Bankers don’t have it easy. They want to avoid risk, but financial transactions can be inherently risky. For example, outdated banking systems can fail because of the volume of transactions that are too suspicious to ignore but too numerous to control. Clients who process their payments at a bank just want to get it done quickly and move on.

For every transaction, the bank’s computers must perform a complicated risk calculation to see if processing the transaction may hurt the bank in the long run. When a transaction is denied or delayed, it’s likely because the algorithm calculated there’s too much risk involved for the bank. However, if you can’t even open an account with a bank, it’s often because bank employees set certain rules to help prevent headaches for their organization. Finding the right bank that is willing to work through the perceived risk factors associated with opening a CBD financial account can be difficult.


Payment processing is governed by two sets of government-imposed rules: KYC (Know Your Customer) and AML (Anti-Money Laundering). KYC means the bank must know the identity of all the parties involved in the processed transaction, and AML means the bank should report suspicious or unusual activity to applicable government authorities.

Some companies are starting to look at different methods of accepting payments online. Such payments include Bitcoin or other cryptocurrencies that are gaining popularity. They do not require any bank or KYC process to open an account.

For example, KYC means the bank will always ask you for your ID, proof of residence, and other documents that show who you are and where you live. If the government decides that something about your transactions is suspicious, the bank can mitigate risk by providing your documents to the government. AML criteria is comparatively vague, but one of its core principles is known as “structuring”, which means sending several transactions with the exact same amount in a row to avoid triggering alarms that would otherwise go off had a lump sum been sent. Another example of AML is a transaction that’s believed to involve drugs or other illegal substances. In the case of AML, the bank must report any transactions that breach AML rules to the government in order to shed risk.

Anti-fraud Struggles

Banks not only have to deal with KYC and AML but also with other sorts of fraud, such as card and identity theft. For example, if you receive personal documents through the mail and simply toss them out, an entrepreneurial criminal can gather the tidbits and recreate enough of your identity to steal it. This happens much more often than many think and can even happen online, such as through a Facebook account.

When a bank suspects there is fraud involved, it sends out its internal anti-fraud department to investigate. This process may involve personnel looking over security camera footage and interviewing witnesses. In cases where the bank’s client alleges fraud, the bank typically reimburses the client straight away and then lets the anti-fraud department attempt to recover the costs from the alleged criminal.

Frequent Audits

Government regulatory bodies are often comprised of meticulous, inquisitive people. If they find the slightest hint of suspicion involving your CBD business transactions, they can close accounts, seize funds, and begin legal proceedings.

Maintain a thorough record of your transactions and business dealings and be upfront. As soon as you start a CBD business, expect to be audited frequently and prepare accordingly. Hire a qualified accountant, which will help ensure you are running your business legitimately.

Insured Deposits and Transactions

Under government regulation, only transactions and accounts that comply with KYC and AML can be insured against theft and fraud. Since hemp products were until recently considered as either illegal substances or to be in a gray area, banks processing any such transactions were opening themselves to risks.

CBD Banking

Trying to do CBD banking can trigger various sorts of alarms and risk calculations inside the bank: “Is KYC good enough? Are we running afoul of AML? How many fraud and theft investigations will we have to do because of this client?” If the bank decides it’s going to incur too much risk by processing your CBD financial transactions, you simply won’t be able to do any business through a conventional bank. You may not even be given an explanation as to why, limiting you to a cash-only system, which is inconvenient and can raise even more suspicions.

A cash-only model also limits you to local markets and can create logistical and security issues. For example, you’ll either have to deliver your products in person or ask the buyer to come to your place of business. Even though it’s not illegal, CBD is still being treated as such by some banks simply because it’s seen as too risky at the moment. If you’re a business doing CBD-related financial transactions through a bank, you could have your account closed at a moment’s notice.

Loan Approval Challenges

Modern society is largely based on credit. Thanks to the ability to take out a loan, you can take more risks with your business idea without using your personal money reserves, and the bank can thicken its profit margins. If you think CBD is a good business idea but the bank disagrees and doesn’t want to give you a loan because it thinks CBD is too risky, you’ll have to use personal or private funds to fund your CBD business.

Conclusion: Seek Small Payment Processors

To many banks, CBD still carries the “reefer madness” stigma that makes it seem too risky. Until the perception of CBD changes and it becomes viewed as just another household substance, businesses are likely to have difficulty processing transactions with a bank or getting a loan for CBD-related endeavors. However, there are ways to lessen these difficulties and give better chances to your CBD business.

One way would be to find a payment processor that is willing to shoulder the risk and take you on as a client, fighting fraud and theft alongside you. Sadly, established banks often simply aren’t willing to cooperate with their clients to such a degree, leaving you with smaller financial institutions or payment processors that are hungry for new clients.

An established bank will be able to know if you’re conducting clandestine hemp-related transactions through its internal AML protocols and shut down your account at a moment’s notice. Be upfront about your intentions and don’t hide what your business is about.

Establishing a CBD company and conducting all transactions through it can help you play by the bank’s rulebook and minimize the risk to you and your reputation. Even if you’re the only employee in your company, asking for a CBD loan as a representative of your company is generally seen as more valid than asking for one as an individual.

CBD businesses must face certain banking struggles, but we aren’t the only ones. Banks flag all sorts of industries as “high risk” from a financial perspective. Alcohol, pawn brokers, cryptocurrency, and gambling are just a few sectors that have struggled and continue to struggle to open financial accounts and secure loans. However, as CBD becomes better understood and as we carve ourselves out as a legitimate business model, the process should become a little bit easier one step at a time.