Fraud: The Cannabis Card Payment Processing Honey Trap

Accepting credit card payments for cannabis… the thing cannabis merchants want more than a bear wants honey. 

Opening a merchant account to accept card payments is enticing for cannabis sellers who are wary (and weary) of doing business on a cash-only basis. It’s hard to keep cash safe.  It’s hard to track or monitor.  The cost of handling, transporting, and depositing cannabis cash are extreme.   Having too much cash on hand presents an ongoing danger to staff and public safety.

Unfortunately, this problem will not be solved overnight.  Cannabis sellers, producers, and processors will have to wait until the federal law changes before they can accept credit cards legally.  Cannabis merchants can't afford to be tempted by what seems like an easy fix or workaround.

You may have heard that some dispensaries are processing credit card transactions “legally”. You may even know fellow cannabis merchants who are accepting credit card payments.  That may be true that they are but accepting credit cards for cannabis isn't legal. 

Before we get into the details just know that there is light at the end of the tunnel.

Credit card processing is still an obstacle.

At this time, there is no cannabis credit card processing solution that is legitimate.  And no bank, even in legal states, will open merchant accounts for legitimate cannabis businesses to accept credit card payments. 

This is because the major card brands have taken a firm stance against cannabis merchants until the federal law is modified in addition to way funds are handled with credit card transactions.  

Banks are risk-averse.  As a consequence, they shy away from accounts that might draw attention from regulators.  Credit card processing for marijuana businesses will not be “in the cards” for the vast majority of acquiring banks. Nor will it be for credit card companies like Visa, MasterCard and American Express until the federal laws are amended.  The added risk, paperwork, and scrutiny is a burden they have no interest in shouldering. 

The Card brands (Visa, MasterCard, Discover, and American Express) do not allow credit card transactions by a cannabis merchants in the U.S.  So, if a dispensary is currently accepting credit cards, it’s likely they are using a mis-categorized Merchant Category Code.  

Sales agents often times claim that they can allow cannabis businesses to accept credit cards.  Not only are these agents deceptive but they aren’t doing businesses any favors.  In fact, they may be inviting cannabis merchants to commit fraud.  Purposely deceiving a bank or processor of the true nature of the business as being cannabis is Bank Fraud and Money Laundering.

Likewise, service providers using offshore processing sources, wallet solutions, or gift card exchanges are opening cannabis business owners to the risk of money laundering charges.

Find legitimate and compliant cannabis payment solutions.

Compliance with current card brand, AML (anti money laundering), BSA (Banking Secrecy Act), and FinCEN guidelines requires cannabis entrepreneurs to find other ways of accepting electronic payments. Before now, this meant cash only.

The first step in finding a legitimate payment provider is to not listen to any salespeople who try to sell you services that claim to have created a "new" path or workaround to accept credit cards.  This is illegal and has the potential of putting you and your business in harms way. Claims such as:

• FinCEN "certified" or "registered"
• "Card Brand Compliant"
• "Our Technology....transparently....accept all credit card brands compliantly..."

are deceptive and no true.  Lets make it simple.

Don't Fall for the Honey Trap.

There is no legal path to accepting credit cards period.  No amount of technology, soothsaying, or fancy marketing can change that!

Simple questions like - who is the acquiring bank?  and who is the payment processor?  should quickly reveal that they won't tell you.  There is a good reason for that.  It's that the bank and processor do not know that their services are being used to process cannabis transactions.

There are legitimate ways to accept various payment types for cannabis while remaining compliant and legal.

At Bankcard International Group, we work hard every day to change the status quo. We advocate on behalf of our clients and the industry as a whole to help all of us prepare for the day when you can accept credit cards as easily as any liquor store, pub, or grocery store can. 

While ancillary cannabis businesses are able to accept credit cards, think cannabis lawyers, packaging, lighting, and marketing companies for example.   Plant touching businesses are still prohibited from accepting credit cards, however, cannabis dispensaries and delivery businesses can accept PIN debit card payments. 

PIN Debit merchant accounts offer dispensaries and delivery services a legal and traditional payment option. 

How is PIN Debit a compliant payment solution for cannabis?

We’ve seen various different schemes for accepting payments for cannabis. Cashless ATM, gift card conversions, closed-loop systems, and more. But none have met the needs of the customer or cannabis merchant for accepting payments in a normal way. 

At B.I.G., we help our clients avoid the unscrupulous representatives that we know or suspect are allowing this practice. We look after the cannabis industry’s long-term interests, not the short-term gains others may be misguided enough to pursue.  

