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What Constitutes Compliant Cannabis Payment Processing?

by Kimberly Baylies on February 12, 2021

Cannabis Payments Part ll - In our last article, we went into detail about why it's so hard for federally backed banks and financial institutions to serve the cannabis industry. We also talked about why those challenges make it impossible for cannabis businesses to accept credit cards. 

By having a good grasp on bank fraud and money laundering laws, you can easily understand why most cannabis payment solutions are not legal and compliant. 

But this knowledge also helps one understand just how to build a proper cannabis payments solution that is legal and compliant.

Just in case you didn't get to read our latest article “Most Cannabis Payment Processing Isn’t Actually Compliant”, here’s a quick refresher:

Cannabis payments can't (legally) include credit cards.Think of it this way: Banks are regulated by the Federal Government. And the card brands essentially work for the banks. Federal law prohibits the sale of illicit drugs and facilitating transactions involving illegally gained funds. Basically, that constitutes money laundering and bank fraud. Cannabis is still a Federally illegal drug. 

In order for banks to work with cannabis, they must develop a compliant BSA AML program. This program keeps them in line with Anti-Money Laundry laws under the Bank Secrecy Act. They are also required to report all transactions involving marijuana or marijuana related business. These reports are called Suspicious Activity Reports or SARs reports.

Not only must the bank that serves the cannabis business, but so must every other entity that could touch the money or be involved in any transaction.

The "sponsor bank", that funds the transactions, is taking on the liability of the transaction and must report SARs on the funds. Then the acquiring bank that processes the transaction must have full transparency to the goods being purchased. Then to complete the compliance circle, the Sponsor bank MUST be able to show that they have verified that the depository bank has a BSA AML compliant cannabis program that also reports SARs on the deposits. Only in this way can the complete cannabis purchase be traced when necessary.

In short, there’s a lot of red tape involved with serving the cannabis industry. And some banks simply can't afford it or take on the liability. Increased risk. Increased data collection and record keeping. Reporting Program development, education, staffing. And much, much more. But despite this, banking and payments options are expanding for cannabis companies. 

So, again I ask, can a bank provide a cannabis business with card payment options and be compliant with BSA/AML laws?

It just takes time and dedicated effort to develop the framework to do it in a compliant manner. 

Our PIN Debit program ensures complete transactional transparency and thus compliance.

As we’ve pointed out, banking and payment options are expanding for cannabis businesses. Financial institutions understand the issues with having an extremely lucrative industry under-banked. Many industry regulators continue to advocate for access to fair banking for the industry. 

In addition to advocating, they continue to research and/or create new avenues for the industry to function in the country’s commerce effectively. And we do, too. And it's through this dedicated work and strategic partnerships that we have created our PIN Debit Program.

The only way to create a truly compliant cannabis payment solution is to overcome each element that makes it non-compliant. That means addressing each requirement of the Bank Secrecy Act and following Anti-Money Laundering laws.  

This took a team effort between each entity and Financial Institution involved in the payment process. We all came together to overcome the challenges and create the first truly transparent and compliant cannabis payment solution.

The sponsor bank worked directly with the card brands and federal regulators to develop this program. The sponsor bank created their own internal BSA/AML team to ensure complete adherence to all rules and FinCEN guidelines. The internal team partnered with Federal regulators to ensure the flow of transaction data met all compliance rules. And they made sure that each entity involved in the payment process has developed a BSA AML compliance program. 

We called upon the Nation’s leading legal team for banking and payments to provide third party examination. Each policy, procedure, and reporting requirement was audited and scrutinized for potential deviation from compliance.

Federal regulators were also called in to audit each step of the process for approval.

The bank, processor, debit networks - all operate under full disclosure. This attention to detail is how our sponsor bank can offer cannabis merchant accounts while still remaining compliant with AML laws.

The result is a comprehensive cannabis payments program that is 100% transparent and approved by the debit networks.

Finally, a dependable cannabis payment solution you can believe in.

Cannabis payment processing that's actually compliant?

With this solution, we’ve also addressed many of the issues with currently accepted cannabis payment options. Merchants want to be able to accept payments just like every other legal business. Customers want to walk into a dispensary and pay with whichever payment form they choose. Our PIN Debit cannabis payment solution gets us one step closer to that world.

PIN Debit allows you to offer customers a totally familiar payment process. No multiple step purchase processes that confuse customers. No more convincing them to get involved with some uncomfortable and unfamiliar process. You won't have to ask them to create an account, preload a card, or buy crypto.

One simple transaction, just like any other store purchase. For the exact amount of purchase. Pin Debit payments are fast and convenient with no time-consuming work-arounds. Customer taps, dips, or swipes their debit card and within a few seconds the transaction is approved. 

There are many benefits for your customers as well. Customers won't be subject to extra out-of-network fees, like they are with the cashless ATM. Customer receipts and bank statements will include accurate merchant DBA and descriptors.

Merchants are equipped with modern payment terminals that are EMV compliant and NFC enabled. Customers will appreciate your dedication to modern payment methods such as mobile payments and tap to pay. With NFC terminals, you're contactless-ready so customers can pay with mobile wallets and smart watches.

