Visa warns cannabis retailers will crack down on cashless ATMs

By Nina Zdinjak

The burgeoning recreational marijuana industry – illegal at the federal level but legal for adults in about 18 US states and DC – has faced several challenges over the years, largely due to the Schedule 1 status of the cannabis plant.

The biggest problem? Banking, of course.

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As in life, retailers had to find a way to bypass the system. Some cannabis dealers have started using cashless ATMs to bypass restrictions on the types of payment cards they can legally accept.

One of the largest payment processors in the world, Visa Inc., recently issued a compliance memo to its customers warning that incorrect coding of point-of-sale transactions through cashless ATMs or through an unspecified enforcement process will be penalized could be punished, reports Marijuana Moment.

Visa’s warning follows the draft law on marijuana banking reform that was recently removed from Congressional Defense Bill. The latest version of the Congressional Defense Act omitted several key provisions contained in the House-approved National Defense Authorization Act (NDAA), including the highly anticipated marijuana banking reform known as the Secure and Fair Enforcement (SAFE) Banking Act is would protect banks and financial institutions that partner with state-legal cannabis companies.

Conscious of a scheme

Visa’s December 2 memo received by Marijuana Moment revealed that the company is “aware” of a system whereby retailers use cashless ATMs to avoid restrictions on the types of sales that payment cards can be used for.

“Cashless ATMs are POS [point of sale] Devices controlled by payment applications that mimic standalone ATMs. However, no cash payments will be made to cardholders, ”the memo clarified. “Instead, the devices are used for purchase transactions that are incorrectly coded as cash dispensing at ATMs. Purchase amounts are often rounded up to give the appearance of a cash payment. “

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Although the Visa Directive does not specifically mention cannabis, it emphasizes that cashless ATMs (also known as reverse ATMs) “are primarily marketed to types of merchants who cannot use payment services – be it because of visa regulations, the rules of others Networks or Statutory or Regulatory Prohibitions, “a category that covers marijuana businesses.

Nathaniel Gurien, CEO of Fincann, the financial services provider to cannabis companies, estimates that this system is trusted by thousands of marijuana retailers in the United States.

A desperate move with disastrous potential

“What keeps me up at night is the fact that it has the catastrophic potential of sapping the dynamism of our industry and wreaking havoc if one or more eager US attorneys don’t grit their teeth about progress,” Gurien said the outlet.

While it is clear that marijuana dealers are in an intolerable situation – they have no access to banking services – they should be aware that using cashless ATMs can put their operations at risk.

Photo by Heath Korvola / Getty Images

Kasim Carbide, corporate and banking compliance attorney, stated that violating Visa regulations “could result in disciplinary action against the merchant, as well as a possible fine of $ 200,000 or $ 2,500 per day (which can be applied retrospectively ). [sic] up to and including the first day of non-compliance) and termination of the merchant account. “

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Additionally, according to the Chicago Bar Association, incorrectly coding cannabis sales is not only a violation of payment processors’ policies (in this case, Visa), but a “violation of federal law” as well.

Confused still?

To add to the already complicated situation, Jessica Billingsley, CEO of cannabis technology company Akerna, pointed out that many companies are unlikely to know that cashless ATMs are illegal.

“Given the many unique complexities and challenges faced by the cannabis industry, many operators fail to understand that they have been sold misrepresented products that may not be legal,” Billingsley said in a statement. “The work of some bad actors cannot undermine the important legal work that the majority of the ancillary providers have done.”

Many cannabis advocates responded to Visa’s statement, arguing that such a large company should support marijuana retailers rather than put obstacles in their way.

“It is unfortunate that Visa is unwilling to partner with the cannabis industry, which is legal in dozens of states and represents billions of dollars in economic activity at a time when this country needs all the financial resources it can take advantage of,” said Morgan Fox, director of media relations for the National Cannabis Industry Association. “But what’s worse, they’re trying to discourage alternative solutions, mainly used by small businesses to protect themselves and their customers from theft and violent crime.”

This article originally appeared on Benzinga and was republished with permission.