Navigating risk
Financial institutions already engaged in cannabis banking, or those considering entering this space, must continue to treat cannabis-related businesses (CRBs) as high-risk clients. While reclassification may ease some public perception challenges, federal law has not yet changed enough to remove cannabis from heightened regulatory scrutiny. As with any cash-intensive business, CRBs require additional monitoring.
Institutions need to:
- Conduct enhanced due diligence and ongoing monitoring of CRB accounts
- Stay informed on updates to FinCEN guidance related to CRBs
- Document decisions carefully and ensure board-level oversight for cannabis banking programs
For those new to cannabis banking, this policy shift presents a strategic opportunity to assess risk appetite and explore potential revenue streams. It also highlights the need for comprehensive AML staffing assessments to ensure teams are equipped to handle these complex customer relationships.
Assess AML staffing needs
As the cannabis banking landscape evolves, institutions must ensure that staffing levels align with new workloads and regulatory expectations. Even with the easing of classification, CRBs still carry operational and reputational risks. A robust AML program, backed by appropriate staffing, remains non-negotiable.
Staffing assessments can help financial institutions:
- Identify gaps in transaction monitoring coverage
- Allocate resources effectively for high-risk accounts
- Support business decisions with data-driven insights
Whether assessments are performed internally or by a third-party provider, demonstrating a commitment to strong internal controls is crucial as federal agencies continue to refine their stance on cannabis.
The cannabis banking opportunity
With the U.S. cannabis market expected to exceed $32 billion, reclassification may catalyze a new wave of legitimate financial services offerings. For community banks and credit unions, it presents a rare opportunity to serve a growing industry often locked out of the traditional banking system.
To prepare, financial institutions should:
- Revisit their risk assessments and cannabis banking policies
- Engage with regulators and peer institutions to understand best practices
- Educate staff across compliance, lending, and operations functions
These steps ensure readiness not just for current compliance requirements, but for future shifts that may follow reclassification, including potential changes to AML/CFT guidelines.
A cautious but strategic approach
The reclassification of marijuana to Schedule III represents progress, but not clarity. Cannabis banking remains a complex and highly regulated endeavor. Financial institutions must remain cautious, deliberate, and informed as they weigh the risks and opportunities in this space. While previous attempts to establish a federal safe harbor for cannabis banking, such as the SAFER Banking Act, have repeatedly stalled in the U.S. Senate, the rescheduling of marijuana could improve the political environment for future legislative progress.
By conducting staffing assessments, updating policies, and maintaining strong oversight, financial institutions can position themselves to serve cannabis-related businesses responsibly and effectively. Now more than ever, compliance professionals have a crucial role in shaping the future of cannabis banking.
