banking Archives - Green Market Report

StaffStaffSeptember 26, 2019
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5min3930

House Takes First Step Toward Federal Validation of the Marijuana Industry: Votes 321 to 103 to Pass the SAFE Banking Act

In a showing of bipartisan support, the House of Congress voted 321 to 103 to pass the SAFE Banking Act.  Of those voting yes, 229 were Democrats and 91 were Republicans.  Unity amongst Democrats was particularly strong with only one Democrat vote being in opposition.  Going forward, this overwhelming amount of party support should help assuage any fears as to whether the Democrats will continue to back the bill as it moves to Senate.

What the SAFE Act Means for the Industry

Currently, banks that provide services to the cannabis industry are at risk of being prosecuted under federal law.  The risk is the same for insurance companies and landlords that operate in, or provide services to, the cannabis industry.  Consequently, cannabis companies are often forced to horde cash and jump through hoops to make payment for items as simple as a utility bill; proper insurance coverage is often difficult to obtain; and options are limited for cannabis companies seeking to rent facilities for their operations.  The lack of federal legalization has not only created several operational obstacles and inefficiencies for companies involved in the cannabis ecosystem, but by forcing cannabis companies to operate only in cash it has created safety issues for employees by making them, and their places of work, targets of robbery.

Although approval of the SAFE Banking Act would not fully legalize cannabis, it would prevent the federal government from taking action against banks, insurers and landlords that provide services to cannabis companies that are operating in compliance with applicable state laws.  Not only would such legislation go a long way towards normalizing the industry, moving from a cash-only environment would significantly enhance public safety.

It should be noted that the bill does not contain provisions relating to capital markets access for cannabis companies.  Accordingly, approval of the SAFE Banking Act would not provide cannabis companies with access to the U.S. capital markets or exchanges.

Next Steps

The next step is for the Senate to consider and vote on the SAFE Banking Act.  This process is expected to occur later this year.  While some are skeptical of the SAFE Banking Act’s chances of receiving approval from a Republican-controlled Senate, there are provisions in the bill that should appeal to Republicans.  One provision addresses Operation Choke Point, a program put in place by the Obama administration that investigated banks for doing business with payday lenders, firearms dealers and other companies at higher risk for fraud and anti-money laundering.  Another provision addresses access to banking services for the hemp industry, which should be of particular importance to Senate Majority Leader Mitch McConnell and his home state of Kentucky.  If the bill is passed by Senate, it would then be submitted for Presidential approval.

Approval of the SAFE Banking Act will not fully legalize cannabis, but it would represent a significant milestone for the cannabis industry by providing access to banking services, and it could also lead to the approval of other cannabis-focused policies, and possibly, full federal legalization.

Jason Wilson
Global Cannabis Industry Expert with over 15 years of experience in the asset management, finance, and structured product space, Jason has a track record of bringing hard-to-access asset classes to market. Recently, Jason was Senior Vice President at INFOR Financial Inc., a boutique investment bank that acted as advisor to Canopy Growth Corporation in connection with entering into its strategic relationship with Constellation Brands.


Debra BorchardtDebra BorchardtSeptember 26, 2019
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9min2290
Editors Note: Readers can follow legislation AT NO COST on the website under the menu Legislation.
On Tuesday, the U.S. House of Representatives approved the Secure and Fair Enforcement (SAFE) Banking Act 321-103. It was considered a historic event because this is the first standalone cannabis policy reform bill to ever reach a House floor vote. The legislation overwhelmingly passed with bipartisan approval.
The House of Representatives voted 321 to 103, representing 79% of the vote, in favor of HR 1595. The YES votes represented 99% of the Democratic majority caucus and 47% of the Republican minority caucus.
The bipartisan SAFE Banking Act (H.R.1595) was introduced by Reps. Ed Perlmutter (D-CO), Denny Heck (D-WA), Steve Stivers (R-OH), and Warren Davidson (R-OH), and it had 206 total cosponsors (including 108 original). The language’s goal was to address the state-legal cannabis industry’s lack of access to banking and other financial services. It provides a safe harbor from federal prosecution for financial institutions that offer services to state-legal cannabis businesses.
“We applaud the House for approving this bipartisan solution to the cannabis banking problem, and we hope the Senate will move quickly to do the same,” said Neal Levine, CEO of the Cannabis Trade Federation, which lobbied in support of the bill. “This vital legislation will have an immediate and positive impact, not only on the state-legal cannabis industry but also on the many communities across the nation that have opted to embrace the regulation of cannabis. Allowing lawful cannabis companies to access commercial banking services and end their reliance on cash will greatly improve public safety, increase transparency, and promote regulatory compliance.”

