Independent Banker - July 2023 - 32

PORTFOLIO
platform that enables financial
institutions to manage compliance,
onboard and underwrite clients as
well as deliver payment solutions, says
Tony Repanich, president and CEO.
Banks can use the platform to
determine whether a prospective
customer has a valid license to
operate a cannabis business in their
state, as well as whether there is
any negative news about them, to
determine whether they are a good fit
for the bank, Repanich says.
That could include if the business
was caught selling to minors or
selling inventory outside its state's
tracking system to avoid paying
taxes, or other activities that could
indicate an increased risk of money
laundering, such as ties to a foreign
government or high-risk individuals.
The platform also helps banks
monitor whether the business
remains in good standing, in part by
validating information the client has
entered and looking for exceptions,
he says. Moreover, the technology
automatically calculates whether a
customer's deposit activity within
a 90-day period matches its state's
tracking data to ensure they are
highly correlated. Banks then use
that data to create the mandated
suspicious activity report, and Shield's
platform transmits the information
electronically on a scheduled basis.
" The bank and customers work on
the same user-friendly platform to
create a consistent compliance picture
for the customer, " says Repanich.
The bank can then accept results and
streamline federal filing requirements.
Shield's platform also gives
cannabis merchants the ability
to accept debit cards from their
customers at the point of sale in a
compliant manner, he says. For banks,
it's a great opportunity to get low-cost
deposits and better fee income than
" All facets of the cannabis
industry need to be fully
understood so the bank can
take the appropriate steps to
craft policies and procedures
to bank this industry. "
-LAURA BENSON, CFG BANK
they get on regular checking accounts.
" You don't need to be pro or anti
cannabis, " Repanich says. " You are
helping to increase public safety by
getting cash out of this business and
providing regular SAR filings to law
enforcement, and you are also making
sure taxes are getting paid on these
sales. It's good for the community that
these merchants can have access to
bank services. "
Getting the board on board
If a community bank is going to serve
the cannabis industry, it's imperative
to not only have the board's complete
support but also their willingness
to understand the significant legal,
operational, reputational and
regulatory risk exposure, says Laura
Benson, vice president, BSA officer
- cannabis at $3.8 billion-asset CFG
Bank based in Baltimore.
" The board needs to also
understand there will be increased
scrutiny by the regulators and there
will be many questions directed at
them, " Benson says. " All facets of the
cannabis industry need to be fully
understood so the bank can take the
appropriate steps to craft policies and
procedures to bank this industry. "
Understanding the state-specific
needs and business practices of cannabis
dispensaries, cultivators, testing labs
and wholesalers is " non-negotiable, "
she says. Understanding what processes
a bank can automate or outsource will
help determine support staffing.
" If you do not hire dedicated staff
to onboard, oversee, monitor and
service this segment, you will not be
successful, " Benson says. " Additional
BSA staff is a must. You have to hire an
extremely knowledgeable BSA officer
and staff to adequately monitor and
oversee the compliance requirements. "
For each Tier I cannabis client-
anyone who directly touches a
cannabis plant as part of their work,
such as a grower, processor or
dispenser-there are continuous SARs
and currency transaction record filings,
as well as enhanced due diligence
requirements. Depending on how a
bank structures its cannabis banking
program, the institution may need to
hire additional cash management and
deposit operations staff.
" It's also highly recommended to
partner with a third-party vendor, "
Benson says. " There are many thirdparty
vendors in this space, so you
have to have demos and conversations
with multiple vendors to ensure you
contract with the one that will meet
your needs. "
Katie Kuehner-Hebert is a writer
in California.
32 // ICBA Independent Banker // July 2023
Independent Banker - July 2023

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