The burgeoning recreational marijuana industry – illegal at the federal level yet legal for adults in some 18 U.S. states and DC – has faced multiple challenges throughout the years, mostly because of the Schedule 1 status of the cannabis plant.
The biggest problem? Banking, of course.
As in life, retailers have had to find a way to work around the system. Some cannabis merchants have begun using cashless ATMs to bypass limitations on the types of sales payment cards they can legally accept.
One of the largest payment processors in the world, Visa Inc. V-1.10%+ Free Alerts
recently issued a compliance memo to customers warning them that incorrectly coding point-of-sale transactions via cashless ATMs could be penalized or punished by unspecified enforcement procedure, reported Marijuana Moment.
Visa’s warning comes on the heels of the marijuana banking reform bill that was recently chopped from Congress’ defense bill. The latest version of the Congressional defense bill left out several key provisions that were in the House-approved National Defense Authorization Act (NDAA), including the much-anticipated marijuana banking reform known as the Secure and Fair Enforcement (SAFE) Banking Act, which would protect banking and financial institutions that work with state-legal cannabis companies.
Aware Of A Scheme
Visa’s memo from Dec. 2 obtained by Marijuana Moment revealed that the company is “aware of a scheme” in which retailers are utilizing cashless ATMs to avoid limitations on the types of sales for which payment cards are allowed to be used.
“Cashless ATMs are POS devices driven by payment applications that mimic standalone ATMs. However, no cash disbursements are made to cardholders,” the memo clarified. “Instead, the devices are used for purchase transactions, which are miscoded as ATM cash disbursements. Purchase amounts are often rounded up to create the appearance of a cash disbursement.”
Although the Visa directive does not specifically mention cannabis, it highlights that cashless ATMs (also called reverse ATMs) “are primarily marketed to merchant types that are unable to obtain payment services—whether due to the Visa Rules, the rules of other networks, or legal or regulatory prohibitions,” a category that covers marijuana businesses.
Nathaniel Gurien, CEO of cup, which provides financial services to cannabis businesses, estimates that thousands of marijuana retailers in the U.S. rely on this scheme.
To Read The Rest Of This Article By Nina Zdinjak on Benzinga
Published: December 13, 2021
Founder & Interim Editor of L.A. Cannabis News