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Reputation Risk: Just Say No to Cannabis Banking?

4 min read
May 5, 2022

Over 30 states have passed laws legalizing medical and/or recreational marijuana—in direct conflict with federal law, which defines marijuana as a Schedule I substance under the Controlled Substances Act. Financial institutions that provide banking services to cannabis businesses and cannabis-related businesses put themselves at risk for violating anti-money laundering laws.  

Some financial institutions see opportunity in banking marijuana and are advocating for changes in federal law that would make it less risky for banks, credit unions, and other financial institutions to bank marijuana-related companies. They see a growing industry where there is money to be made. 

But is that a good reason to bank marijuana businesses?  

It’s more than a question of legality and profits. It’s a question about mission, vision, and values. Does providing banking services to the marijuana industry align with your institution’s core values? 

Does Marijuana Align with Your Institution’s Values?  

Every strategic decision a financial institution makes should be risk assessed. That includes determining whether a potential strategy aligns with the institution’s mission, vision, and values.  

Mission: A description of the institution’s business, including what it aims to accomplish and how it aims to accomplish it. In short, it’s why the institution exists. 

Vision: The institution’s goals for the future. It’s the destination. 

Values: The fundamental beliefs and ideals of the institution. This serves as a guidepost that helps the institution determine what is right or wrong when making both big picture and everyday decisions. (Examples of values include: loyalty, honesty, accountability, sustainability, philanthropy, commitment, dependability, efficiency, compassion, passion, innovation, positivity, respect, and stability.) 

Any financial institution considering embracing banking marijuana businesses should consider whether it best represents the institution’s interests and ideals. Does it enhance the reputation and expectations for service and excellence you’ve built in the community, or does it have the potential to tarnish it? 

Marijuana’s Health Risks 

Marijuana may be legal in some states, but it remains controversial.  

Marijuana contains a psychoactive chemical called THC. While marijuana creates feelings of euphoria or relaxation in some individuals, others experience:  

  • Impaired short-term memory 
  • Impaired attention, judgment, and other cognitive functions 
  • Impaired coordination and balance 
  • Increased heart rate 
  • Anxiety, paranoia 

Frequent users often experience irritability, mood and sleep difficulties, decreased appetite, cravings, restlessness, and/or various forms of physical discomfort when in withdrawal. Large doses can result in acute psychosis, including hallucinations, delusions, and a loss of the sense of personal identity, according to the National Institutes of Health (NIH). 

An estimated 30 percent of marijuana users develop marijuana use disorder resulting in dependence that results in withdrawal symptoms or addiction, according to the NIH. 

The NIH warns that it’s easy to accidentally consume larger-than-anticipated amounts of THC. First, different marijuana varieties contain varying amounts of TCH. Unlike a beer, with a clearly labeled alcohol by volume (ABV), it’s not always possible to know how much TCH is in a marijuana product.  

When marijuana is consumed in food or drinks, the TCH takes longer to take effect than when it is smoked—typically 30 to 60 minutes. This can encourage users to consume more than they expect when they don’t get an immediate reaction. Edibles can also lead to problems with serving sizes. One brownie may not be one serving of TCH—it may be several. An unexperienced or uninformed user may consume the entire item in one sitting, leading to potentially serious health problems. It can also tempt children who find edibles and consume them not realizing they contain drugs. 

The health risks of marijuana are especially high for children, young adults, and those with a genetic predisposition to psychiatric disorders. For example, individual that smoke high-potency marijuana daily are five times more likely to develop psychosis than those who have never used the drug. Studies suggest that exposure to marijuana in children and young adults can permanently impact executive function, memory, and IQ, according to Harvard Medical School. Heavy use can result in up to 8 points of IQ loss. 

Retail stores selling marijuana normalizes marijuana use, reducing the risk perception, especially among the young. If it were that unhealthy, they reason, why is it legal? 

Do You Want to Stake Your Reputation on Marijuana Banking? 

Organizations pushing to ease restrictions on banking marijuana rarely refer to the drug as marijuana. They call it as cannabis. 

That’s because they know marijuana has a bad reputation. Not everyone is comfortable with its casual use. Calling it cannabis sounds more respectable, but it doesn’t change what it is or the potential for public disapproval. 

Just think of the headlines each year when a rogue troop of Girl Scouts set up cookie booths outside a marijuana dispensary. While dispensary shoppers make great customers since they have to carry cash (dispensaries are typically cash operations due to banking restrictions), the location isn’t a good look America’s favorite cookie entrepreneurs. Local Girl Scout councils quickly jump into crisis management mode and shut down these booths.  

How about your institution? How would customers, employees, and the community respond if your institution became the bank of choice for dispensaries and other marijuana businesses? Some customers wouldn’t mind, but other customers might have qualms about banking at the marijuana bank. 

It’s a lesson a Nebraska bank after a school shooting in Florida ignited a national conversation about gun control. The bank had offered a co-branded Visa card with the National Rifle Association (NRA) for years without issue. After the shooting customers and advocacy groups expressed concern banking with a company that supported the NRA and one group planned a protest. Before the protest could happen he bank ended its relationship with the NRA, citing customer feedback as the reason. 

A Word of Advice 

That’s why looking at marijuana banking and any other strategic initiative that could be perceived as controversial (including “vices” such as sports gambling and tobacco) need to be assessed through the lens of your institution’s mission, vision, and values. Is the addition of cannabis income worth the reputation risk? Does it support values like social responsibility, trustworthiness, integrity, and accountability?  

That’s for your institution to decide—and ultimately your customers too.  

Consider your mission, vision, and values before making the decision to enter cannabis banking. The cost of doing business with the marijuana industry might be higher than you think. 


Related: Creating Reliable Risk Assessments

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