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  1. Home
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Bankers Are Getting More Comfortable With Cannabis

Attitudes are changing, and the number of financial institutions serving the space is increasing, according to experts.
By STEVE GELSI Sep 14, 2018 | 12:30 PM EDT
Stocks quotes in this article: MTEC

While cash often remains king in the cannabis business, U.S. banks have been growing more amenable to providing accounts and other services, industry experts said at a panel presentation on Friday.

"Things are changing," said Tyler Beuerlein, executive vice president of business development for Hypur Inc., which provides compliance services and
facilitates transactions for banks in the cannabis space. "With every state that comes online, there's a new set of banks that will serve the market. As regulators get more accustomed to it, that will help as well."

Hypur is preparing a national launch of its services as the industry expands, he said.

Matt Karnes, founder and managing director of Green Wave Advisors, said it's clear that the Trump administration is not going to try to shut down legal cannabis businesses. Roughly 400 out of 7,000 financial institutions in states where cannabis is legal are now banking the space. That number should increase.

"There's a lot of fear, there's added risk...but over the next two or three years this issue will be resolved. Either federal prohibition will end or the States Act [allowing legal cannabis businesses] will pass."

Although U.S. Attorney General Jeff Sessions in January withdrew the Obama administration's Cole memo that prevented federal prosecution of state cannabis, banks continue to circle the cannabis business.

"At first, some of the banks on the edge hit pause at first, but since then I've seen a reversal," said Andre Herrera executive vice president of banking and compliance for Hypur "It created a positive affect for banks ...[because] the Cole memo was rescinded and the world didn't explode."

Herrera, who works closely with banking regulators, said there has not been a single banker that has gone to jail for cannabis banking, or faced any civil or regulatory penalties.

As long as bankers follow guidelines issued in 2014 by the U.S. Treasury's Financial Crimes Enforcement Network (FinCen), bankers escape heat.

Herrara was less bullish on efforts in California to set up state-sponsored banks for the cannabis space because lenders cannot get reserve master accounts from the U.S. Federal Reserve bank. The account is needed for banks to transact with the federal banking system for wire transfers and other bread and butter transactions.

"The Federal Reserve has yet to issue a master account to a cannabis banker," he said.

Herrera said banks would benefit from further guidelines from banking regulators on how to work with cannabis companies as lenders become more comfortable with the idea of providing accounts to the industry.

"I see attitudes changing," Herrera said. "Three years ago, I'd mention marijuana and I'd hear nothing but owls and crickets. A year later, I was asked to speak at an industry event. Some banks are doing it as a community services to take cash off the street. Others are in it for the added business. Others have family members using medical cannabis. More and more are open to it even compared to a year ago."

The comments came during a panel presentation on the economics of banking at the Green Market Summit on Friday at the World Trade Center. Tahira Rehmatullah, CFO of MTech Acquisition Corp. (MTEC) , moderated the panel, which was sponsored by Hypur. It was one of several gatherings on a variety of topics scheduled for the event.

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At the time of publication, Gelsi had no positions in any securities mentioned.

TAGS: Investing | Stocks

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