Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
From the WA and M Studio on the campus of
Florida A and M University.
Speaker 2 (00:04):
This is Mary Forum Radio, a weekly conversation on the
education and research of the medical marijuana being conducted at VMUI.
Speaker 3 (00:12):
Hi.
Speaker 4 (00:13):
I'm Heidi Outway, your host for this conversations on Cannabis
Virtual Form, brought to you by the Medical Marijuana Education
and Research Initiative at Florida and M University. In this conversation,
we're talking about banks that work with the heavily regulated
cannabis industry and how it impacts medical marijuana patients and
(00:34):
companies in Florida. So let's talk and learn about this
subject with our guests. Joe Bohrer is the Chief Financing
Solutions Officer for First Federal Bank, which works with cannabis
companies across Florida and the US. He's been in banking
for over thirty years and has extensive financial, analytical and
(00:54):
regulatory experience. Joe, Welcome to the Forum.
Speaker 3 (00:58):
Thank you, Heidi, it's a pleasure to be here.
Speaker 4 (01:00):
Our next guest is Jenen Forsythe who has more than
a decade of banking experience and serves as a specialty
compliance officer at First Federal Bank. She is an expert
in banking compliance and risk management within the cannabis industry. Jenen,
we're excited to have you.
Speaker 1 (01:17):
On the forum. Thanks Heidi.
Speaker 4 (01:20):
To everyone watching. Please share the link to this form
on your social media channels so others can learn.
Speaker 1 (01:26):
About this topic.
Speaker 4 (01:27):
We also want you to tell us what you think
about this forum by completing the survey that will be
posted on Mary's social media pages. Your name will be
entered into a drawing in March twenty twenty five to
win a one hundred dollars gift card provided by one
of Mary's partners. Now, let's start this conversation on cannabis,
so Joe and Jenen, Let's set the stage for this
(01:50):
conversation by presenting our listeners and viewers with the state
of Florida's medical cannabis industry. Medical marijuana is a nearly
two billion dollar industry in Florida with over eight hundred
thousand licensed patients across the state. So Joe, how many
companies have licenses to grow and sell medical cannabis in Florida.
Speaker 3 (02:11):
As of today, there are twenty five active licensees and
in late twenty twenty four, twenty two additional licenses were approved.
Speaker 1 (02:19):
Wow, that's a lot.
Speaker 4 (02:20):
And then how many medical marijuana treatment centers also known
as dispensaries are in Florida.
Speaker 3 (02:25):
On the OMMU website last week they reported that seven
hundred and nine dispensaries are open in Florida.
Speaker 4 (02:31):
Wow, that's pretty remarkable. So, Jen, and let's kind of
shift into the fact that marijuana is still illegal at
the federal level, which means medical marijuana companies in Florida
that work with banks, you know, it can get kind
of complicated. So how are banks able to work in
this industry?
Speaker 2 (02:52):
Well, Hatti, that's really a bank to bank situation or
case by case scenarios. So really is determined through conversations
that those institutions would want to have with their federal
regulators as well as executive management, their respective executive management
board members on you know, if they have a board
(03:13):
of directors, as well as maybe committees or other shareholders,
you know, kind of depending upon how the institution is
made up. Ultimately, each institution will need to determine their
respective risk tolerance for any number of higher risk industries
of course, including cannabis.
Speaker 4 (03:29):
Yeah, so who are your customers in general? In the
in the cannabis industry.
Speaker 3 (03:35):
So we bank anybody that touches the plant. In Florida,
we have vertically integrated operators, we bank them. We also
bank cannabis, you know, plant touching cannabis folks in all
states in the United States, so we can we can
actually bank people in all fifty states. However, only in
the states where it's approved at the state level. Right.
We also bank the CBD and HEMP space, and we
(03:57):
bank vendors that provide services to cannabis companies.
Speaker 4 (04:01):
Yeah, and so for the HIMP and the CBD stores,
are there risk in banking for them.
Speaker 3 (04:08):
As well, Jenna, And that's a good question.
Speaker 2 (04:10):
Yeah, absolutely, Yeah, thanks Joe. So, you know, even though
they are federally legal, those companies are still considered to
be like cannabis adjacent and so they are still higher
risk business types. They're still licensing, testing, permitting requirements that
those companies have to uphold, which you know, the bank
should take an invested interest in to make sure that
(04:33):
they are only serving legitimate and state compliant or federally
compliant companies.
Speaker 1 (04:38):
Wow.
Speaker 4 (04:39):
You know, I was doing some digging when we decided to,
you know, bring up this topic to our viewers and listeners,
and I dig some digging around, and I didn't see
any of the big well known bank brands, you know,
showcasing that they service the legal cannabis industry.
Speaker 1 (04:55):
So Joe, tell me what types.
Speaker 4 (04:57):
Of banks actually work within the legal cannabis industry.
Speaker 3 (05:01):
So largely what you see are community banks and regional
banks that you know, the board of directors has approved
the ability to bank the cannabis space. And when we
talk about the big banks, they have not taken on
a risk profile. Well that where they will support that and.
Speaker 4 (05:16):
Tell me more about you know what it means by
that risk piece. What does that mean to the folks
who are listening that it's a risk for a bank
to take on this this type of business in the
cannabis industry.
Speaker 2 (05:33):
Because so essentially, go ahead, you have it.