We want to bring a cannabis payment processing solution that is both compliant and familiar. PIN Debit payment processing is the answer. It is the first “traditional” payment processing solution to be brought to the cannabis industry. And it paves the way for future card payment options.

Our PIN Debit program provides a compliant payment processing solution through a transparent cannabis merchant account.  We offer full disclosure of our processor and acquiring bank and vice versa they are fully informed about our client's businesses.

Together, formal regulators, legal advisors, and our sponsor bank’s internal BSA/AML team worked to create a compliant flow of transaction data. To achieve that flow of transaction data, each party involved must have transparency. Each financial institution, entity, or system involved in the payment process must be aware of the source of the funds. Additionally, they each must have an established and compliant cannabis AML/BSA policy. And, finally, the sponsor bank must verify that the merchant’s depository bank is also aware of the nature of the business and also runs a compliant AML/BSA program.

Every step and process has been audited and approved. This high level of transactional transparency enabled us to provide the first fully compliant cannabis merchant accounts. And it allows us to process debit card payments while meeting or exceeding federal guidelines.

Getting approved for a cannabis PIN Debit Merchant Account is easy.

Doing anything in the cannabis industry requires diligence. And creating a transparent and compliant cannabis payment solution is no different. Luckily, when you work with B.I.G., you’ll be working with one of the most experienced and knowledgeable teams in the industry.  We've been providing financial and payment services to the industry since 2008.

We put all that experience to work for you to make the whole process as easy as possible. 

The most important thing all cannabis merchants must have to get approved is a compliant business bank account. The merchant’s depository bank is the final step in transparent financial chain of custody. The sponsor bank cannot send money to any bank without verifying that bank is aware of the source.

Don't worry, if you have yet to get a compliant cannabis bank account, we can help. One of the goals of creating a transparent cannabis payment solution was building relationships with cannabis friendly banks. 

Once you have a compliant bank account, it's time to apply for your merchant account.

Here, we want to give you a partial list of the types of documents you will be required to provide:

• Executed eSigned Merchant Agreement
• Executed Attestation Disclosure - Bank will confirm merchant’s bank has a compliant BSA/AML program and is aware the merchant is cannabis related. 
• Articles of Incorporation/Organization or Doing Business As (DBA) filing for sole proprietorship
• Marijuana Related Business (MRB) license
• Imprinted, voided check or bank letter
• 3 months' most recent processing statements (if applicable)
• Driver’s license of each Beneficial Owner with 15% or more of equity interest and Authorized Signer(copy of front and back)

 We put together a comprehensive checklist of supporting documents merchants will need to get approved for a cannabis PIN Debit merchant account. Cannabis merchants can find the entire checklist on our website.

You will want to have each of these items along with your Completed Cannabis Merchant Account Pre-Application. Putting together a complete and organized package will please underwriting and expedite approval.

While most merchant accounts can be approved in 24-48 hrs, cannabis merchant accounts take a bit longer. Most cannabis businesses can be approved for a merchant account in about 10 days. Boarding legal cannabis businesses requires complying with enhanced compliance measures. And this just takes a little bit longer. 

As soon as your merchant account is approved, the bank will program your terminal with the proper encryption keys and ship it out right away.  But don’t worry, if your current terminals are supported by the processing platform, you won't be required to upgrade. Instead, we can program your existing terminals with the new encryption keys, minimizing start-up expenses. 

Compliant cannabis payments in your dispensary or delivery. 

Resorting to Cashless ATM programs for cannabis payments is no longer the only option. Customers no longer have to rely on confusing schemes to buy cannabis. And they certainly don’t have to pay extra convenience fees to use their card.

By working closely with our banking & processing partners along with debit networks we’ve been able to bring familiar payment options to dispensaries and their customers. 

Customers don't have to worry about not having enough cash on them when they visit your dispensary. And they don't have to eat the extra fees associated with cashless ATMs. 

When customers are finished choosing their product, they simply walk up to the bud tender, swipe, dip or tap their debit card, and pay the same way they would anywhere else. 

Create a frictionless and familiar payment environment for your customers. Accepting cards allows you to reduce the amount of cash taken in, stored, and deposited. It not only saves money, but it increases sales and safety.  

Get approved for your PIN Debit cannabis merchant account now. For more information, give us a call. Our ETA Certified Payment Professionals are happy to discuss costs, bank information, and explore full product features with you.