Risk Management

Are Banks Gouging Marijuana and Bitcoin Businesses?

"Banks are looking at all the risk factors and saying, ‘I have more on the line to bank this industry and we're going to bill them more,'" says one...
Katie Kuehner-HebertApril 13, 2015
Are Banks Gouging Marijuana and Bitcoin Businesses?

Few banks are serving bitcoin and legal marijuana businesses because of their “cloudy regulatory status,” and those that do are charging hefty fees, according to an American Banker story.

Companies involved in the business of pot are reportedly paying as much as $3,000 a month for basic checking accounts, and bitcoin firms are paying fees that can range into the tens of thousands of dollars, American Banker said. In contrast, most small businesses typically pay $50 or less in monthly bank fees.

Andre Herrera, executive vice president of banking and compliance at Hypur, a payments company, told the newspaper that it was “absolutely reasonable” for banks to charge the risky sectors higher monthly fees, given the due diligence required and the potential fines for lapses in anti-money laundering compliance.

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“There are a number of legal, legitimate businesses that pay a higher price for their financial services,” Herrera said. “Banks are looking at all the risk factors and saying, ‘I have more on the line to bank this industry and we’re going to bill them more to offset this risk.’”

However, those close to the two sectors say banks may be using risk as a cover to charge exorbitant prices.

“The reality is that it’s extremely difficult to get a bank account in this industry, so if you do find a bank you are highly incentivized to play by whatever rules they set for you,” National Cannabis Association deputy director Taylor West told American Banker.

Large banks won’t touch pot companies, leaving them fewer options to shop around locally, American Banker said.

Regarding bitcoin-related businesses, Silicon Valley Bank is the only bank to disclose that it works with bitcoin companies, but would not say how much it charges for the privilege, except that the fees are comparable to the charges imposed on ordinary money transmitters.

Spokeswoman Carrie Merritt reportedly wrote in an email to American Banker that “for any [money-service business] or money transmitter, banks incur overhead costs for onboarding, screening, and closer transaction monitoring. Those costs are passed on to the [money-service business] customer, based on the nature of their business.”

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