Speaker 3 (05:36):
Sorry, I'll start, Jan, and then you give the details
because you're a lot more knowledgeable. Because cannabis is still
federally illegal, it becomes a challenge for folks that don't
want to take on that type of risk, you know, Jan,
and we'll we'll share with you how we're able to
do that.
Speaker 2 (05:55):
There's also very limited, limited guidance for this industry type.
And so typically banks when they serve higher risk industries,
and you know there are a number of them that
are cash intensive or just generally more risk intensive to
take on for the institution, there are a number of
like publications, expectations, exam manuals, things like that that are
(06:16):
available not only to the banker, but of course also
to the regulators. So for the cannabis industry, that's not
yet been established. So that is what makes it a
bit more difficult to serve this industry because you know,
you are working with a number of best practices that
are really related to other sort of similar industries, but
there is no published guidance to date for serving these companies.
Speaker 4 (06:39):
So would similar industries maybe be alcohol and pharmaceuticals, because
I mean, it's all along the line. To me, it
seems similar and I could be wrong, But is that
are those industries that could also be risky to be
in for a.
Speaker 2 (06:54):
Bank, Yes, definitely. So any industry you know that has
heightened risk, a cash intensive component, any international component, you
know that there's a there's a number of different components
that those industries, even if they are federally legal or
even state legal, if you will you know, still present
a lot of risk to the bank for serving them.
Speaker 4 (07:15):
Yeah, So over the last few years, there's been talk
about the Safer Banking Act. Can you talk a little
bit about that and what it would mean for the
cannabis industry if it were to be brought forth?
Speaker 2 (07:28):
Certainly, so, the Safer Banking app Act, you know, if
brought to fruition, would really just provide like a safe
harbor for banks and financial institutions and a number of
other institutions, you know, lending, et cetera, to be able
to serve the industry or essentially not be be penalized
just for serving the industry. You know, however, that doesn't
(07:49):
reschedule or deschedule you know, the drug of course, that's
a whole separate set of actions. So the industry will
continue to be treated as higher risk. You know. If
safer does pass, however, you know, that framework that I
was talking about essentially not existing would exist under the
passing of the Safer Banking Acts. So it would provide
(08:10):
some direction, some safe harbor, perhaps some comfort for more
intitions to get into the space.
Speaker 4 (08:16):
And where does it stand right now? I was looking
before the show and it was just a lot of
back and forth. So where does that stand right now
in the at the federal level.
Speaker 2 (08:27):
So the Senate floor is pending. It hasn't passed the Senate,
but it was passed by the Senate Banking Committee.
Speaker 4 (08:33):
Yeah, and you mentioned rescheduling, and we did a couple
of forums on that topic last year. Could either of
you just kind of give us a talk about the
rescheduling and what that could mean to banking in the
cannabis space.
Speaker 3 (08:51):
So, rescheduling it moving it from a Schedule one to
a Schedule three, which was what the proposal was. It
moves it to be comperable to other pharmaceuticals that are
no longer federally illegal. Right, that's sort of the state
of where it would be. And so by doing that,
you probably remove some of the barriers for the banking
(09:12):
industry on being able to serve the industry.
Speaker 1 (09:15):
Wow. Wow.
Speaker 4 (09:17):
And then how does all of this impact patients medical
marijuana patients in Florida, if they're you know, going to
their local dispensary to get their legal medical marijuana, how
does banking impact them to be able to purchase cannabis legally?
Speaker 3 (09:39):
So banking impacts them functionally, and it also impacts them financially,
and if we talk about the functional piece, you know,
jan In referenced that it's a cash intensive business. And
one of the reasons it's cash intensive is because the
large card brands and national debit networks have prohibited the
processing of those transactions at the retail retail location, so
(10:02):
you can't take your typical debit card or credit card
to a dispensary and offer it for payment for the
purchase of product. So that makes it difficult because the
convenience factor is gone. You either have to plan to
get cash ahead of time to take it and give
it for the payment, or if you go to the
dispensary you often see ATMs there, the cost for the
(10:25):
consumer goes up because they have to pay a fee
for withdrawing that cash from the ATM. They get it
probably two places, one a foreign ATM transaction at their
financial institution and to the owner of that ATM charges
that as well because that's how they drive revenue. So
it becomes a higher cost for those people to actually
(10:46):
go to the dispensary and use cash. On the corporate side,
this is a bit of a longer trail operating with
cash for companies that are cannabis related. Is more expensive
than processing credit cards because there's a lot of manual
issues involved, a lot of safety issues involved. And then
on the backside, how does that cash get taken from
their location to actually getting credit in their account and
(11:09):
it's very complex and costly for them. Those costs get
passed along to the consumers.
Speaker 1 (11:14):
Wow.
Speaker 4 (11:15):
And so earlier you mentioned that we have twenty two
new growers licenses coming into the state of Florida, which
means we'd have a lot more providers. Could that help
with the costs potentially of having to spin cash because
we have more competition, or I would think in the market.
Speaker 1 (11:38):
Would that have an impact at all?
Speaker 3 (11:40):
That's a great question. Unfortunately, that's not going to change
the retail point of sale solutions that are in place
for people to buy cannabis. It's largely cash or there
are wallet apps that they you know, people have to
download and they can use those. That's cumbersome as well.
