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B2B Vault Episode 35: Cannabis & Payment Processing

Written by Allen Kopelman

December 28, 2021

merchant statement analysis

Video Transcription

Hi, Allen Kopelman here with another episode of B2B Vault providing educational information for business owners and merchants. B2B vault, the payment technology podcast.

So today, we’re going to talk about cannabis and payment processing. I must get phone calls for this probably at least 2, 3, 4 times a week. We get people that call us up. Oh, I own a dispensary. I want to get set up with credit card processing, or they say, oh, what does it matter? What I sell, which I start giggling. Sometimes when people say that, I’m like, well, it matters to the bank. The bank wants to know what, what are you selling? So we have to know, and I hear all the usual things, oh, we’re a licensed business. We’re a regulated business. I don’t understand why we can’t have a credit card machine and our cannabis dispensary and so on.

Well, right now, Visa is cracking down on the cashless ATM industry. And basically, so the cashless ATM, it’s hard to explain, but basically, it looks like a credit card machine. Still, they put ATM software inside it so that the machine mimics the ATM, and the customer runs a transaction and spits out a piece of paper instead of money. And then the store has to give the difference in of the difference between them. So they got a hundred dollars out, and their bill was only $84. They would have to give them $16 of change. So, now Visa is cracking down on cashless ATMs. I’m not going to say that a hundred percent of cashless ATMs are non-compliant or compliant, but you’re not supposed to process those types of transactions on the Visa or MasterCard network. Now other regional debit networks run on the ATM rails, which is different from the credit card rails, but Visa and MasterCard own some rails that process ATM transactions.

So you have your ATM card or check card from the bank. When you go to the bank or an ATM and get money out, you know, often those are run on the faeza network. So Visa is saying, like, this is not allowed. Some of the banks, you know, they’re sending letters out to the banks, and the banks are sending letters out to all the people who process and saying, no, we don’t want you doing this. You know, now some banks could say, well, we want to do that, but we’re only going to process on the regional networks that permit us. So as long as they’re doing it, you know, and not using Visa and MasterCard, and they registered with thin Sen, it’s in a gray area. People always ask me about the safe banking act. They voted on the safe banking act; it’s been voted on and the house, but not on the floor in committee and several committees. It’s been voted in the Senate, a couple of committees, and the safe banking act. I don’t understand why they want to pass the safe banking act.

You already have in Canada; they’re taking credit cards for cannabis. So there’s no reason why they can’t be doing it in the United States. I mean, it’s the same Visa and MasterCard; it’s different banks. In Canada, there are a lot fewer banks that do credit card processing and card issuing. Only fewer than ten banks issue cards and process cards in Canada and the United States. There are hundreds and hundreds and hundreds of banks, and there are tons and tons of processors. So it’s, you know, it’s, I mean, it’s a considerable number. It’s like comparing how many people live in New York to how many people live in Montana? You know it’s just the two different numbers and different controls, but the safe banking act, this thing is stuck. No idea why they’re not interested.

Cannabis Payment Processing is a multi-billion dollar industry. We’re talking about cannabis. So at some point, I have to think that Visa and MasterCard are going to say, oh, here’s our stamp of approval. Or here’s the compliance that we’ll accept from the processors to be compliant. And, you know, and somehow this thing gets squeezed through Congress. I mean, you know, I don’t understand what’s I think it’s more of a, oh, I have no idea why they don’t want to do it. It just doesn’t make a lot of sense. You don’t even read a lot about what is this Senator says or has a representative people say, or, I mean, states are passing laws. So that means governors and the people in the law and the state legislatures are passing laws to make cannabis legal. So obviously, there’s a lot of movement in there. More and more states are legalizing medical marijuana or recreational marijuana. I mean, Oregon is probably the most liberal state. I think you can do Aero in there, and it’s legal up to a specific map. I disagree with that, but that’s just crazy. But I mean, they just got to come up with some national scheme that’s going to, you know, that can be run out across all these states.

So all the rules are the same, you know, and then you know, and do something from that standpoint. So electronic payments and, you know, cannabis, what can be, what can you do in your cannabis shop next? Oh, I thought we had a list. Oh, so what can you do in your cannabis shop? Uh, you forgot to list. Several cannabis places use wallets, where you have to take your, uh, you know, your bank account and link it up to a wallet. You see, you transfer money into the wallet and then the wallet, you can pay the cannabis place with these, you know, with this cash transfer, use an ACH. Now those companies need to be, you know, regulated by FinCEN. So if you’re going to use one of these wallets, you should check it out. Are they regulated? Are they set up for consumer-to-business transactions, or are they set up as a P to P network?

CashApp is supposed to be a person-to-person PDP. It’s not set up as C consumer to be business. It’s set up person to person like Zelle. Zelle has, uh, offers business transactions. Although I would say, it’s pretty pricey. It’s much cheaper to do an ACH and then Zell somebody some money. And there are limitations on that also, like, so you can’t do large transactions, you know, so there’s a lot of wallets out there. I’ve seen a number of these wallet companies get swallowed up by the government and shut down and closed down by their banks. For exceeding the amount of cash, they’re supposed to be handling or the shutdown because they’re doing things they’re not supposed to do. So you have to make sure that you’re using a compliant wallet; they’re registered with FENSA.

