Visa warns of the cashless ATM trend that is widespread in the cannabis industry

Visa recently issued a memo describing a common scheme used by companies in the cannabis industry – “cashless ATM” point-of-sale (POS) transactions. Cashless ATM transactions occur when a merchant takes an order, rounds the total up to an even number, and then makes a transaction that is incorrectly coded as an ATM withdrawal.

Although cannabis companies were not specifically mentioned in Visa’s memo, there is a good chance it was aimed at such companies, as cashless ATMs are widely used in the cannabis industry. With few options left in the cash-only industry, companies will try almost anything to facilitate credit and debit card purchases.

“Visa is aware of a system in which POS devices marketed as ‘cashless ATMs’ are used in commercial transactions and violates the Visa Basic Rules and the Visa Product and Service Rules and the Plus Core Rules and the Plus Product – and service rules violated. “The memo reads.

Typically, a purchase is rounded up to the nearest denominator of twenty dollar bills. Cashless ATMs imitate standalone ATMs and carry out the transaction backwards, so to speak. Visa stated that the practice is a violation as it compromises the integrity of an ATM transaction, which Visa never intended.

“Cashless ATMs are point-of-sale devices powered by payment applications that mimic stand-alone ATMs. However, no cash payments will be made to cardholders, ”the memo continues. “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 … “

Alternatives are provided by technology platforms specifically tailored to meet the financial needs of traders in the cannabis industry.

“The trend towards cashless ATMs is harming investors, dispensaries and consumers because it is essentially blatant money laundering,” Tom Gavin, CEO of CannaTrac, told High Times. “Instead of creating loopholes and using a cashless ATM, pharmacies should use other solutions currently on the market that are safe, legal and transparent. A suitable financial solution should be registered with FinCEN and have a money transmitter license, or be the agent of a sponsor or bank with a money transmitter license in their state. “

Gavin continued, “Cashless ATMs are harming everyone involved by putting investors’ hard-earned money at risk and the potential for pharmacy closures that will hinder medical patients from accessing their medicines. Until there are permanent regulations at the federal level, solutions that exist today (such as CannaCard) should be used to process transactions correctly for all parties involved. “

Thousands of pharmacies could be severely affected by Visa compliance reminder. The digital payment system from CannaTrac simplifies the payment process and enables credit card processing for the cannabis business – without having to resort to cashless ATMs.

Cashless ATM transactions in a cash industry

Given the state restrictions on cannabis, the industry remains largely cashless, leading companies to try almost anything to bypass restrictions on credit card transactions. The Secure and Fair Enforcement (SAFE) Banking Act would solve this problem, but it was recently removed from the National Defense Authorization Act (NDAA).

The major credit card networks – Visa, Mastercard, American Express – avoid the cannabis industry due to the risk of repercussions from federal agencies.

Visa’s memo is not entirely clear on what the penalty will be for breaking the rules, however enforcement will be carried out in the event that Visa becomes aware of ongoing cashless ATM practices.

“Acquirers will be exposed to violations of the regulations and / or penalties if they – or their third-party representatives – are found to have materially failed to comply with visa requirements,” the memo continues. “If it is determined that there has been a deliberate violation of Visa regulations that adversely affects the goodwill associated with Visa and / or the Plus system, brand, products and services, an acquirer may be subject to further compliance enforcement measures . “

Until cannabis is removed from Appendix 1 of the Controlled Substances List, systems like cashless ATMs and other financial loopholes will continue to exist as cannabis companies have few other options.