The next step is for the Senate to approve the legislation. That group has a companion version of the SAFE Banking Act (S.1200) that was introduced in April by Sens. Jeff Merkley (D-OR), Cory Gardner (R-CO) and a bipartisan group of 21 original cosponsors. It currently has 33 total cosponsors. Earlier this month, Senate Banking Committee Chairman Mike Crapo (R-ID) said his committee will take up the cannabis banking issue this year and is working on preparing a new bill.
“The SAFE Banking Act is about public safety, accountability and respecting states’ rights. Our federal banking laws were designed to prevent illicit activity and help law enforcement do their jobs. These laws need to be applied to legitimate marijuana businesses and employees in order to improve transparency and accountability and help root out illegal transactions. Most importantly, the SAFE Banking Act will get cash off our streets, reducing the risk of violent crime and making our communities safer,” said Rep. Ed Perlmutter (D-CO), who introduced the bill in this session. “While Congress has stuck its head in the sand for many years, this Committee has shown leadership on this issue and I want to thank my cosponsors and members of the Committee for their support.”
The Arcview Group CEO Troy Dayton said, “We are extremely encouraged by these cannabis reforms passed by the House. It would be a game-changer for this developing industry and we are hopeful that the Senate follows suit. Legal cannabis businesses, which employ more than 165,000 people, would finally be able to operate safely, develop and grow their businesses. This step forward begins to pave the way for legal, regulated cannabis businesses to open up a plethora of opportunities, which were previously unavailable. The measure would also have a profound, positive impact on the investment landscape, patients and consumers. For years, Arcview has been working towards and supporting this moment. We applaud the progress taken by our regulators and industry and look forward to more reforms being fully enacted.”
“We are extremely uplifted by the House vote on the SAFE Banking Act, but there is still work to be done,” said Andrew Berman, CEO of Harborside. “The Senate needs to swiftly act to adopt similar banking protections. In addition, Congress needs to approve the Marijuana Opportunity Reinvestment and Expungement Act that would start to repair the damage done by the decades of prohibition.”

Evan Eneman, CEO of the MGO | ELLO National Cannabis Alliance said, “Many of our cannabis clients openly struggle to establish banking relationships, with many of their accounts previously being closed due to the stigma of prohibition. Passage of SAFE Banking in the House is a major step toward ensuring that banks can operate hand-in-hand with cannabis companies out in the open versus previous ‘behind closed door’ interactions.”

Commenting on next steps, NORML Political Director Justin Strekal said: “Today’s vote is a significant first step, but it must not be the last. Much more action will still need to be taken by lawmakers. In the Senate, we demand that lawmakers in the Senate Banking Committee hold true to their commitment to move expeditiously in support of similar federal reforms. And in the House, we anticipate additional efforts to move forward and pass comprehensive reform legislation like The MORE Act — which is sponsored by the Chairman of the House Judiciary Committee — in order to ultimately comport federal law with the new political and cultural realities surrounding marijuana.”

Würk CEO Keegan Peterson said, “We are pleased with the House’s decision today. For too long, legal cannabis businesses have not had access to regular banking and payroll services they rely on to operate and grow their companies. The industry has been a job machine across many communities in the U.S. and now employs 250,000 Americans. Not having access to banking puts the incomes of these employees at risk and causes unnecessary financial challenges for business owners. We urge the Senate to follow the Houses’ lead and pass the SAFE Banking Act before the year is out.”

