May 9th-11th,2019 - Cartagena, ColombiaN C I A - B A N K I N G C O M M I T T E E

AyinehsazianSahar

www.expocannabiz.com

Why won't financial institutions take on cannabis businesses?

1. In U.S., because cannabis remains illegal at federal level, federally chartered �nancial institutions will not take on these businesses, including ancillary businesses, because they must strictly abide by federal laws. These �nancial institutions include some of the most widely known, such as Wells Fargo, Bank of America, Chase, US Bank. As a result, it's the more local state charted institutions, especially the credit unions, which have really taken on the cannabis businesses.

Concern of NCUA/FDIC insurance (though this has never been pulled)

A.

B.

Reputational risks- banking cannabis can be taboo and more traditional clients of banks will not generally be comfortable with the idea of their bank taking on cannabis clients. Note however that a study a couple of years ago in U.S. showed that most people, especially those between 20-40 prefer their bank serving cannabis operators rather than big corporations or pharmaceutical companies.

c.Why won't financial institutions take on cannabis businesses?

1.

what does it mean to properly bank cannabis?

2.

A. B.

C.

2014 FinCEN Guidance - ongoing KYC due diligence requirements, Suspicious activity report requirements. Dept of Treasury in favor of cannabis banking because all cash industry is harder to keep tabs on and a huge public safety danger. Can be hard to keep up with and expensive. Cost is passed on to clients. If you go to a depository institution and they are able to immediately open an account for you as a cannabis operator, that's not a good sign because proper cannabis due diligence takes time. Note that FinCEN Guidance doesn't really extend to lending - that's a personal choice banks must make.

State cannabis laws protecting �nancial institutions from prosecution to a certain degree.

SAFE banking act - has been attempted multiple times, currently going through law making process. Cautiously hopeful.

Potential solutions/ what can you do?

3.

A.

A bank of cannabis. This idea has been around for a long time. However, no such �nancial institution has ever come to fruition and I do not foresee it working out. Biggest concern is concentration issue - very unsafe to have majority of bank's assets in any industry, especially a newer less established one like cannabis. Bank regulators have consistently balked at this idea for numerous reasons. One such �nancial institution was attempted in Colorado a few years ago, but failed to get account with Federal Reserve.

Potential solutions/ what can you do?

3.

B.

"alternative banking solutions" - do your homework and ask lots of questions! Ask about their licenses - do they have them? How long have they had them for? Who do they bank with? Where will your money ultimately go? How can you get it out? How long does it take and why? If they do not have a license, why are they exempt? Have they previously shut down any user's account? Why? Hesitation to respond is generally not a good sign. While you can't really expect a company to share all of their secrets, they should be able to clearly guide you through the course your money will travel from and back to you.

Potential solutions/ what can you do?

3.

C.Crypto-currency - generally not a good idea, as it tends to further complicate cannabis money. Bank must now understand cannabis and crypto currency issues.

D.Getting and keeping a bank account- be ready with all business formation docs and licenses. Be honest. Always be willing to completely and fully respond.

E.Valuation of company increased by bank account. Especially if bank is aware of nature of business.

Potential issues presented by U.S. Banks.

Couple of years ago, Uruguay banks received notices from American banks that they would stop working with these banks if they accepted cannabis funds. These U.S. Banks cited the U.S. PATRIOT act, saying that because cannabis activities were illegal in the US, accepting cannabis related funds would be breaking U.S. law. While opinions on this differ, there is a growing school of thought, which I am a part of, that there is actually no underlying crime because it is not again U.S. law for a business in another country to partake in cannabis activities that are permitted by that country.

4.

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