Every few weeks, Steve Rusnack fills up his gas tank and sets off for the roughly 500-mile round trip between his cannabis shop in Fort Kent and his bank in Augusta. 

He isn’t crazy about the nearly 10-hour trek, especially during the first half when he’s carrying large amounts of cash ready for deposit. But he has little choice. 

Rusnack is the owner of Full Bloom Cannabis, an Aroostook County marijuana company with two adult-use shops and one medical storefront. While his business is fully legal at the state level, many banks won’t risk working with a business the federal government says is not. To do so could open the banks up to charges of criminal money laundering and compliance penalties.

Rusnack is one of well over 1,000 cannabis business owners in Maine’s medical and recreational markets who have struggled with the lack of access to banking. 

Industry experts say the shortage of banks and credit unions willing to serve the cannabis industry creates undue financial and regulatory burdens on businesses. The lack of basic financial services also causes safety concerns for cash-driven companies, squanders growth by cutting off access to loans, and puts mom-and-pop shops at a disadvantage compared with large multistate operators with deep pockets. 

But there’s also a huge opportunity in cannabis for banks and credit unions.

Maine is home to 285 state-licensed adult-use cannabis businesses, including cultivators, store owners, manufacturers, and testing labs, with another 207 businesses in various stages of the approval process. 

Retailers in 2022 sold $159 million worth of products and are on track to surpass that this year, with around $118 million sold through July. 

In the medical market, according to July 31 data, there were 1,940 providers – known as caregivers – 53 active dispensaries, plus nine more waiting for approval. 

But the financial institutions say their hands are tied. Without change from the federal government, they run the risk of being fined or shut down. Plus, the regulations in place are burdensome for the banks. Many would rather continue not serving cannabis businesses than take on the risk and the resource burden.

THE FINAL STRAW

Matt Hawes, a founding member of the Maine Cannabis Industry Association, said one of the field’s biggest challenges is the limited number of financial institutions willing to take the risk, as well as the geographic distribution of the ones who are.

The impact is especially felt by retailers, who need small bills and change to operate cash-based businesses, said Hawes, owner of cannabis-infused beverage manufacturer Novel Beverage in Scarborough and co-owner of Brothers Cannabis, a Bangor-based adult-use chain.

Skowhegan Savings Bank is the northernmost bank that serves cannabis-related businesses. 

“If you’re in Bangor or north or east of Bangor, you’ve got a long way to go to get to your bank,” he said. 

It puts wear and tear on a vehicle and can be costly in labor if an employee makes the bank run, and carrying large amounts of cash is a security risk. 

Add that to the challenge of operating a retail business with an abnormal shopping experience – security at the door, products you can’t touch, and high prices paid primarily in cash, though sometimes debit – and it’s just another strike against the industry during a time when discretionary spending is precious. 

“If banking was our only issue, we’d probably be feeling great,” Hawes said. “This is the straw that breaks the camel’s back in an industry that has a lot of straws.” 

Among those other straws is the presence of large multistate operations, with deep pockets that many industry members say are pushing out the mom-and-pop shops that can’t compete. The lack of access to lending only compounds the issue. 

“Access to capital in the cannabis industry is probably the No. 1 barrier to entry,” Hawes said. 

But the tide is starting to turn. 

More institutions are starting to offer banking services to cannabis businesses, and while lending is still virtually unheard of, Hawes said more are considering it. 

“Where we are with banking feels like a dream because I finally have a bank account,” he said. “I still feel like we’re making progress.” 

When Rusnack, the Aroostook County business owner, opened his medical store in 2016, he didn’t have a bank account either. He’d go to Family Dollar and load up on prepaid debit cards for everything.

Seven years later, with three stores, plus cultivation and manufacturing, he has two bank accounts. Things are moving in the right direction, but there’s still a way to go. In his case, literally. 

Skowhegan Savings Bank, which he uses for his adult-use stores, has a location in Dexter, which Rusnack said is technically closer, but it’s far off the highway. Since he tries to combine his bank trips with other work-related trips “downstate,” the Augusta location is more convenient. Plus, he banks with cPort Credit Union, also in Augusta, for his medical store.

“I have to go there in person whenever they need a live signature or if we deposit cash,” he said. Fortunately, with online banking, there’s a lot he’s able to do remotely. 

WITHOUT LOANS, GROWTH SLOWS

It’s unclear exactly how many banks will serve cannabis-related businesses, but industry professionals say it’s a small number. And of those, even fewer, if any, will offer lending. 

Maine State Credit Union started “tiptoeing” into cannabis banking this year and now has between one to two dozen cannabis or cannabis-related accounts, said Adam Kavanaugh, chief operating officer. 

As the federal and state laws continue to contradict one another, Kavanaugh said the safety concerns from a cash-heavy industry have only grown.

Opening up deposit banking for cannabis businesses provided an opportunity to better serve the community, both from a public safety and economic perspective. 

Maine State Credit Union does not, however, offer lending services to cannabis businesses. 

“We’re trying to read the tea leaves as far as what’s going on on the federal lending side,” Kavanaugh said, and while it’s highly unlikely that the government would start prosecuting these businesses and banks, it’s not impossible. “There’s much more risk associated with lending.” 