 


Debra BorchardtDebra BorchardtJuly 22, 2019
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4min13820

Next week, the Senate will be holding a hearing on July 23 by the Committee on Banking, Housing and Urban Affairs. The Senate is making a move following a House cannabis banking bill that cleared that chamber’s Financial Services Committee with a bipartisan vote in March. Readers can follow the action on that bill for free on the Green Market Report under the Legislation tab.

That piece of legislation now has 206 cosponsors, almost half of the House while the Senate legislation has only 32 out of 100 senators signed on. The conservative politicians would prefer to stand down while cannabis is still federally illegal, but supporters of the legislation argue that forcing the industry to a cash system encourages theft and diversion.

Although many cannabis businesses continue to suffer from account closures and difficulty processing credit card transactions, there has been some advancement with regards to the banks and the industry. “We’ve seen incredible changes in the cannabis banking space in the last 2 years,” said Todd Kleparis, CEO of California-based Hardcar. The company is a leader in Cash-In-Transit (CIT), cannabis banking and vaulting, and cannabis financing. They currently operate out of 11 states, plus Washington D.C., and have plans to expand into 3 more states by the end of 2019

He added, “Our first banks were only in the hundreds of millions of dollars and our banks now are in the billions of dollars. Banks are becoming more open to cannabis, but the market demand still outweighs the number of banks legally banking this industry.”

Hardcar also announced that it can now safely transport and bank any amount of cash for any company in the United States. In an effort to secure the nation’s largest secured network of banks, the company has been able to establish routes for any CBD and Hemp company, anywhere in the country.

Last week the company said that it had secured a multi-billion dollar bank and now has the ability to offer cannabis loans and financing options for businesses looking to expand their operations.

“In the beginning, cannabis banking was only for high revenue cannabis businesses because banks could justify the larger expense to monitor and process all transactions. Nowadays, banks are accepting smaller businesses and the pace of adoption has radically increased. These new loan services bring a whole new dynamic to the cannabis industry and we’re proud to lead the industry with the largest collection of financial options. Now any CBD or Hemp location can apply for traditional land loans, and very shortly, THC locations will be able to do so as well. ”

“We believe banking still to be a critical part of the cannabis industry that needs more attention,” said Kleparis. While moving money is a critical part of the system credit card transactions are the piece of the puzzle holding many businesses back. This type of legislation would remove those barriers and help companies to behave like other more traditional businesses.

Credit unions seem to be the most favorable financial institutions for cannabis businesses that touch the plant, but even ancillary companies are experiencing difficulties. One accounting and bookkeeping firm that works with cannabis companies was closed by Chase. Others tell of being able to get accounts, but then get charged exorbitant fees by the financial institution

The challenge for the Senate is resolving the banking issue while cannabis remains federally illegal. This is the barrier to entry for the banks and they see anything else as a nonstarter.


Caroline CahillCaroline CahillApril 5, 2019
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5min25850

The CBD industry has been moving full steam ahead in 2019, bolstered by the 2018 Farm Bill and advancements on the federal level to ensure cannabis banking services, but that progress hasn’t been enough for some financial services institutions to continue working with the industry.

On March 14, 2019, Elavon, a payment processing subsidiary of U.S. Bank, notified its hemp and CBD clients that it had recategorized hemp and cannabidiol-based merchants as a prohibited business type and that accounts for such merchants would be closed within 45 days.  

“After several months supporting this merchant segment, it has become clear that the pace of an evolving Federal and State regulatory framework makes it extremely difficult to validate the qualifications required to operate within this industry,” said Elavon in an email to its hemp and CBD clients.

As an Elavon partner, FINCANN, a cannabis banking financial network, received Elavon’s notice and began sourcing solutions for its clients at once.

“We immediately reviewed remaining available options and within 24 hours had viable USA-based excellent alternatives available,” said Nathaniel Gurien, founder and CEO of FINCANN. “Since Elavon is not terminating their existing portfolio of CBD merchants until May 15, some merchants opted to immediately apply to one of our alternatives, others decided to wait and see until at least mid-April.”