And so with those new entrants, it's probably not going
(12:01):
to change the payment at the point of sale situation
until either rescheduling or rescheduling happens, or safer banking addresses
that directly.
Speaker 1 (12:09):
That's interesting, and that even is it even going to happen.
Speaker 4 (12:14):
I mean, I know this is speculative, but it sounds
like for the consumer it's it could be a potential
barrier to get medical marijuana if the costs are kind
of high. So what do you think that it has
the potential to pass at all? Or it's just the
process that we just s don't know At this point, I.
Speaker 2 (12:35):
Would just say we're a bit uncertain. You know, we're
entering into a you know, a new president elect, so
obviously things are changing rapidly with the introduction of those individuals,
and so there's there's a lot that's still kind of unknown.
You know, we're a bit over a month then, so
I think it's yet to be determined.
Speaker 1 (12:54):
Yeah.
Speaker 4 (12:54):
So so if someone wants, I want to kind of
shift a little bit to talk about the UH and
ciliary businesses that support the cannabis industry. So, if someone
wants to come into Florida and they want to start
a business that supports Florida's you know, billion dollar cannabis industry,
where would they go to get funding and what types
(13:16):
of questions should they be asking if they were.
Speaker 1 (13:19):
To come to a bank like yours that supports the industry.
Speaker 3 (13:24):
So if somebody comes to the state, the first thing
they have to do is identify who actually banks the
cannabis space in the state of Florida, because as a
service provider, you're probably going to have to bank with
one of those folks long term, because the large banks
have had a history of de risking people and moving
them out of their financial institution. So from that perspective,
(13:44):
you want to find an institution that is cannabis friendly,
and they have taken the position that we are serving
and supporting the industry. As it relates to funding, that's
a really complex topic. There is lending available, but typically
the lending available has some sort of collateral like real
estate attached to it, and typically banks like ours and
(14:05):
others are looking for cash flow positive companies. So companies
that are fairly new or startup, they're going to struggle
getting any sort of bank debt. They probably will have
to go to an investor pool to capitalize their companies.
Speaker 4 (14:18):
Wow, that's interesting, Jen, did you want to add anything
to that?
Speaker 1 (14:22):
Nothing related to funding. Chose the man on that one,
so we talked a little bit.
Speaker 4 (14:29):
I mean, you guys kind of like laid out all
the challenges and the risks that are involved in banking
with the cannabis industry. So I'm just curious about, you know,
what happens if you know what's.
Speaker 1 (14:44):
Like the future. What would the future look.
Speaker 4 (14:46):
Like should we have the Safer Banking Act, should we
have you know, deregulation, all of those things occur, What
would that How would that change the cannabis industry, not
only in Florida but across the nation.
Speaker 2 (15:00):
Well, I think any any positive direction on any any
of those initiatives would of course provide some of the
institutions who are a bit leary to get into the industry,
you know, a bit of comfort. I think, you know,
framework is speaking from a compliance perspective, is critical, you know,
for us to understand the expectations of our regulators, you know,
(15:21):
so we don't go into examination season with any surprises.
The expectations are clear, their expectations are clear as far
as you know what they're supposed to be examining and
looking for, you know, for the success of the program.
So I I believe that any positive forward movement will
will be good. One comment though, that I want to
(15:42):
make is, you know, typically banks who are in this
industry for the long haul would be more ideal. So
you know, this isn't this isn't the best industry to
get into on an experimental basis. A lot of these companies,
you know, have have been debanked, some with little to
no notice. So you know, even though they are federally
(16:04):
illegal and you know there is a lot of nuanced
surrounding them, they are nonetheless enormous commercial operations. So you know,
you can imagine how harmful that is to their operation
to be immediately uh debanked. So that that's just you know,
a trailing comment Heidi regarding the institutions entering the space.
Speaker 4 (16:26):
Wow, well, what could put a cannabis business or those
who serve the cannabis industry at risk of losing their
banking their banking?
Speaker 1 (16:33):
What would cause that? So so there are a number
of things. Go ahead, you go, Jo, I'll go after you.
Speaker 3 (16:40):
Yeah, this is the way we work. So we apologize everybody.
Speaker 1 (16:44):
I'd like to thank to you. I love it.
Speaker 3 (16:46):
Yeah. So really two things. One, if it's a bank
that is not in favor of cannabis and they identify
you as running cannabis transactions or having cannabis related activity,
that's going to cause you to get debanked, right, that's one.
The second thing is remember in the banking industry there
are mergers and acquisitions, and if a bank is acquired
by a bank that does not want to serve the
(17:06):
cannabis industry, all those customers have to find a new home.
And we have found that on a number of occasions
that's how we have customers come to us.
Speaker 1 (17:13):
Yeah. Wow.
Speaker 2 (17:14):
Two other things to consider would be the political climate.
So whether it's at the federal or state level. You know,
new governor governors could be introduced at the state level
that are absolutely not in support of the industry and
so that would change the climate drastically for the state.
And then the other thing from a banking perspective, a
way to lose your banking in a word, is just
(17:35):
non compliance, whether that's non compliance with the bank standards
you know that the bank has set and placed onto
the company, or failing to or falling short of the
expectations that are at the state level, for example, not
maintaining adequate licensure is a really easy example to give.
Speaker 4 (17:54):
So we've covered, you know, from my perspective, like all
the different aspects of of banking, and what it could
mean and also how it could impact you know, medical
marijuana patients who are having to pay cash, you know,
when they go.
