An estimated tens of billions of dollars in unsecured cash from state-legal cannabis retail sales stored outside the U.S. banking system will remain stranded from federally chartered banks even if lawmakers in Congress pass the SAFER Banking Act, and the Treasury Department and other agencies follow with implementing regulations. 

Left largely unaddressed in both the legislation and agency regulations are the cash hoards that small retailers have generated in the years since states legalized cannabis sales and how that money would be repatriated into the economy through the banking system.  

Congress recognizes the security risk this cash poses to the country.   

Large depositories of cash have become a target of unscrupulous actors. Even with passage of a federal law, the retail cannabis market will continue to be predominantly cash driven at the point of sale, and retailers will still be grappling with security concerns related to the safe handling of this money. 

What’s more, a federal law will still require a regulatory framework across multiple federal agencies, and creating this framework will be a lengthy process in the best of circumstances. Even then, banks will be looking for guidance on what to do with the cash retailers are sitting on. The banking system and the retailers need a solution. 

Despite the roadblocks that stand in the way of repatriating this money into the banking system, where it can be accounted for, taxed and put to work on behalf of the country, there’s a step federal regulators can take now to start a repatriation process: third-party compliance certification.  

The government standards that the Centers for Medicare and Medicaid Services require of health care providers to receive federal funding is conducted in large part by a national accrediting agency, the Joint Commission. States can also do their own accrediting, but many of them rely on the Joint Commission because of resource constraints they face.  

Within the cannabis industry, the infrastructure already exists for third-party entities to do the kind of accrediting that the Joint Commission does.  

Due to the complexity of the retail cannabis market, a robust private security industry has evolved which provides transportation, collection and warehousing services for these stranded cash assets. Many of these firms are run by former U.S. military and law enforcement and legal professionals. 

Such firms could be enlisted to provide third-party verification on the source and ownership of these legacy cash transactions, ensuring it comes from legal cannabis sales, to assist retailers and banks in complying with existing Bank Secrecy Act and anti-money laundering laws and regulations, and any new requirements instituted by the SAFER Banking Act or other federal legislation. 

Firms handling these security and compliance issues would need Treasury Department guidance on the custody and control of these stranded assets and could include robust forensic accounting methods. These private firms could respond to a future Treasury Request for Qualification, which would include extensive vetting of applicants. Qualified by the Treasury Department, these third-party organizations would be equipped with forensic accounting capabilities and legal and financial services expertise. Just as importantly, they would have relationships with retailers and the other companies already in the space.

Waiting for passage of federal legislation and the regulatory framework that follows misses the problem posed today by these billions of dollars in stranded assets. Storage of large amounts of cash outside the traditional financial system creates the conditions for crime that, to date, has fallen on the third-party cannabis security industry that has evolved along with the laws enacted by states legalizing cannabis. 

Given that banks are not in the position to process billions of dollars in cash deposits, it’s incumbent on lawmakers and regulators — even if the SAFER Banking Act becomes law — to look at the existing infrastructure for the safe management of this money and, with proper controls, create a mechanism by which this money is repatriated into the economy.