Elavon isn’t the only merchant services provider rethinking its hemp and CBD clients. On March 19, Cannovia, a maker of CBD-infused products, was notified by Stripe that its account would be terminated. Having just launched its online storefront on March 14, Cannovia attempted to appeal Stripe’s decision but was denied.

“Prior to the notification of the merchant services cancellation, we were not fully aware of the limitations of the banking industry to support the needs of the CBD industry,” said Brian Baum, the CEO of Cannovia.

With both Stripe and Elavon out of the picture, Cannovia soon learned that finding a merchant services provider on its own wouldn’t be easy.

According to Baum, “What became clear was that the options were limited and any banks willing to consider supporting the industry were beginning to utilize the services of intermediaries such as FINCANN to assist them in managing the sheer volume of entities looking for merchant services solutions.”

Linking up with FINCANN to secure a new merchant services provider allowed Cannovia to remain operational and avoid any major interruptions.

Meanwhile, both financial institutions and industry stakeholders continue to keep an eye on the SAFE Banking Act, which would provide certain protections for depository institutions that work with cannabis-related businesses as well as the businesses themselves. The House Committee on Financial Services is currently drafting a report on the act to present to the House of Representatives. If the full House approves the bill, the Senate will vote on it.   

“If the SAFE Banking Act overcomes its estimated 40% likelihood of passing the Senate, it will only encourage banks currently contemplating ‘dipping their feet into the water’ to ‘take the plunge,’” Gurien said. Once financial institutions take the plunge, legal cannabis-related businesses will be able to bank just like any other legal business.

 


Debra BorchardtDebra BorchardtMarch 28, 2019
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3min12490

The House Financial Services Committee voted 45 to 15 to advance the Secure and Fair Enforcement (SAFE) Banking Act. Currently, Federal law prohibits banks from providing banking services to cannabis companies since cannabis is illegal despite some states legalizing cannabis.

Today’s legislation would keep regulators from taking punitive action against a bank that works with a cannabis business like limiting their charter or deposit insurance when the state has legalized cannabis. In addition to protecting banks in legal states, the legislation seeks to promote diversity by making bank regulators to make annual reports on the availability of banking services to minority and women-owned cannabis companies. The legislation was sponsored by Rep. Ed Perlmutter D-Colo.

While the vote is considered to be a huge step and a sign of progress, it would still need to pass a full House vote and then move to the Senate to be approved.

“It’s clear that the SAFE Banking Act has a high likelihood of passing in the house,” said Kyle Sherman, CEO of cannabis tech company Flowhub. “With limited bipartisan support, however, it’s unlikely to pass the Senate. Either way, it’s imperative that cannabis companies get better access to banking like any other developed industry. I’m cautiously optimistic about SAFE.”

Manny Perez, who is the Vice President of Marketing at the cannabis data company Headset said, “Allowing banks to service cannabis businesses in legal states will help bring the industry forward. Providing access to bank accounts, transfer services, and debt financing, just to name a few, will be key to lower cost of capital; not to mention the end of the over-risky cash-only business practice.”

Not only would the effects be felt at the transactional level and on the capital raising end as Perez noted, but it will also have an effect on research funding. “This will open the door to more funding for medical marijuana companies that are developing first-in-class therapies for auto-immune diseases like rheumatoid arthritis, multiple sclerosis and more,” said Alex Somjen, the CEO of Resinco Capital Partners.

R.J. Lehman, the director of finance, insurance, and trade policy at R Street also pointed out that a 2017 report from the Wharton Public Policy found that half of all cannabis dispensaries had been robbed or burglarized.  “Extending credit to an indirect affiliate of a legitimate cannabis business or even counting the income of an employee as collateral for a home or auto loan could potentially trigger sanctions,” Lehmann said. “The SAFE Banking ACT would provide predictability and transparency to the lending market in an era of shifting and sometimes contradictory legal norms around cannabis.”


Debra BorchardtDebra BorchardtFebruary 11, 2019
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4min11091

Editors Note: You can follow all current legislation for free under the Green Market Report Legislation tab.

