Cannabis Banking Glossary

Plain definitions of the banking, tax and compliance terms cannabis operators and financial institutions use most. Last updated November 2026.

280E (Section 280E)

Section 280E of the Internal Revenue Code bars businesses that traffic in Schedule I or II controlled substances from deducting ordinary business expenses, other than cost of goods sold. Since April 2026, marijuana covered by a qualifying state medical license is in Schedule III, so 280E no longer applies to that medical activity. Adult-use activity remains subject to it. Read more about 280E

Adult-use cannabis

Cannabis sold under state law to adults 21 and older without a medical recommendation. It is also called recreational cannabis.

AML (anti-money laundering)

The laws, rules and internal controls financial institutions use to detect, prevent and report money laundering and other financial crime. The main U.S. AML law is the Bank Secrecy Act.

Ancillary cannabis business

A business that serves the cannabis industry without growing, processing or selling cannabis, such as a landlord, security firm, consultant or software provider. Banking for ancillary businesses

Armored transport

Secure pickup and delivery of cash by a licensed armored carrier, usually from a cannabis business to a bank or cash vault. Read more about armored transport

Beneficial owner

A person who directly or indirectly owns 25% or more of a business, or who has significant control over it. Banks identify and verify beneficial owners when opening business accounts. Read more about beneficial ownership

BSA (Bank Secrecy Act)

The main U.S. anti-money laundering law. It requires financial institutions to keep records and file reports such as Currency Transaction Reports and Suspicious Activity Reports. Read more about the Bank Secrecy Act

Cannabis-related business (CRB)

A term banks use for any business that touches cannabis, including licensed cultivators, processors and dispensaries, and many of the businesses that serve them.

Cash-intensive business

A business that takes in a large share of its revenue in cash. Banks apply extra monitoring to these accounts. Cash management for cannabis businesses

Cole Memo

A 2013 U.S. Department of Justice memo that set federal enforcement priorities for state-legal marijuana. It was rescinded in 2018, but the same priorities appear in FinCEN's 2014 banking guidance.

Currency Transaction Report (CTR)

A report a financial institution files with FinCEN for cash transactions totaling more than $10,000 by or for one person in a business day. Read more about CTRs

Customer due diligence (CDD)

The checks a bank performs to verify a customer's identity, ownership and expected account activity, both at account opening and over time. Read more about due diligence

Dual-market state

A state with two regulated cannabis markets, medical and adult-use. See cannabis banking by state

Enhanced due diligence (EDD)

Additional review for higher-risk customers, such as license verification, site visits and closer transaction monitoring. Banks typically apply EDD to cannabis businesses. Read more about due diligence

Excise tax

A tax on a specific product. Most states with legal cannabis charge a cannabis excise tax, usually on adult-use sales, in addition to sales tax.

FinCEN

The Financial Crimes Enforcement Network, a bureau of the U.S. Treasury that administers the Bank Secrecy Act and receives reports such as CTRs and SARs.

FinCEN marijuana guidance

FinCEN's 2014 guidance explaining how banks can serve marijuana-related businesses while meeting Bank Secrecy Act obligations, including the due diligence steps and SAR filings expected. Read more about the guidance

Hemp

Under federal law, cannabis with a delta-9 THC concentration of no more than 0.3% on a dry-weight basis. A narrower federal definition of hemp takes effect on November 12, 2026.

KYC (know your customer)

The process of verifying who a customer is and understanding their business. It is part of customer due diligence.

Medical cannabis

Cannabis sold to registered patients under a state medical program, usually with a certification from a licensed practitioner.

Multi-state operator (MSO)

A cannabis company that holds licenses in more than one state. Banking for multi-state operators

Rescheduling

Moving a substance from one schedule of the Controlled Substances Act to another. In April 2026, marijuana covered by a qualifying state medical license moved from Schedule I to Schedule III. Read more about rescheduling

Suspicious Activity Report (SAR)

A confidential report a financial institution files with FinCEN about potentially suspicious transactions. Under FinCEN's 2014 guidance, banks file marijuana-specific SARs for cannabis accounts. Read more about SARs

Schedule I

The most restrictive category of the Controlled Substances Act, for substances considered to have a high potential for abuse and no accepted medical use. Adult-use marijuana remains in Schedule I.

Schedule III

A category of the Controlled Substances Act for substances with accepted medical use and a lower potential for abuse. Since April 2026, marijuana covered by a qualifying state medical license is in Schedule III. Read more about Schedule III

Seed-to-sale tracking

State-required software that tracks cannabis from cultivation through sale, so regulators can account for every plant and product.

Single-state operator (SSO)

A cannabis company licensed in only one state. Banking for single-state operators

Smart safe

An electronic safe that counts and verifies cash deposits. Many smart safe programs let a portion of the deposited cash be credited to a bank account before armored pickup. Read more about smart safes

A state or local program that gives licensing priority, fee reductions or other support to people and communities harmed by past cannabis enforcement. Banking for social equity operators

Vertically integrated

A cannabis company that controls several stages of the supply chain, such as cultivation, processing and retail. Some states require it.