One of the biggest challenges for a legal marijuana business is opening a bank account. This is because Federal law prohibit it. Washington State, which will sell around $1B of marijuana this year, has a limited number of small banks and credit unions offering banking to cannabis businesses. However, Noah Carey and Bill Erwin, are looking to change that.
Carey and Erwin both have backgrounds in finance and risk management. Their company, Shield Compliance, will offer banks and cannabis businesses fully automating banking regulatory compliance, transparent connections between all the business record-keeping systems and the reduction of the risk and worry that comes from working in cannabis. The risks and worries that entrepreneurs in the industry face are very real. For example, recent statements by Attorney General Jeff Sessions show that the justice department is set to crack down on legal businesses growing, processing and selling cannabis.
The Shield Compliance will draw on experience from the technology and finance sectors to ensure that banks feel protected. Noah Carey, who has 30 years of financial risk management experience, states that banks and their customers want to easily track the money flowing through their business, and meet the strict audit requirements each state has set up for legal marijuana companies. The system will allow banks to vet their clients in the usual way, allowing them to understand their cash flow, business plans, management team and all the other information they need to work with them.
The Shield Compliance systems main function is to connect the Point of Sale system to inventory systems to make sure that every dollar is accounted for going in and out of the business. In doing so, the proper reports will be automatically created to comply with state laws. By storing both the bank and vendor information in the Shield system, the bank has all the information it needs if there is an audit. If a financial error occurs, the bank and customer can communicate about it via a chat box that pops up.
Carey explained one of the biggest opportunities for the company, “We’re working to reduce the risk for banks to get into the industry and saving them time by automating the actions they have to take to manage the relationship. If banks adopt the software and Shield Compliance gains first mover advantage in the market, the upside would be sizable.” However, there are risks involved for the company. Jeff Sessions may direct the department of justice to attack the industry, so at the very least, the political and legal climate will continue to keep banks from entering the marketplace.
Currently, one bank in Chicago is using the Shield Compliance system. That same company is working with others who may adopt the system. Normally, banks working with marijuana-related companies don’t want their names publicized. Carey believes that although banks are not ready to say they are in the cannabis business, that may change soon.
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