Serving cannabis-related businesses (CRB) brings significant growth potential for credit unions—along with challenging operational demands and complex regulations. But cannabis banking doesn't necessarily mean high-risk banking, says Tony Repanich, president/CEO and board member at Shield Compliance.

He believes successful credit unions develop cannabis banking specialists who understand the compliance requirements, embrace technology, and gain buy-in from regulators before starting their programs.

Repanich explains how he acclimates credit unions to this industry, details the risks and compliance challenges in doing so, and offers some compliance best practices.

Credit Union Magazine: What’s the state of legal cannabis today?

Repanich: At last count, 38 states have approved medical use for cannabis. That’s the start for most markets. As those markets get larger and have greater acceptance, they eventually move into an adult use market. Nineteen states and the District of Columbia have done that, which creates a bigger market. 

As these markets evolve, so does the demand for financial services.

Q: How do you help credit unions serve CRBs?

A: We look at a few factors. One is helping the management team and board do a risk assessment. They need to consider more than differences between state and federal law, including the additional work outlined in the Financial Crimes Enforcement Network (FinCEN) guidance.

Then, they must understand the impact this will have on their operations and some of the parties they work with, such as insurance providers and corporate credit unions. What will these parties think about their entrance into this market? And how do they manage that?

We partner with experts who can develop risk assessments and policies, and third-party providers. For example, the retail cannabis market is 75% cash. Many credit unions are consumer focused and haven’t worked with cash-intensive businesses. They need a plan for how they will handle this volume of cash. That’s why we partner with cash logistics companies that specialize in this area.

It’s a combination of understanding the risk and the business opportunity, the impacts on the institution, and what services or tools can be brought to bear on those issues.

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