Virginia CannaBusiness Banking and Credit Card Processing Services: Who you gonna call? (Hint: not B of A!)

On July 1, 2021, the Commonwealth of Virginia joined the many other United States in legalizing cannabis use, possession and personal-use cultivation for adult citizens over 21 years of age.

The new law not only removes criminal penalties for personal use and possession of cannabis, it also opens up incredible economic opportunities for minority and women-owned Virginia small businesses, Virginia farmers, and the many other companies and entrepreneurs who will partner with and serve cannabis-related suppliers, processors, growing equipment manufacturers, distributors, and so on.

These businesses — just like every other sector of our state economy, from grocery stores to home improvement warehouses and big box retail stores, to trucking businesses, or accounting firms, private schools, home builders and gas stations — will ultimately need lines of credit, factoring services, financial advisors, insurance services, loans, credit card processing and operating accounts.

But current federal drug laws and strict regulation, enforcement and interdiction at the federal government level maintain the status quo since the late 1930s — with cultivation, possession, and use of cannabis still unlawful to the same degree as cocaine, opiates and narcotics. Accordingly, federally-regulated financial institutions — such as big national banks like Regions, or US Bank, and “National Associations” like Bank of America, N.A., as well as smaller regional and local banks like City National, or F&M Bank — have significant restrictions on their ability to accept deposits and to facilitate interstate transactions from businesses affiliated in any way with the state-legalized cannabis industry.

It is fact that Virginia cannabis-related businesses have already lost banking and payment processing services at traditional national banks who refuse to furnish accounts and services to such companies, or who pull services once a cannabis link to the business is discovered. The author is aware of one such bank who sent out an undercover employee to a new grow store to determine whether it was “a marijuana business”. When the employee reported back that there was a picture of a cannabis plant in the store — even though no illegal activities were being carried out at the retail location — the bank unilaterally closed the store’s merchant account and ended their banking and card-processing relationship. The Federal restrictions on the bank’s cannabis-related banking services was cited as the reason.

The answer for most cannabusinesses in Virginia will be the state-chartered bank. Such banks, organized under the Virginia Code Title 6.2 rather than federal law, and regulated by Virginia’s Bureau of Financial Institutions, and the State Corporation Commission, will be more friendly to cannabis-related businesses by design. That is, Virginia’s homespun banking regulations will have to allow opportunities for its newly-legalized cannabis industry to bank profits, process credit and debit card payments, and the like, or the industry will have a short and disappointing lifespan, contrary to the legislature’s intent.

The State Corporation Commission publishes an annual list of current state chartered banks in Virginia, at the link below. I strongly encourage my clients with cannabis-related businesses to partner with a state-chartered bank for reliable and lawful banking and credit card processing services in Virginia, in order to take full advantage of the incredible economic opportunities that Virginia’s new cannabis laws provide.

Virginia state chartered banks:

Click to access banks.pdf

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