California North Coast cannabis companies face strict vetting, higher costs from banks, credit unions

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Although cannabis was legalized for recreational use last year by California voters, businesses that produce the plant and service the industry still face challenges when deciding how to bank their money.

The announcement last month by North Bay Credit Union that it had been taking some deposits from cannabis companies for roughly a year was notable because while there are financial institutions that handle the industry’s money, many avoid the limelight as cannabis is still outlawed at the federal level.

In 2014 the federal government laid out how banking services could be provided in the cannabis industry in the so called “Cole Memo,” named after former U.S. Deputy Attorney General James M. Cole. But in 2018, the memo was rescinded.

As a consequence many cannabis companies that are directly involved with cultivating and processing cannabis plants conduct their businesses largely in cash, while ancillary operations that service the industry like Fumé, a cannabis consulting and advisory company based in Napa, face strict vetting and fees from their banks.

Fumé CEO Eric Sklar said his company is not directly involved with producing the plants but still pays a bank $1,000 monthly for an account, on top of an additional setup fee plus $500 for any additional accounts, because Fumé services the industry.

“The problem for a bank is that enhanced due diligence is really complicated and time consuming,” Sklar said, referring to the vetting of cannabis and cannabis connected businesses performed by banks to ensure they were not engaging in money laundering or other illegal activities.

That due diligence included submitting to site visits, divulging the ownership structure of a company, tracking of cash, and other requirements, he said.

Sklar, who declined to name his company’s current or previous financial service providers, said he was dropped by a bank in November because of his connection to the industry.

Because some companies in the industry are unable to access banking services, it was not uncommon to pay local and state taxes in cash, Sklar said.

Not all operations were cash only, however.

“It’s a little bit of a myth to say that banking doesn’t exist in cannabis,” said Douglas Cortina, CEO of San Francisco-based NorCal Cannabis Company, which has roughly 500 employees and is involved in each aspect of cannabis production and sale.

“Any saber rattling from the Department of Justice … can very quickly close a bank’s cannabis program and we’ve seen that a lot,” said Cortina, a former banker himself at Brown Brothers Harriman in New York City.

NorCal used credit unions to bank operations assets but declined to name any.

CannaCraft Inc., a cannabis manufacturer and distributor with a large operation in Santa Rosa, is an example of a business that directly handles the plant and has struggled to find banking services, according to Vice President of Corporate Communications Kial Long.

“It’s a very lengthy process, and ultimately it’s very expensive,” Long said of the vetting banks require cannabis companies like CannaCraft go through to ensure they are not violating state laws or laundering money.

Long wrote in an email the company spent upwards of six months working with a bank in Los Angeles, which she declined to name, to set up an account, which ultimately failed.

She cited the onerous vetting process and the expense — the bank would have charged a new account set-up fee of $4,500 for non-cannabis touching accounts and $10,500 for cannabis accounts. It also would have included a monthly account fee of $1,000 for non-cannabis touching accounts, $2,750 for cannabis accounts and an annual compliance fee of $3,000.

Read more about North Coast cannabis commerce:

Their business was at the moment conducted entirely in cash as a result and required costly round the clock armed guards Long added.

It was unclear which other banks in the North Bay handled profits from the cannabis industry. Most banks contacted about the issue by the North Bay Business Journal did not respond to requests for comment.

The California and Nevada Credit Union League, the trade association for the two states with over 300 members, did not make anyone available for comment.

Providing banking services to cannabis companies would allow those businesses a safe way to store cash, discouraging crime, according to an email from Chris Call, CEO of North Bay Credit Union.

Call wrote he had been “hoping to promote a sense of civic duty among other financial institutions to step up to this issue,” by announcing his company’s services, adding “financial institutions can actually provide a valuable source of transaction monitoring to law enforcement that they do not have the resources to do on their own.”

Redwood Credit Union Chief Operating Officer Cynthia Negri said her company did not provide banking services to the cannabis industry, acknowledging the potential for federal regulation as a factor.

“For Redwood Credit Union the cash intensiveness of cannabis-related businesses doesn’t fit with our business model,” Negri added.

Federal reporting requirements could be another reason some financial institutions are reluctant to deal with the cannabis industry.

Financial institutions are required to file a Suspicious Activity Report with the U.S. Treasury Department’s Financial Crimes Enforcement Network whenever cash transactions exceeding $10,000 are made, another onerous reporting requirement many financial institutions wish to avoid, Sklar said.

The U.S. Department of Justice declined to comment for this story and the Treasury Department did not respond to an emailed request for comment.

Staff Writer Chase DiFeliciantonio covers technology, banking, law, accounting, and the cannabis industry. Reach him at or 707-521-4257.

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