Speaker 1 (18:07):
To the dispensaries.
Speaker 4 (18:09):
Is there anything else that you'd like to share with
our viewers and listeners that they should be aware of,
not only if they're whether they're a business, whether they're
working in the industry, or whether they're a medical marijuana
patient at the legal level.
Speaker 1 (18:24):
Can anything else you want to share with them?
Speaker 2 (18:28):
I would say to do your research on the institutions
who are who are marketing to you, because you know,
there there is an increasing number of institutions who are
serving the space. It hasn't gone down, it's consistently gone
up nationally and at the state level. So you know,
just like these institutions will interview you to determine if
they would like to do business with your company, you
(18:48):
absolutely should and have the right to interview that institution
in turn to make sure they are the best fit
for you, that they are interested in ensuring compliance for you,
and that again you know they're in it for the
long haul.
Speaker 4 (19:02):
Yeah, that compliance piece is really interesting because again you
said it's a risky thing, so I think that's for
them to learn more about that. That's pretty interesting. And
then what are the red flags that your bank isn't compliant?
Anything you want to share on that part.
Speaker 3 (19:19):
So here here is one of the other things I'd
like to piggyback on what jan And said, Heidi one
is use your sphere of influence right. Make sure you're
selecting the right attorney that has a cannabis background because
they will be able to make introductions to the right
institutions that they know bank the industry and also get
a very good CPA. They also have those connections. So
I think as you speak about what are the things
(19:42):
you should do, preparedness has to do with sphere of
influence in addition to being knowledgeable. Like jan And said,
there's a lot of legwork to do before you serve
the industry, but if you do it correctly, you do
stay out of harm's way.
Speaker 4 (19:54):
Yeah, I mean there's a lot of risk and for
the investment of time and resources into setting up a busines,
you're going to want to make sure you're doing the
right thing, especially when it comes to the financial aspects.
Speaker 1 (20:05):
Of it for sure.
Speaker 3 (20:06):
Yeah, And I think one of the biggest things you
can deliver for the cannabis consumer is when will payments
change right convenience of payments. That's going to be a
game changer for the companies as well too, because all
of a sudden safety security costs of operating go down.
Hopefully that translates into lower product costs for the consumer
(20:27):
and for folks that have a cannabis card and they're
a patient, that will benefit their lives dramatically.
Speaker 4 (20:34):
You know, I wanted to ask about the medical marijuana
qualified physicians who service and care for medical marijuana patients.
I would assume are they also having to be you know,
are they at risk with the banking of supporting cannabis
(20:55):
patients because they are taking revenue and things like that.
Does that impact this banking impact them as it does
the mmtcs and the growers.
Speaker 2 (21:06):
Not as directly. So it absolutely does affect them, but
not as directly because you know, they are not an
actual license entity themselves. However, you know, they they're in
the industry industry adjacent, so they banks, you know, will
will choose in some cases perhaps to bank those types
(21:28):
of offices and even HIMP and CBD in some cases,
but will not take the plant touching entities. So it
really will vary case by case, but yes, they absolutely
are debanked on an ongoing basis.
Speaker 1 (21:41):
Wow, I had no idea.
Speaker 4 (21:42):
I just thought about that because we've been talking more about,
you know, the growers and the CONTI are like, well,
wait a minute, we have over two thousand qualified physicians
in the state of Florida who are doing business, so
thank you for sharing that insights. Well, I thought this
was really fascinating. And if do you all have any
closing thoughts anything else that we want to touch on,
because I feel like I've learned a lot. I'm sure
(22:04):
our listeners and viewers have as well.
Speaker 3 (22:06):
Well, just as Janin's talking about, you know, plant adjacent,
our industry adjacent. One of the topics I think that
really affects cannabis companies is section two eighte of the
I R S Code that their tax their effective tax
rate is so much higher than other companies. Relief on
that would provide relief to those companies, and I think
(22:29):
that would trickle down to the patient level and the
consumer in the form of lower cost because right now
their effective tax rates are very, very high. It's something
that you see a lot of discussion about, but nothing
has really changed as it relates to that that would
be a great relief to the industry.
Speaker 4 (22:45):
That's fascinating, and we're getting some really positive comments from
people who are watching and listening. Carla Carrera says, Hey,
I'm learning this is great. So this is some really
really good information and I don't see any questions from
our audience. So Joe and Jenn and I want to
thank you for being guests on this Conversations on Cannabis
virtual form, brought to you by the Medical Marijuana Education
(23:08):
and Research Initiative at Florida and M University. Thank you
to everyone watching this program. Tell us what you think
about this form by completing the survey posted in the
comment boxes on Mary's social media pages. If you complete
this survey, your name will be entered into a drawing
on March twenty twenty five to win a one hundred
dollars gift card provided by one of Mary's partners. We
(23:29):
also want to encourage you to go to the Florida
Department of Health Office of Medical Marijuana Use website to
learn how to obtain a legal medical marijuana card in
the state of Florida. We also encourage you to go
to Florida and M University's Merry website to learn more
about this initiative, its educational programs, and about cannabis use
in Florida. Thanks everyone. The views and opinions of our
(23:55):
invited guest are not necessarily the views and opinions of
Florida Agricultural and Mechanical University or the Medical Marijuana Education
and Research Initiative
From the WA and M Studio on the campus of
Florida A and M University.