On Wednesday this week, Congress will hold a hearing on banking services for the cannabis industry. This is the first hearing to be held by the new Congress that will begin tackling the issue of banking for cannabis companies.

Businesses that work in states where cannabis has been legalized continue to struggle with financial institutions. The major credit card companies of Mastercard and Visa refuse to work with cannabis companies since it is still a federally illegal product. The major banks in this country also decline to bank these companies even though some are publicly traded entities with market capitalizations in the billions. Cannabis companies have turned to local banks and credit unions for their banking needs. Payment options are a pieced together with various solutions, but they aren’t ideal.

Attorney Brady Cobb met with House lawmakers last week and is actively engaged with the legislative process. “With the opposition out of the way, we can finally make some progress,” said Cobb. He was referring to the ouster of Pete Sessions, who continually refused to bring cannabis legislation to the floor for a vote. Cobb said that the committee’s existing members were supportive and expect new members to be positive as well. The hearing will be available on CSPAN.

This comes on the heels of the creation of a new lobbying group called the National Cannabis Roundtable that is being chaired by former Speaker of the House John Boehner. The Speaker sits on the board of Acreage Holdings Inc. (ACRG.U). That group is also working towards getting laws changed to favor more traditional banking.

Marijuana Moment reported that the people scheduled to testify include Corey Barnette, owner of the District Growers Cultivation Center and Metropolitan Wellness Center, which produce and sell medical cannabis in D.C., California State Treasurer Fiona Ma, Rachel Pross, the chief risk officer at the Oregon-based Maps Credit Union and Greg Deckard of State Bank Northwest in Washington State representing The Independent Community Bankers of America. In addition to that, Major Neill Franklin, a retired Maryland police officer who serves as the executive director of Law Enforcement Action Partnership (LEAP) looks to be on board.

While it would be great news for cannabis companies and dispensary owners to finalize use a major bank or take a debit card for a transaction, it could spell trouble for others. A whole cottage industry has sprung up in order to solve the banking problems for cannabis companies. It’s possible that by opening up the system, these companies stand a chance of getting acquired by bigger banks who want to get a quick foot in the door.


Debra BorchardtDebra BorchardtFebruary 6, 2018
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9min25160

Treasury Secretary Steve Mnuchin testified during an appearance before House Financial Services Committee about the Financial Stability Oversight Council’s (FSOC) annual report. During his testimony, he addressed cannabis and banking saying, “We do want to find a solution to make sure that businesses that have large access to cash have a way to get them into a depository institution for it to be safe.”

He also said, “We are reviewing it with the intent not to take it down without a replacement.”
A copy of the clip can be watched here.

Robert Fireman, CEO of MariMed Inc, (MRMD) a firm which has established cannabis cultivation and dispensary facilities in 6 states and distributes branded precision dosed products in numerous states, voiced his support for government efforts to enable the cannabis industry to use traditional banking:

“Banks play a major role in all business.  Marijuana is classified as a Schedule I drug under the federal drug control regulations has been a barrier for most banks to provide needed financial services to the cannabis industry.  In many states, cannabis businesses cannot obtain banking accounts to make deposits or issue checks and wires for payables.  Most banks refuse to provide even secured loans to own and develop cannabis facilities.   Banks who have mortgages on commercial and industrial buildings consider it a default if these business owners lease any part of property to cannabis business.  Currently, having to deal with lots of cash presents security issues that other businesses do not have.  Conventional banking will be a great benefit to this emerging cannabis industry as it tries to become more mainstream in the 29 states that now have some form of legal cannabis.”

Here are some additional reactions from marijuana industry entrepreneurs and leaders

Wil Ralston, President of SinglePoint (SING): “This is a great step in the direction of enabling cannabis-based businesses to access to traditional banking. We believe this further legitimizes the industry and again shows the need for a solution in a heavy cash-based business.”

