Most financial institutions are wary of working alongside cannabis-related businesses despite widening acceptance, according to a new report.
The U.S. Government Accountability Office analyzed data from the Financial Crimes Enforcement Network, a federal agency that combats financial crimes, to determine how cannabis-related businesses operated alongside the financial industry.
Under IRS code, businesses engaging with Schedule I or II controlled substances cannot deduct business expenses for federal tax purposes. Cannabis-related business owners reported this as a major constraint in the report
The network calls on banks to comply with Banking Secrecy Act requirements when working with cannabis-related businesses. The Banking Secrecy Act requires financial institutions to gather information on cannabis-related businesses and file suspicious activity reports based on certain interactions with the businesses.
In 2024, 1,000 businesses filed suspicious activity reports on transactions with cannabis-related businesses.
“[Cannabis-related businesses] may experience bank account closures, high fees for bank accounts, and high interest rates for business loans,” the GAO report reads.
Visa, Mastercard, American Express and Discover prohibit transactions for cannabis-related businesses due to its classification as a Schedule I drug. Most financial institutions told GAO that potential legal and regulatory sanctions often dissuade them from working with cannabis-related businesses.
GAO could not conclusively report whether banks supporting cannabis-related businesses were subject to fines or other legal action resulting from the partnerships.
“Federal banking regulator officials said that they had not taken any enforcement actions against their supervised institutions solely for serving CRBs,” GAO wrote.
Some financial institutions that offer services for cannabis-related businesses limit their availability. Some institutions did not offer international wire services or loan programs for cannabis-related businesses.
“Financial industry association representatives explained that lending to CRBs can be risky because cannabis is federally illegal, so the government could seize collateral used to secure the loan,” GAO wrote.
The owners of cannabis-related businesses said banking restrictions often prevent business expansion and limit how owners can use financial resources.
“Individuals working in the industry can face challenges maintaining bank accounts and obtaining car loans, mortgages, or life insurance,” GAO wrote.
Sens. Elizabeth Warren, D-Mass., Raphael Warnock, D-Ga., Tina Smith, D-Minn., and John Fetterman, D-Penn., requested information on the status of cannabis-related businesses and banking regulations.
“The conflict between federal and state law has led CRBs and cannabis industry associations to report challenges accessing basic financial services, including bank accounts and loans,” GAO wrote. “These challenges may also extend to CRB employees seeking personal banking services. Congress has considered, but not enacted, legislation to help address these reported challenges by providing safe harbor protections for financial institutions that serve state-licensed CRBs.”