Speaker 2 (00:04):
This is Mary Forum Radio, a weekly conversation on the
education and research of the medical marijuana being conducted at VMUI.
Speaker 3 (00:12):
Hi.
Speaker 4 (00:13):
I'm Heidi Outway, your host for this conversations on Cannabis
Virtual Form, brought to you by the Medical Marijuana Education
and Research Initiative at Florida and M University. In this conversation,
we're talking about banks that work with the heavily regulated
cannabis industry and how it impacts medical marijuana patients and
(00:34):
companies in Florida. So let's talk and learn about this
subject with our guests. Joe Bohrer is the Chief Financing
Solutions Officer for First Federal Bank, which works with cannabis
companies across Florida and the US. He's been in banking
for over thirty years and has extensive financial, analytical and
(00:54):
regulatory experience. Joe, Welcome to the Forum.
Speaker 3 (00:58):
Thank you, Heidi, it's a pleasure to be here.
Speaker 4 (01:00):
Our next guest is Jenen Forsythe who has more than
a decade of banking experience and serves as a specialty
compliance officer at First Federal Bank. She is an expert
in banking compliance and risk management within the cannabis industry. Jenen,
we're excited to have you.
Speaker 1 (01:17):
On the forum. Thanks Heidi.
Speaker 4 (01:20):
To everyone watching. Please share the link to this form
on your social media channels so others can learn.
Speaker 1 (01:26):
About this topic.
Speaker 4 (01:27):
We also want you to tell us what you think
about this forum by completing the survey that will be
posted on Mary's social media pages. Your name will be
entered into a drawing in March twenty twenty five to
win a one hundred dollars gift card provided by one
of Mary's partners. Now, let's start this conversation on cannabis,
so Joe and Jenen, Let's set the stage for this
(01:50):
conversation by presenting our listeners and viewers with the state
of Florida's medical cannabis industry. Medical marijuana is a nearly
two billion dollar industry in Florida with over eight hundred
thousand licensed patients across the state. So Joe, how many
companies have licenses to grow and sell medical cannabis in Florida.
Speaker 3 (02:11):
As of today, there are twenty five active licensees and
in late twenty twenty four, twenty two additional licenses were approved.
Speaker 1 (02:19):
Wow, that's a lot.
Speaker 4 (02:20):
And then how many medical marijuana treatment centers also known
as dispensaries are in Florida.
Speaker 3 (02:25):
On the OMMU website last week they reported that seven
hundred and nine dispensaries are open in Florida.
Speaker 4 (02:31):
Wow, that's pretty remarkable. So, Jen, and let's kind of
shift into the fact that marijuana is still illegal at
the federal level, which means medical marijuana companies in Florida
that work with banks, you know, it can get kind
of complicated. So how are banks able to work in
this industry?
Speaker 2 (02:52):
Well, Hatti, that's really a bank to bank situation or
case by case scenarios. So really is determined through conversations
that those institutions would want to have with their federal
regulators as well as executive management, their respective executive management
board members on you know, if they have a board
(03:13):
of directors, as well as maybe committees or other shareholders,
you know, kind of depending upon how the institution is
made up. Ultimately, each institution will need to determine their
respective risk tolerance for any number of higher risk industries
of course, including cannabis.
Speaker 4 (03:29):
Yeah, so who are your customers in general? In the
in the cannabis industry.
Speaker 3 (03:35):
So we bank anybody that touches the plant. In Florida,
we have vertically integrated operators, we bank them. We also
bank cannabis, you know, plant touching cannabis folks in all
states in the United States, so we can we can
actually bank people in all fifty states. However, only in
the states where it's approved at the state level. Right.
We also bank the CBD and HEMP space, and we
(03:57):
bank vendors that provide services to cannabis companies.
Speaker 4 (04:01):
Yeah, and so for the HIMP and the CBD stores,
are there risk in banking for them.
Speaker 3 (04:08):
As well, Jenna, And that's a good question.
Speaker 2 (04:10):
Yeah, absolutely, Yeah, thanks Joe. So, you know, even though
they are federally legal, those companies are still considered to
be like cannabis adjacent and so they are still higher
risk business types. They're still licensing, testing, permitting requirements that
those companies have to uphold, which you know, the bank
should take an invested interest in to make sure that
(04:33):
they are only serving legitimate and state compliant or federally
compliant companies.
Speaker 1 (04:38):
Wow.
Speaker 4 (04:39):
You know, I was doing some digging when we decided to,
you know, bring up this topic to our viewers and listeners,
and I dig some digging around, and I didn't see
any of the big well known bank brands, you know,
showcasing that they service the legal cannabis industry.
Speaker 1 (04:55):
So Joe, tell me what types.
Speaker 4 (04:57):
Of banks actually work within the legal cannabis industry.
Speaker 3 (05:01):
So largely what you see are community banks and regional
banks that you know, the board of directors has approved
the ability to bank the cannabis space. And when we
talk about the big banks, they have not taken on
a risk profile. Well that where they will support that and.
Speaker 4 (05:16):
Tell me more about you know what it means by
that risk piece. What does that mean to the folks
who are listening that it's a risk for a bank
to take on this this type of business in the
cannabis industry.
Speaker 2 (05:33):
Because so essentially, go ahead, you have it.