Bryan Meltzer, Partner at Feuerstein Kulick LLP: “Although far from concrete, Secretary Mnuchin’s testimony today was encouraging because he appears to understand that limiting access of state-compliant cannabis businesses to the banking system is not in the federal government’s interest and is harmful to public safety. We hope that Secretary Mnuchin follows through with his testimony by causing the Treasury to adopt guidance and regulations that add some protection and certainty to banking in the cannabis space, but ultimately this is an issue that will require Congress to act on.”

Arnaud Dumas de Rauly, Chief Strategy Officer for The Blinc Group: “Mnuchin’s testimony to the House Financial Services Committee revealed his intentions to ‘collect our necessary taxes and other things’ with regards to allowing cannabis companies to benefit the traditional banking system. This is a game-changing statement which underlines the federal government’s intentions with regards to our industry. Its implications are numerous, spanning from simple credit card transactions to multi-million dollar funding deals, all the way to public listings for canna-businesses. Now is the time to get our ducks in a row; as soon as the Federal Government puts this play into action, regulation, compliance, and standards will follow and become the key to business sustainability. On the other hand, when he refers to ‘other things,’ I can’t help but wonder if he’s referring to making marijuana plant deposits in their vaults.”

Matthew Singer, CEO of tökr: “Positive movement in the push for legitimizing the cannabis industry. More and more states are legalizing cannabis; the sooner the complaint businesses can get access to bank and financial services, the better for everyone.”

Mike Kramer, CEO of 420 Blockchain: “I, and what I imagine to be a majority of the cannabis industry clearly agree with Deputy Mnuchin. The reasons why money derived from cannabis sales should be in banks are obvious when it comes to trackable taxation, transparency, and safety. The government needs to see that cannabis companies are operating under state compliance laws in order to feel comfortable letting these organizations work with traditional financial establishments. After talks at Capitol Hill with various Congress members, I see an obvious desire to integrate my blockchain technology into states with legal cannabis sales to guarantee compliance. At this point, it isn’t a question of if or why we should let cannabis money in banks, but rather how can we get that money in banks as soon as possible? Everyone sees the need so it’s only a matter of time before that need must be met.”


Debra BorchardtDebra BorchardtNovember 27, 2017
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5min27970

A new report from GreenWave Advisors on the cannabis banking industry estimates that California will collect $5.2 billion once the state implements its adult use marijuana market. Including sales tax, that number could rise to $6.2 billion.

Analyst Matt Karnes wrote, “With other new state markets planned for 2018, we estimate total legal marijuana retail revenues of approximately $12.1 billion, or $14.5 billion including sales tax.” Karnes continues to believe that by 2021, all 50 states and Washington D.C. will have some sort of legalized medical marijuana if not a fully legalized market which would result in retail revenues of $30 billion ($36 billion including sales tax).

Most banks do not service cannabis companies with GreenWave estimating that only 5% of financial institutions are on the record as having a relationship with a known marijuana business. Karnes believes this lost opportunity for the banks will drive new federal legislation. In the meantime, the industry has been pursuing its own solutions.

Dispensaries usually have ATM machines available for cash purchases and some engage in a cashless ATM, which essentially functions as a debit withdrawal to the dispensary. Others use a third party to transact the purchases, prepaid cards or mobile wallets. These wallets transfer money from the shopper’s bank account to the dispensary. Some of these mobile wallet companies include PayQwick, CanPay, Tokken and SingleSeed.

GreenWave noted that this banking and payment challenge has created opportunity in the industry. “The land grab is significant (over 7,000 financial institutions in the U.S.) and the successful rollout of these product offerings will likely mitigate one aspect of cannabis investment risk.”

Cannabis Fin Tech Solutions

Kind Financial was a cannabis banking pioneer with its Link to Banking (LTB) platform. The company is headed by former FinCen official Tom Fleming. “LTB assists financial institutions comply with regulatory guidelines by leveraging a proprietary technology platform that tracks and analyzes transactional data enabling banks to identify reportable suspicious activity,” wrote Karnes. The KIND Financial company also provides software that tracks cannabis from seed-to-sale and can track the flow of funds.