Somebody comes to you; they have a cashless ATM solution. Okay. Are you registered with, you know, FinCEN? Is that allowed? I mean, we work with an ATM company where the bank will not, you know, not going to name names of the bank, but we have a bank that allows for cannabis for, uh, for our company. If we want to, let’s say you got a cannabis shop, and you want to have an ATM dispensing cash in your cannabis shop. We can put an ATM in your business that distributes money. And there’s a cannabis asset station paper that we have to sign, and the merchant has to sign. And it explains what the rules are for placing an ATM in a cannabis location. So we have to get the business license, the driver’s license of the person who owns the candidate, corporate papers, their federal tax ID number. And, you know, the cannabis shop cannot be the owner of the ATM.

We’re supposed to be the owner of the ATM as we’re the ATM service. And the cash has to be supplied by us. The money cannot be provided by the cannabis company or owner of the cannabis shop. So, you know, that’s, you know, some people don’t want to go along with that kind of solution. Some do so that they want to go along with that solution. We hook it up, but we will not put an ATM in a cannabis location. And then, the owner is going to take funds from the register and put them in the ATM. A clear violation of anti-money laundering. You’re going to get caught anyway because your bank will monitor banks. Monitor ATM is straightforward. So a lot of banks don’t like ATM operators. So what they check for, how they catch everybody is, is if you go, let’s say I operate an ATM one.

Let’s say I’m running one ATM. So I go to the bank, get 10, 20 grand, whatever it is, I have $20 bills. I order the cash once a week. And I take that 20 grand, 10, whatever the amount is, I put it inside the ATM. Now at the end of the month, the bank knows that that bank account is as ATM transactions and it, and it’s always better to use a separate bank account for that. And even if you don’t and you’ve run it into a regular business account, they’re going to see, okay, Hey, this guy got ATM, incoming, ATM transactions. What does that add to how much money the business owner picks up at the bank? Now, if you only picked up five grand at the bank and 40 grand went into your bank account, you’re going to get an email or a letter from the bank probably. They’re going to ask you many questions about the ATM. Who’s processing the ATM, who owns the ATM, and where do you get the money? When you tell the bank you got them, you took the money out of your cash register. That’s an AML anti-money laundering violation. So they’re going to get upset with you. And they’re going to say, oh, we’re going to, you need to stop that, or we’re going to close your bank account, close your bank account down, or even worse kick you out of the bank.

There’s been some recent legislation that blocks banks from going after ATM operators. So that’s good because that was a national law that just passed. And you know, so now banks cannot discriminate against people who are, um, loading and servicing ATMs, as long as we behave and abide by the rules, because people always ask me, oh, how can they catch me? It’s straightforward. You know, if you’re getting more cash in, then you take out of the bank, they’re going to catch it. Cause they have auditors. They might notice it in three months, six months a year, and then boom, you’re kicked out of the bank. I’ve seen lots of businesses get kicked out of the bank because of, you know, they’re not following the, whatever the ATM compliance rules.

You see, we try to follow all the rules and nationwide payment systems. We don’t mess around. We work with payment Alliance for our ATMs. If we have somebody who wants to put an ATM in a cannabis location, we explain the rules; we show them the asset from what’s going on. Do it the right way, or don’t do it at all. So that’s what’s going on with cannabis. I mean, if you’re in, if you want the safe banking act, the past, probably the best idea is to contact your local person in the house of representative and your Senator, and write to them and say, Hey, we should pass the safe banking act, passed the safe banking act. And you know, maybe you, Joe, you follow some cannabis magazines online and websites. And they’re always, uh, you know, stepping up campaigns to try to get these, uh, pass a representative people on the senators, the past, the safe banking app.

It makes sense. You know, I know that, um, you know, listen, they’re trying to push this cashless society right now. So that’s, you know, why I don’t understand why the safe banking act is not getting passed. It would, you know, ease up a lot of the cash, especially with those businesses. I want to tell you it’s in the billions, probably triple-digit billions a year of money’s being spent.

Those in those businesses now what businesses related to cannabis, cannabis-related businesses, which we, you know, like doctor’s offices, where you get cards, um, people who sell things like lights and rolling papers and all different kinds of packaging materials, and thanks to dispensary’s, we can get them set up with credit card processing. We call it MRB marijuana, MRB marijuana-related business. So we can take care of marijuana-related businesses all day long. We have a couple of banks that they allow for that. Those companies want to take a credit card. They don’t want to do all these cash transactions. Some of this, uh, things like, uh, led lights, grow lights, um, you know, bulk pack, all kinds of packaging material that has to be sold to these, to these businesses, same thing, marijuana card doctors don’t want people walking in and them two, $300 to pay for your marijuana card. Uh, we got it set up with credit cards.

So this is another episode, B2B vault hope. I answered all your questions about cannabis and payment processing. I’m sure this will get updated, uh, more than one star in 2022. Maybe we’ll see the safe banking act get passed. So don’t forget. Follow us at B2B Vault on popular podcast networks and YouTube. You can visit our website, B2B vault.info, and have a great day. Everybody Carpe diem seize the day.

Merchant Statement Analysis | Merchant Services Statement Analysis
Merchant Statement Analysis | Merchant Services Statement Analysis
Merchant Statement Analysis | Merchant Services Statement Analysis

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