Speaker 3 (05:36):
Sorry, I'll start, Jan, and then you give the details
because you're a lot more knowledgeable. Because cannabis is still
federally illegal, it becomes a challenge for folks that don't
want to take on that type of risk, you know, Jan,
and we'll we'll share with you how we're able to
do that.
Speaker 2 (05:55):
There's also very limited, limited guidance for this industry type.
And so typically banks when they serve higher risk industries,
and you know there are a number of them that
are cash intensive or just generally more risk intensive to
take on for the institution, there are a number of
like publications, expectations, exam manuals, things like that that are
(06:16):
available not only to the banker, but of course also
to the regulators. So for the cannabis industry, that's not
yet been established. So that is what makes it a
bit more difficult to serve this industry because you know,
you are working with a number of best practices that
are really related to other sort of similar industries, but
there is no published guidance to date for serving these companies.
Speaker 4 (06:39):
So would similar industries maybe be alcohol and pharmaceuticals, because
I mean, it's all along the line. To me, it
seems similar and I could be wrong, But is that
are those industries that could also be risky to be
in for a.
Speaker 2 (06:54):
Bank, Yes, definitely. So any industry you know that has
heightened risk, a cash intensive component, any international component, you
know that there's a there's a number of different components
that those industries, even if they are federally legal or
even state legal, if you will you know, still present
a lot of risk to the bank for serving them.
Speaker 4 (07:15):
Yeah, So over the last few years, there's been talk
about the Safer Banking Act. Can you talk a little
bit about that and what it would mean for the
cannabis industry if it were to be brought forth?
Speaker 2 (07:28):
Certainly, so, the Safer Banking app Act, you know, if
brought to fruition, would really just provide like a safe
harbor for banks and financial institutions and a number of
other institutions, you know, lending, et cetera, to be able
to serve the industry or essentially not be be penalized
just for serving the industry. You know, however, that doesn't
(07:49):
reschedule or deschedule you know, the drug of course, that's
a whole separate set of actions. So the industry will
continue to be treated as higher risk. You know. If
safer does pass, however, you know, that framework that I
was talking about essentially not existing would exist under the
passing of the Safer Banking Acts. So it would provide
(08:10):
some direction, some safe harbor, perhaps some comfort for more
intitions to get into the space.
Speaker 4 (08:16):
And where does it stand right now? I was looking
before the show and it was just a lot of
back and forth. So where does that stand right now
in the at the federal level.
Speaker 2 (08:27):
So the Senate floor is pending. It hasn't passed the Senate,
but it was passed by the Senate Banking Committee.
Speaker 4 (08:33):
Yeah, and you mentioned rescheduling, and we did a couple
of forums on that topic last year. Could either of
you just kind of give us a talk about the
rescheduling and what that could mean to banking in the
cannabis space.
Speaker 3 (08:51):
So, rescheduling it moving it from a Schedule one to
a Schedule three, which was what the proposal was. It
moves it to be comperable to other pharmaceuticals that are
no longer federally illegal. Right, that's sort of the state
of where it would be. And so by doing that,
you probably remove some of the barriers for the banking
(09:12):
industry on being able to serve the industry.
Speaker 1 (09:15):
Wow. Wow.
Speaker 4 (09:17):
And then how does all of this impact patients medical
marijuana patients in Florida, if they're you know, going to
their local dispensary to get their legal medical marijuana, how
does banking impact them to be able to purchase cannabis legally?
Speaker 3 (09:39):
So banking impacts them functionally, and it also impacts them financially,
and if we talk about the functional piece, you know,
jan In referenced that it's a cash intensive business. And
one of the reasons it's cash intensive is because the
large card brands and national debit networks have prohibited the
processing of those transactions at the retail retail location, so
(10:02):
you can't take your typical debit card or credit card
to a dispensary and offer it for payment for the
purchase of product. So that makes it difficult because the
convenience factor is gone. You either have to plan to
get cash ahead of time to take it and give
it for the payment, or if you go to the
dispensary you often see ATMs there, the cost for the
(10:25):
consumer goes up because they have to pay a fee
for withdrawing that cash from the ATM. They get it
probably two places, one a foreign ATM transaction at their
financial institution and to the owner of that ATM charges
that as well because that's how they drive revenue. So
it becomes a higher cost for those people to actually
(10:46):
go to the dispensary and use cash. On the corporate side,
this is a bit of a longer trail operating with
cash for companies that are cannabis related. Is more expensive
than processing credit cards because there's a lot of manual
issues involved, a lot of safety issues involved. And then
on the backside, how does that cash get taken from
their location to actually getting credit in their account and
(11:09):
it's very complex and costly for them. Those costs get
passed along to the consumers.
Speaker 1 (11:14):
Wow.
Speaker 4 (11:15):
And so earlier you mentioned that we have twenty two
new growers licenses coming into the state of Florida, which
means we'd have a lot more providers. Could that help
with the costs potentially of having to spin cash because
we have more competition, or I would think in the market.
Speaker 1 (11:38):
Would that have an impact at all?
Speaker 3 (11:40):
That's a great question. Unfortunately, that's not going to change
the retail point of sale solutions that are in place
for people to buy cannabis. It's largely cash or there
are wallet apps that they you know, people have to
download and they can use those. That's cumbersome as well.
