On December 2, 2021, Visa published a compliance memo regarding cashless ATMs and the misuse of ATM transactions. The memo begins by saying, “Visa is aware of a scheme where POS devices marketed as ‘Cashless ATMs’ are being deployed at merchant outlets and are operating in violation of the Visa Core Rules and Visa Product and Service Rules and Plus Core Rules and Plus Product and Service Rules.”
While the memo does not call out cannabis businesses specifically, it notes that cashless ATMs “are primarily marketed to merchant types that are unable to obtain payment services—whether due to the Visa Rules, the rules of other networks, or legal or regulatory prohibitions.”
This category includes state legal cannabis businesses across the country, which widely use cashless ATMs due to a lack of alternative options.
The memo goes on to state the following:
Transactions designated as ATM cash disbursements (e.g., POS Condition Code 02, Merchant Category Code (MCC) 6011—Financial Institutions – Automated Cash Disbursements) may only be used to dispense cash in the local currency or the type of currency or travelers cheques displayed on the ATM. An acquirer must ensure that all Visa and Plus Network transactions contain complete, accurate, and valid data. Acquirers miscoding POS purchase transactions as ATM cash disbursements are in violation of these requirements.
Additionally, any obfuscation of information from transactions to further this scheme also violates these requirements. This includes non or mis-identification of a merchant outlet (as these are POS purchase transactions) or using altered or fictitious location information.
While the memo is vague on the topic of enforcement, cannabis businesses should anticipate the possibility of losing access to cashless ATM services due to increased risks perceived by service providers.
The SAFE Banking Act, which stands for the Secure and Fair Enforcement Act, passed the House five times but has not passed the Senate. Absent passage of the SAFE Banking Act, or without greater reform at the federal level, the cannabis industry will continue to have limited access to banking options.
If you have questions please reach out to a member of our Licensing and Regulatory Compliance division.