strict compliance with all required government banking
and financial regulations.