And so with those new entrants, it's probably not going
(12:01):
to change the payment at the point of sale situation
until either rescheduling or rescheduling happens, or safer banking addresses
that directly.
Speaker 1 (12:09):
That's interesting, and that even is it even going to happen.
Speaker 4 (12:14):
I mean, I know this is speculative, but it sounds
like for the consumer it's it could be a potential
barrier to get medical marijuana if the costs are kind
of high. So what do you think that it has
the potential to pass at all? Or it's just the
process that we just s don't know At this point, I.
Speaker 2 (12:35):
Would just say we're a bit uncertain. You know, we're
entering into a you know, a new president elect, so
obviously things are changing rapidly with the introduction of those individuals,
and so there's there's a lot that's still kind of unknown.
You know, we're a bit over a month then, so
I think it's yet to be determined.
Speaker 1 (12:54):
Yeah.
Speaker 4 (12:54):
So so if someone wants, I want to kind of
shift a little bit to talk about the UH and
ciliary businesses that support the cannabis industry. So, if someone
wants to come into Florida and they want to start
a business that supports Florida's you know, billion dollar cannabis industry,
where would they go to get funding and what types
(13:16):
of questions should they be asking if they were.
Speaker 1 (13:19):
To come to a bank like yours that supports the industry.
Speaker 3 (13:24):
So if somebody comes to the state, the first thing
they have to do is identify who actually banks the
cannabis space in the state of Florida, because as a
service provider, you're probably going to have to bank with
one of those folks long term, because the large banks
have had a history of de risking people and moving
them out of their financial institution. So from that perspective,
(13:44):
you want to find an institution that is cannabis friendly,
and they have taken the position that we are serving
and supporting the industry. As it relates to funding, that's
a really complex topic. There is lending available, but typically
the lending available has some sort of collateral like real
estate attached to it, and typically banks like ours and
(14:05):
others are looking for cash flow positive companies. So companies
that are fairly new or startup, they're going to struggle
getting any sort of bank debt. They probably will have
to go to an investor pool to capitalize their companies.
Speaker 4 (14:18):
Wow, that's interesting, Jen, did you want to add anything
to that?
Speaker 1 (14:22):
Nothing related to funding. Chose the man on that one,
so we talked a little bit.
Speaker 4 (14:29):
I mean, you guys kind of like laid out all
the challenges and the risks that are involved in banking
with the cannabis industry. So I'm just curious about, you know,
what happens if you know what's.
Speaker 1 (14:44):
Like the future. What would the future look.
Speaker 4 (14:46):
Like should we have the Safer Banking Act, should we
have you know, deregulation, all of those things occur, What
would that How would that change the cannabis industry, not
only in Florida but across the nation.
Speaker 2 (15:00):
Well, I think any any positive direction on any any
of those initiatives would of course provide some of the
institutions who are a bit leary to get into the industry,
you know, a bit of comfort. I think, you know,
framework is speaking from a compliance perspective, is critical, you know,
for us to understand the expectations of our regulators, you know,
(15:21):
so we don't go into examination season with any surprises.
The expectations are clear, their expectations are clear as far
as you know what they're supposed to be examining and
looking for, you know, for the success of the program.
So I I believe that any positive forward movement will
will be good. One comment though, that I want to
(15:42):
make is, you know, typically banks who are in this
industry for the long haul would be more ideal. So
you know, this isn't this isn't the best industry to
get into on an experimental basis. A lot of these companies,
you know, have have been debanked, some with little to
no notice. So you know, even though they are federally
(16:04):
illegal and you know there is a lot of nuanced
surrounding them, they are nonetheless enormous commercial operations. So you know,
you can imagine how harmful that is to their operation
to be immediately uh debanked. So that that's just you know,
a trailing comment Heidi regarding the institutions entering the space.
Speaker 4 (16:26):
Wow, well, what could put a cannabis business or those
who serve the cannabis industry at risk of losing their
banking their banking?
Speaker 1 (16:33):
What would cause that? So so there are a number
of things. Go ahead, you go, Jo, I'll go after you.
Speaker 3 (16:40):
Yeah, this is the way we work. So we apologize everybody.
Speaker 1 (16:44):
I'd like to thank to you. I love it.
Speaker 3 (16:46):
Yeah. So really two things. One, if it's a bank
that is not in favor of cannabis and they identify
you as running cannabis transactions or having cannabis related activity,
that's going to cause you to get debanked, right, that's one.
The second thing is remember in the banking industry there
are mergers and acquisitions, and if a bank is acquired
by a bank that does not want to serve the
(17:06):
cannabis industry, all those customers have to find a new home.
And we have found that on a number of occasions
that's how we have customers come to us.
Speaker 1 (17:13):
Yeah. Wow.
Speaker 2 (17:14):
Two other things to consider would be the political climate.
So whether it's at the federal or state level. You know,
new governor governors could be introduced at the state level
that are absolutely not in support of the industry and
so that would change the climate drastically for the state.
And then the other thing from a banking perspective, a
way to lose your banking in a word, is just
(17:35):
non compliance, whether that's non compliance with the bank standards
you know that the bank has set and placed onto
the company, or failing to or falling short of the
expectations that are at the state level, for example, not
maintaining adequate licensure is a really easy example to give.
Speaker 4 (17:54):
So we've covered, you know, from my perspective, like all
the different aspects of of banking, and what it could
mean and also how it could impact you know, medical
marijuana patients who are having to pay cash, you know,
when they go.