The inability to access capital has some businesses in a stranglehold, said Mark Benjamin, co-owner of Botany, a Rockland-based adult-use store. A second Botany location is planned for Belfast, but without access to loans, they’re limited in how far they can expand.

“We have not grown as fast as we could have grown,” Benjamin said. “We have one store right now, but my guess is we would have three if we were in a regular industry.”

As a Maine State Credit Union customer, he can’t get a traditional loan, but his business is too small to attract some of the venture capital bigwigs.

Plus, as a federally illegal business, he’s unable to deduct ordinary business expenses because his income, according to the IRS, comes from “trafficking.” The tax burden is immense, and Botany is restructuring to alleviate some of the strain.  

‘ONEROUS AND COSTLY’ FOR BANKS 

For most financial institutions, the risks still outweigh the reward.

Because cannabis is still federally illegal, financial institutions run the risk of violating the Controlled Substances Act and being considered money launderers under the Bank Secrecy Act. 

In 2021, the government updated its interpretation of the 2014 Financial Crimes Enforcement Network guidance, requiring banks and credit unions to keep extensive records and report data about marijuana-related businesses on a near-constant basis. Businesses are required to have a sales/deposit validation system in place and to report specific information about investors and vendors.

The financial institutions are also required to submit a Suspicious Activity Report to the network at least every six months detailing deposits, withdrawals, transfers, and more, regardless of whether the business complies with state law. 

If the businesses don’t comply, they run the risk of regulatory sanctions that the Maine Credit Union League says are “onerous and costly.”

But it’s also onerous and costly for the account holders.

Scott Ouellette is glad to have a bank account – he doesn’t know how he’d be able to run his manufacturing business, Upta Camp Edibles, without one. 

For his first three years in business, Ouellette, who is based in Bowdoinham, had to go to the post office with cash and do a money order just to buy what he needed. 

His bank account with cPort Credit Union made it possible to build his business, but it hasn’t been easy. 

The fees required just to keep the account open are costing him thousands, and he’s frustrated by the level of oversight the federal government requires. 

“They’re monitoring every aspect of our accounts. I really don’t have anything to hide, but it gives you that uncomfortable feeling – it makes you feel like a criminal,” he said. “It’s really unfortunate that we have to succumb to these crazy terms just to run a business.” 

But Jim Roche, president of the Maine Bankers Association, said the challenges for both banks and businesses won’t change without federal intervention.

“It’s an individual risk management choice that each bank assesses and decides independently,” he said. “The federal government could decide tomorrow to enforce federal drug laws still on the books that regard cannabis as illegal. Until the law changes, the risk to banks does not go away.”

AWAITING A SOLUTION

That’s where the Secure and Fair Enforcement (SAFE) Banking Act comes in. 

This legislation, co-sponsored by U.S. Sen. Angus King, I-Maine, would prohibit federal regulators from prosecuting financial institutions that provide banking services to state-sanctioned and regulated businesses or associated businesses. 

Banks would still need to comply with Financial Crimes Enforcement Network guidance, but as more states and the government adapt to legalized cannabis policies, it could be streamlined. 

“A business that follows all state laws should be able to access the banking system – that’s pretty commonsense,” King said in a statement. He said the bill would bring more customers to banks, improve public safety and support the hundreds of small businesses now operating in the cannabis industry.

The idea behind the SAFE Banking Act is nothing new – the legislation was introduced nearly a decade ago, and it has passed the U.S. House seven times. This is the first time the Senate has given the bill serious scrutiny, according to Politico, and the future of the legislation is murky.

It has the support of Maine’s financial industry trade groups. 

“Banks want certainty and clear rules of the road, which would allow them to serve all legal businesses with a level playing field,” Roche said. “SAFE Act would provide that.” 

Robert Caverly, vice president of advocacy and outreach for the Maine Credit Union League, said the organization has advocated for the SAFE Act for years, but noted that it’s not the end-all-be-all. 

“There are going to continue to be challenges from a regulatory perspective. It’s a good first step but it’s not going to remove all of the challenges that exist,” he said. 

Ellen Parent, the league’s director of compliance, noted that banking for the state’s adult-use businesses is significantly easier than for medical retailers. The rules governing the two programs are drastically different, with significantly more governmental oversight for the adult-use program, and the reporting requirements for the state are pretty aligned with the information the banks need. 

The medical market, however, was designed with privacy for the patients in mind and the information the providers need to give the bank may not be as readily available. 

Rusnack, the owner of Full Bloom in Aroostook County, is hopeful that the SAFE Banking Act or something like it will come along, but after 12 years in the industry, he’s not getting his hopes up.

“It seems to me, that it’s one of the last big pieces before legalization on the federal level. It’s either going to be the first domino to fall or the last,” he said. “If they allow banks to lend, then what’s the point of it being illegal?”

While financial and cannabis industry officials await a decision on the SAFE Banking Act, a bill in the Maine Legislature sought a similar solution. 

Proposed by Sen. Nicole Grohoski, D-Hancock, L.D. 788 would direct the state treasurer to review the options for meeting the banking needs of the industry, including examining efforts in other states, at the federal level and any other measures the Legislature can take to encourage federal action. 

The bill passed in both chambers but was moved to the special study table, where it died. It was not immediately clear if the bill will be reintroduced next session.

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