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FEBRUARY 2022
Shield Compliance
Noah Carey

3 Questions with Noah Carey

As more states implement legal cannabis programs and the federal government continues to introduce legislation related to cannabis banking and legalization, a growing number of financial institutions are taking steps to better understand this line of business and the advantages of investing in cannabis banking programs of their own. Here are a few questions we often get from prospective cannabis bankers.

1. Will financial institutions still need specialized compliance programs if the federal government legalizes marijuana?

In short, the answer is yes. The BSA/AML risk associated with serving cannabis-related businesses (CRBs) will not change significantly when Congress eventually passes marijuana reform legislation. Why? Because regardless of how cannabis is viewed at the federal level, financial institutions must continue to guard against legacy funds, a robust illegal market, and bad actors. While federal legalization or the passage of the SAFE Banking Act would provide greater regulatory clarity, we believe there are benefits for financial institutions to begin serving this market now, such as an early-mover advantage on new relationships and the revenue that can be generated from this line of business.

2. How can my financial institution manage the volume of cash handling required for banking CRBs?

While much of the cannabis industry still operates in cash, we are seeing growing acceptance and availability of payment processing and payroll services to help eliminate cash transactions. Shield has a wide range of integrated financial service offerings, including a partnership with Spence Labs, to help financial institutions extend their service model to CRBs. Electronic payment solutions also allow financial institutions to create new revenue streams as part of their cannabis banking programs. With continued margin compression, it has become even more important for banks and credit unions to seek additional sources of non-interest income.

3. What is the status of lending to this industry?

Most financial institutions initially enter the market to generate new sources of low-cost deposits and non-interest fee income. However, compliance and due diligence processes implemented on the deposit side can also be leveraged to mitigate credit risk. As a result, financial institutions seeking to gain a competitive advantage are increasingly looking toward lending as the next big opportunity in cannabis banking. Ultimately, the decision on the type and breadth of services that can be offered to CRBs relates to the level of risk the financial institution is willing to take.

Admittedly, this is a challenging industry to serve. However, by partnering with experts who can assist with implementing compliance technologies, risk management policies, and operational processes, banks and credit unions can manage the complexities and gain the financial benefits of cannabis banking.

Learn more about Shield's Cannabis Banking Solution › 
Cannabis Banking Playbook
Download the Shield Compliance Cannabis Banking Playbook
Understanding what is required to serve cannabis businesses and minimize risk helps bankers succeed in this fast-growing market. Informed by the experience of pioneering bankers, Shield’s cannabis banking playbook defines a path forward for financial institutions to serve these businesses successfully.
 
Meet the Expert
"Meet the Expert"
As part of our series featuring the bankers and experts paving the way for the mainstream availability of cannabis banking services, we asked Jordan Courtner, Director of Onsite Compliance at Empyreal Logistics, to explain how third-party specialists can help financial institutions meet their compliance obligations. Jordan developed Empyreal's state-specific regulatory compliance auditing platform and offers insights into the inspection process.
 
Shield in the News
Bloomberg News
Shield was featured in a Bloomberg News article, Cannabis Banking Is Booming Despite Federal Uncertainty. The article also highlights our customers, Bill Hufnagel, President and CEO of Dart Bank, and Todd Gunderson, President and CEO of Credit Union 1, who are leading the industry and paving the way for newly-minted cannabis bankers.
Oklahoma State Bank
In January, we announced a partnership with Oklahoma State Bank (OSB). As one of the earliest providers of cannabis banking services in Oklahoma, OSB understands the compliance and operational requirements associated with serving this industry and turned to Shield to help improve the functionality and scalability of its program. We are very excited to work with the team at OSB.

Based on our thorough review of their capabilities, we are confident Shield Compliance will enable us to maintain the highest levels of compliance while delivering an exceptional experience to our customers.

David Hardy, President & CEO
Oklahoma State Bank
Shield was also featured in these publications:
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Shield Compliance transforms how financial institutions manage risk, comply with regulations, and satisfy operational demands associated with serving the legal cannabis industry. Shield’s technology sits behind the financial institution, powering its compliance and risk management operations in the background. This approach enables financial institutions to grow their portfolios and gain an early-mover advantage on new relationships and the added revenue from these customers while protecting themselves from the risks associated with banking this industry.
 
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