Speaker 1 (18:07):
To the dispensaries.
Speaker 4 (18:09):
Is there anything else that you'd like to share with
our viewers and listeners that they should be aware of,
not only if they're whether they're a business, whether they're
working in the industry, or whether they're a medical marijuana
patient at the legal level.
Speaker 1 (18:24):
Can anything else you want to share with them?
Speaker 2 (18:28):
I would say to do your research on the institutions
who are who are marketing to you, because you know,
there there is an increasing number of institutions who are
serving the space. It hasn't gone down, it's consistently gone
up nationally and at the state level. So you know,
just like these institutions will interview you to determine if
they would like to do business with your company, you
(18:48):
absolutely should and have the right to interview that institution
in turn to make sure they are the best fit
for you, that they are interested in ensuring compliance for you,
and that again you know they're in it for the
long haul.
Speaker 4 (19:02):
Yeah, that compliance piece is really interesting because again you
said it's a risky thing, so I think that's for
them to learn more about that. That's pretty interesting. And
then what are the red flags that your bank isn't compliant?
Anything you want to share on that part.
Speaker 3 (19:19):
So here here is one of the other things I'd
like to piggyback on what jan And said, Heidi one
is use your sphere of influence right. Make sure you're
selecting the right attorney that has a cannabis background because
they will be able to make introductions to the right
institutions that they know bank the industry and also get
a very good CPA. They also have those connections. So
I think as you speak about what are the things
(19:42):
you should do, preparedness has to do with sphere of
influence in addition to being knowledgeable. Like jan And said,
there's a lot of legwork to do before you serve
the industry, but if you do it correctly, you do
stay out of harm's way.
Speaker 4 (19:54):
Yeah, I mean there's a lot of risk and for
the investment of time and resources into setting up a busines,
you're going to want to make sure you're doing the
right thing, especially when it comes to the financial aspects.
Speaker 1 (20:05):
Of it for sure.
Speaker 3 (20:06):
Yeah, And I think one of the biggest things you
can deliver for the cannabis consumer is when will payments
change right convenience of payments. That's going to be a
game changer for the companies as well too, because all
of a sudden safety security costs of operating go down.
Hopefully that translates into lower product costs for the consumer
(20:27):
and for folks that have a cannabis card and they're
a patient, that will benefit their lives dramatically.
Speaker 4 (20:34):
You know, I wanted to ask about the medical marijuana
qualified physicians who service and care for medical marijuana patients.
I would assume are they also having to be you know,
are they at risk with the banking of supporting cannabis
(20:55):
patients because they are taking revenue and things like that.
Does that impact this banking impact them as it does
the mmtcs and the growers.
Speaker 2 (21:06):
Not as directly. So it absolutely does affect them, but
not as directly because you know, they are not an
actual license entity themselves. However, you know, they they're in
the industry industry adjacent, so they banks, you know, will
will choose in some cases perhaps to bank those types
(21:28):
of offices and even HIMP and CBD in some cases,
but will not take the plant touching entities. So it
really will vary case by case, but yes, they absolutely
are debanked on an ongoing basis.
Speaker 1 (21:41):
Wow, I had no idea.
Speaker 4 (21:42):
I just thought about that because we've been talking more about,
you know, the growers and the CONTI are like, well,
wait a minute, we have over two thousand qualified physicians
in the state of Florida who are doing business, so
thank you for sharing that insights. Well, I thought this
was really fascinating. And if do you all have any
closing thoughts anything else that we want to touch on,
because I feel like I've learned a lot. I'm sure
(22:04):
our listeners and viewers have as well.
Speaker 3 (22:06):
Well, just as Janin's talking about, you know, plant adjacent,
our industry adjacent. One of the topics I think that
really affects cannabis companies is section two eighte of the
I R S Code that their tax their effective tax
rate is so much higher than other companies. Relief on
that would provide relief to those companies, and I think
(22:29):
that would trickle down to the patient level and the
consumer in the form of lower cost because right now
their effective tax rates are very, very high. It's something
that you see a lot of discussion about, but nothing
has really changed as it relates to that that would
be a great relief to the industry.
Speaker 4 (22:45):
That's fascinating, and we're getting some really positive comments from
people who are watching and listening. Carla Carrera says, Hey,
I'm learning this is great. So this is some really
really good information and I don't see any questions from
our audience. So Joe and Jenn and I want to
thank you for being guests on this Conversations on Cannabis
virtual form, brought to you by the Medical Marijuana Education
(23:08):
and Research Initiative at Florida and M University. Thank you
to everyone watching this program. Tell us what you think
about this form by completing the survey posted in the
comment boxes on Mary's social media pages. If you complete
this survey, your name will be entered into a drawing
on March twenty twenty five to win a one hundred
dollars gift card provided by one of Mary's partners. We
(23:29):
also want to encourage you to go to the Florida
Department of Health Office of Medical Marijuana Use website to
learn how to obtain a legal medical marijuana card in
the state of Florida. We also encourage you to go
to Florida and M University's Merry website to learn more
about this initiative, its educational programs, and about cannabis use
in Florida. Thanks everyone. The views and opinions of our
(23:55):
invited guest are not necessarily the views and opinions of
Florida Agricultural and Mechanical University or the Medical Marijuana Education
and Research Initiative
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