Using a debit card to pay for goods is a comfortable and familiar payment process for customers. Customers rarely carry cash on them anymore. Knowing they can pay with their card means they don't have to worry about making a stop to pull out cash. 

Studies show that paying with a card encourages last minute and impulse purchases. 

Cashless ATM options required customers to withdraw a certain preconceived dollar amount in $5 increments. Once they estimate how much they need to withdraw, they aren’t likely to go over that amount. They would have to do it again. This discouraged impulse and last-minute purchases. 

With card payments, you're likely to have fewer cash transactions. Fewer cash transactions are more convenient for bud tenders and safer for owners. Transactions are quicker, and cashiers will not have to make change as often. You’ll have less chance of cash handling mistakes and theft. And you won't have to transport large cash deposits to the bank (or pay for them). Your profits will be funded directly into your bank account. 

Delivery drivers are able to carry less or no cash and won't have to make change in the field. Mobile ready terminals allow drivers to take debit cards at the time of purchase out in the field.

Discover our Compliant Solution

Compliant cannabis payment processing brings relief to an under-banked industry.

When you begin accepting cannabis payments with our PIN Debit program, you can finally breathe a sigh of relief. Cannabis business owners can accept payments without the fear of being shut down any minute. You don't have to risk funds being seized or held and losing months' worth of hard-earned profits. And you don’t have to scramble for a new way to accept payments because you got shut down. Again. 

When was the last time as a cannabis business you got to pay the same normal and fair price for things as other businesses? PIN Debit has low interchange plus pricing compatible with current debit card processing interchange rates.

Any business that accepts card payments must meet Payment Card Industry (PCI) security standards. Because this is a truly compliant solution, you won't sacrifice any security of your customer's card data. The PIN Debit solution is 100% PCI compliant and meets all PCI Data Security Standards for card transactions. 

 

Pilot program for compliant cannabis card payment processing.New cannabis payment solution requirements for cannabis merchants.

Requirements of approval include that the merchant MUST prove that their depository account is BSA/AML compliant. That means that you must have a business bank account with a bank that has a compliant BSA AML program in effect. If you don't currently have a compliant bank account, we can help them establish a legitimate bank account quickly. Just let us know up front. 

We made the application process streamlined so that you can turn in a complete application. This helps to ensure that application approval is a speedy process so businesses can be accepting payments quickly. And so it's a viable option for businesses of all types and sizes, there’s no application fee and no contract. 

Of course, first you’ll fill out the straightforward merchant Pre-application. Your package will include a voided check from your compliant bank or a bank letter proving our account status. If you submit a bank letter, it will require additional supporting documents.

The banks will be in contact with each other to confirm each is compliant and knows the other is as well.To facilitate this, you will be required to sign and submit an Attestation letter. This gives the processing bank permission to contact your bank to confirm information given. The processing bank will confirm that your bank has a compliant BSA/AML program. They will also confirm with the bank that your DDA (dedicated deposit account) is transparent. This allows them to do due diligence and prove your bank is aware your business is a cannabis business.

Supporting documentation includes the same type of paperwork typically requested for any merchant account. You’ll need 3 months processing history statements including any return and chargeback records. Don’t worry if you don't have processing history, we have other options. You'll also need to provide your Articles of incorporation and of course your MRB license. For a full list of required documents, visit this website page.

The whole process only takes about 10 business days. Considering the depth of boarding compliant processing, that's pretty quick.

Ready for a real, legal and compliant solution for cannabis payment processing?

This solution is safe and legal for your business and your customers. While other “work-arounds” and sneaky tactics may allow you to accept payments for a while, they are not dependable. They damage the industry and its reputation with the government. It's hard to show the government you want to be a legitimate part of American commerce and then participate in illegal money laundering activities. It undermines the whole industry.

For now, we are enabling merchants to accept PIN Debit payments for cannabis. Were happy to offer dispensaries a frictionless buying solution for their customers. We're even more happy to provide a cannabis payments solution that is truly transparent and compliant. 

But with time, we hope this program leads to full credit card processing. The intention is that this program serves as a case study for the payment card industry. Success of this program will prove that diligence and transparency can exist in cannabis payments. 

This is a stepping stone for true, compliant credit card processing for the cannabis industry. FinCEN and Federal regulators are watching this program closely as a pilot program for complaint credit card payments. Diligent record keeping and reporting will prove that every payment for cannabis can be traced from end to end completely.

It's inevitable that change will come, eventually. We currently have two major banking and cannabis reform Bills awaiting vote in Congress. They may be amended or improved upon. And if they don't pass, there will surely be more to follow. Eventually something's got to give. It’s just a matter of time. 

When this happens, we can simply activate the credit card option for our merchants. Imagine being able to “yes! We accept credit cards!” without making any changes. Since you already have a merchant account, you won't have to apply for a new merchant account when credit cards become an option. 

We are excited for this day as sure as you are. Until then, align yourself with the one legal cannabis payment option available today. 

Discover our Compliant Solution




Topics: Cannabis, cannabis dispensary, cannabis delivery