More banks, credit unions to cover pot deals

As the list of states legalizing marijuana use grows, so does the number of financial institutions willing to provide banking services to companies associated with emerging industries.

Banking options for cannabis dispensaries and the industry ancillary businesses have long been limited as the product is federally classified as a List 1 drug under the Drug Enforcement Administration (DEA)defined as “drugs with no currently accepted medical use and high potential for abuse“This designation has created hurdles for top companies looking to open accounts with the risk averse banking industry.

But banks and credit unions are slowly entering the room with the help of companies that specialize in compliance and risk.

“Banks are exploring ways to find new sources of low-cost deposits,” Tony Repanich, chief operating officer of Shield Compliance, a Seattle-based pot compliance firm, told Banking Dive. “Small to medium-sized checking accounts are some of the best sources of low-cost deposits because they don’t carry interest and the average balance in these accounts can be significant.”

Repanich, who spent 25 years in the commercial and retail banking, said another key benefit for financial institutions serving high-risk portfolios such as: B. Marijuana-related businesses (MRBs), the lack of competition in the market to secure these checking accounts.

“In addition, MRB customers have limited access to excess cash investment opportunities, so their account balance is typically higher than that of traditional checking accounts,” he added.

From March 493 banks and 140 credit unions in the US provide services for MRBs, aAccording to the latest marijuana banking update from the Financial Crimes Enforcement Network (FinCEN). FinCEN declined to share the names of the financial institutions on the list with Banking Dive.

The FinCEN report shows that 633 institutions serve the industry, a 54% increase over the 411 in the same period last year.

Most financial institutions entering the room have assets of less than $ 2 billion. Repanich said.

“They are usually very close to the market they serve,” he added.

For some of these banks, the marijuana market is an opportunity to break into a competitive environment, said Jacques Santucci, founder and CEO of Strimo, a software platform for MRBs.

“The banks that I see doing this are banks that are trying to grow,” he told Banking Dive. “They’re fighting for the same dollar, the same commercial real estate building, the same car loan, or the same deposit. … As it goes, it’s going to be a regulated industry, possibly very mature, and possibly a commodity. The sooner you ‘the more loyalty you have, the more Your bank is getting bigger. “

Naomi Granger, co-founder of Dope CFO, told Banking Dive that she is encouraging her MRB clients to seek out credit unions.

“When it’s legal in this state, they are often taken over by the state-chartered credit unions because they are not governed by the Federal Reserve,” she told Banking Dive.

Granger, a CPA who trains other accountants on how to work in the marijuana niche, said the bank application process for MRBs can be daunting and approval deadlines can be up to 45 days.

Banks often charge high fees for the large cash deposits MRBs need to make, in addition to the additional IRS filing required for cash deposits greater than $ 10,000, Granger said.

“I don’t think it’s getting any easier,” said Granger. “But there are more banks jumping on board. I’ve even heard of some customers who have managed to go under the radar with some of the larger Bundesbanks.” but that’s not the norm. “

Growing support for laws like that The SAFE Banking Act (Secure and Fair Enforcement) reads Repanich said he was helping banks feel more comfortable in this room.

The list of states that have legalized the drug has now grown to 33, and Washington DC lost one of the most vocal opponents of marijuana reform last year when Attorney General Jeff Sessions resigned.

Repanich said the departure of sessions was a sign to the bankers that the The marijuana industry will “only move forward from this point”.

Santucci said he wouldn’t be surprised if one of the larger banks in the industry stepped into the room in the near future.

“Bigger banks will say, ‘We can only open a special department for that, let’s look at that.’ CPA firms are already doing it, lawyers are already doing it, and insurance companies, “he said. “Real estate projects in the cannabis industry run around $ 20 million. Some companies are growing. They have 100,000 square feet of growth space. And they will have 100 retail stores. Someone will want to fund this.”

Credit Union cards

Maps Credit Union, based in Salem, Oregon, has been actively involved in the marijuana industry since 2014. Credit Union has around 500 marijuana business accounts, including retail pharmacies, manufacturers, processors, wholesalers, and laboratories. According to Cards, cash deposits from these accounts totaled more than $ 298 million last year.

To manage the risks and regulatory burdens, the credit union works closely with state regulators like the Oregon Liquor Control Commission (OLCC) to ensure that their MRB account holders meet state licensing requirements.

According to Maps, the company also has full-time staff of compliance experts, including a chief risk officer, an advanced monitoring accounts manager, and a banking secrecy law compliance manager, all dedicated to the credit union’s MRB accounts.

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