Hypur is a software platform that can audit a company in real time to make sure it is in compliance with the law. It can also provide a connection to the point-of-sale system and allow the banks a way to reconcile cash collections with deposits. This company includes John Vardaman, who worked at the Department of Justice and helped to pen the Cole Memorandum.

Safe Harbor Banking Solutions is an original player that launched in Colorado and more recently in Hawaii. Its platform provides an automated front office to help banks bring on marijuana businesses and monitor them. It also handles the back office work of compliance and monitoring. It charges a subscription fee for the service and will soon be available in eight additional states with plans for 20 states in 2018. Safe Harbor is a subsidiary of Partner Colorado Credit Union.

Banking Solutions

Since the big banks have refused to engage with cannabis companies, credit unions have stepped up and Colorado led the way.

The Fourth Corner Credit Union applied for a master account at the Federal Reserve Bank of Kansas City and was denied. The bank filed an appeal. The San Francisco Federal Reserve Bank has shown its willingness to take these types of deposits, so it’s possible that could help Fourth Corner in its quest.

Partner Colorado Credit Union says it handles $80 million a month in marijuana business deposits but is limiting its exposure to the industry to only 10% of its assets.

Legislation

“The Secure and Fair Enforcement Banking Act of 2017 (Senate Bill S1152 and House Bill HR2215) has been proposed to create protections for depository institutions that provide financial services to cannabis-related businesses,” said Karnes. “While there is support on both sides of the aisle, the timing of a vote is unclear.” Karnes maintains that the Trump administration’s stance toward banking deregulation could be a positive for the cannabis industry.

Karnes concluded, “There is no one answer and we think there will be a patchwork of alternative offerings.”


Debra BorchardtDebra BorchardtNovember 14, 2017
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4min2495527

Getting a cannabis cash into a Federal Reserve has been like finding the holy grail. In Colorado, credit unions have sued in order to be able to establish a master account, which is the key to cannabis banking. This past summer, the Fourth Corner Credit Union won a partial victory when a court said that the Federal Bank of Kansas City couldn’t block access.

Apparently, while that was happening in Colorado, HARDCAR Security found the grail in the state of California. The company has been secretly working in a pilot program for the last four to five months covering some the largest cannabis accounts in California. HARDCAR has been depositing the money in both the Federal Bank of San Francisco and the branch in Los Angeles. “No one else has been able to get into the Fed in California,” said HARDCAR Security CEO Todd Kleparis.

A bank sponsored HARDCAR with the Federal Reserve and all of its guards go through federal background checks. “We bring the money to their locations and they go through it,” said Kleperis. “Our company has moved over $25 million in a few short months.” The most important piece of this banking puzzle is that the cannabis company money is now co-mingled with regular money. It legitimizes the cash and allows it to enter into the monetary system.

Cities Also Need Help With Cannabis Cash

In addition to picking up the cannabis business money and depositing it with the bank, HARDCAR said it is also going to be assisting cities with the movement of their cannabis cash. “No other armored car company wants to take the cannabis cash,” said Kelperis, “This risk is too much. Think about all those grow sites in Desert Hot Springs. Who is going to go get it? We’re going to go to the cities and help them put all these tax revenues in the bank.”

Most of the focus on solving the cannabis banking problem has been on the plant touching businesses, but it also turns out that the municipalities were finding that their banks wanted nothing to do with the cannabis tax revenues. Kleperis mentioned that Los Angeles contemplated setting up its own bank, but that it would take years to establish. He also believes that by getting access to the Federal Reserve system, it will keep more of the money in the state and put more money back into the system. There are many stories of “backyard banks” where farmers bury cash because they have no way to bank it and worry about robberies.

HARDCAR is a company filled with military veterans and that may have made the decision for the Federal Reserve to accept cannabis cash as little easier. Or it could be that the California cannabis market will dwarf the Colorado market and that much cash floating around the state would make for a dangerous situation. Either way, it’s a huge step forward for cannabis banking and the mainstreaming of the industry’s money. Kleperis added, “It’s a huge win.”



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