Episode 121 – Banking in the Cannabis Industry



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Joe: On this episode of the "CPG & CBD University Podcast," banking in the cannabis industry, the lack of regulation at the federal level is challenging to conduct banking in federally insured financial institutions. We introduce you to a company leading the way for safe, legal banking in the industry. This is the "CPG & CBD University Podcast," and it starts right now.

I'm Joe Agostinelli, host of the "CPG & CBD University Podcast." And my guest today had a vision back in 2014 that cannabis-related businesses needed financial services. Back then it was a new interest industry. Today, as the explosive growth continues, Safe Harbor Financial manages more than 600 cannabis banking accounts and has processed over $11 billion since its inception. Sundie Seefried is the CEO of Safe Harbor Financial. She joins me via Zoom, if you're watching our video episode on YouTube, to discuss how her vision has evolved to what it is today. Sundie, thanks for joining me.

Sundie: Well, thanks for having me. Happy to share our story.

Joe: So let's go back even before 2014, 10 years ago, Colorado voters passed Amendment 64, legalizing the sale and use of recreational marijuana. Two years later, how does Safe Harbor Financial come about?

Sundie: Well, I have to say it was a very big surprise in both my mind and the mind of the board because it's not something we ever even talked about in the boardroom. But it was a couple of my attorney friends took me off for drinks, probably shouldn't have done that, and they said, "Why won't anybody bank our clients?" And I had a great deal of respect for both of these attorneys. And I thought, "Well, you know, since you're friends, I'll at least research it," thinking I would go to the commissioner and I'd kind of get the head shake, you know, don't go down that path. But instead, the commissioner opened the door and told me to, you know, go ahead and try to figure it out, which really surprised me. And I was on my way to retirement.

And so I was winding my career down, but when I started hearing the stories about how cash was being managed in Colorado and how unsafe the environment was for all of us and all of our members at the credit union, I started sharing it with the board and we all agreed that we needed to do the right thing and actually move to bank the cannabis industry and figure it out. And that's what we did.

Joe: And as I mentioned in the opening, since then, over 600 cannabis banking accounts and Safe Harbor's processed more than $11 billion, its billion with a B. How has Safe Harbor been so successful in the space?

Sundie: We really jumped in to solve the problem in Colorado, but one thing led to another, you know, the industry is very tight and word travels very quickly. Even if you try to make, you know, very quiet introduction of the whole process and you say, NDAs, let's not tell anyone, we can't take all of Colorado at one time, we've gotta do this methodically, word travels. But then when our clients started getting banked in Colorado, they started going out of state and getting licenses. And so we had to make that decision. Do we bank them out of state or do we just bank them in Colorado? And regulations are such that you can't leave half a business unbanked and fulfill Bank Secrecy Act obligations. So that's how we started expanding out of state, and our clients started expanding out of state.

And then the word...what started as a Colorado issue we were solving, now became a national issue we were solving. And so then we were sought after to help other states, at that point in time, do the same thing and get banked. But there wasn't enough financial institutions out there willing to help, and being of the credit union nature, that's what we do. We help, right? We help our communities. We help everybody out. And that's just how it grew and grew and grew. So we really had the front runner position and a very desperate need of an industry to get banking services.

Joe: And aside from banking services, just a teaser of what's coming up on the podcast, we'll get to some of that community involvement from you guys in a little bit here, but the challenges that cannabis industries face and continue to face today, especially on the compliance side, when seeking financing are no secret, how do you overcome those?

Sundie: Wow, there's a lot of challenges they have. But I will have to tell you the very first challenge that they had when we first met the industry and started interviewing them was the fact that those who were legal wanted to be legitimized. They wanted to be standing apart from the black market players, right? They wanted to weed out the bad players. So they were willing to do anything to be compliant. And the industry really knew what compliance was about because the regulations are so tight at the state level. So, you know, compliance was an issue. We worked it out. I told them I was designing a program around them being compliant and around our institution being compliant with financial regulations. And they really helped by sharing their story and sharing their operational details to allow me to mitigate those risks.

Nowadays, in terms of getting bank accounts, I think a lot of people, they can get the bank accounts now. It is expensive. So that's one challenge they face. But financing is starting to become very available at this point in time. The problem with financing and securing assets against the loan is that there's still the issue of forfeiture and seizure as long as it's illegal at the federal level. So that means the industry continues to pay a premium rate because of that risk.

Joe: And how challenging is it to stay on top of those changing regulations across the country in an industry where one state could be very different from a neighboring state in the industry?

Sundie: You know, this is one of the big misconceptions in the industry across the country. FinCEN guidance is very clear with us as financial institutions. And it states that we can rely on the state issuing the license. Therefore, if a state issues a license, it's the state's responsibility to make sure that that company is compliant. It's my responsibility to make sure they have a legitimate license from the state, which means we're always monitoring licenses. So do I have to know every regulation in every state? No, I need to be familiar with the way the process works. And when it comes to lending, if you're going to loan against the value of a license, it does help to know if it's a limited license state or an unlimited license state because that also determines the value of the license in any given state. So being familiar is one thing, knowing every regulation, not necessary.

Joe: And the Safe Banking Act of 2021 seemed as if there was some progress with the house passing it, but then it's still waiting on the Senate on certain future there. What does that mean for the industry?

Sundie: I think safe banking is...well, we're sixth time around. One can hope it passes. I think it's a good sign for the industry that there's some momentum going on the legislative level. But when we started in 2014, we knew that we were going to do something that was considered illegal at the federal level and made us money launderers. And we were counting on one thing, legislation catching up with us. Seven years later, we're still waiting for legislation to catch up, you know, with us.

Safe banking may bring more financial institutions into the market to serve the cannabis industry, but it won't open up banking widely. It won't really change the processes and procedures. Safe Banking Act will take away that prosecution risk that we face as the officers and directors. We can be prosecuted for money laundering at this point in time. Safe banking says you cannot prosecute somebody simply for banking the cannabis industry anymore, but the real threat to financial institutions is the BSA threat, Bank Secrecy Act. Just last week, I read an article where one bank was fined $140 million because their Bank Secrecy Act activities were not in line with what regulators expect. It's a very expensive proposition if you don't do it correctly.

That's what will keep financial institutions out of the market and keep them from serving the industry. So, yes, I think you're going to see more access to financial services if safe banking passes, but I still think there's going to be a very slow adoption by financial institutions.

Joe: And, of course, we'll continue to monitor the regulations and, hopefully, further discuss more on a future episode, but I talked about this a little bit and, obviously, as a credit union, very involved in the community. And aside from the banking impact in the industry, philanthropy, extremely important to you and the team, the Partner Colorado Foundation you established in 2005. What has the foundation been able to accomplish, and how's it still at work in the community today?

Sundie: Oh, that was way back in 2005, it was really the board's idea. They wanted to do something good and have a give-back. And so I said...what was really important to them was education. They knew what moved people ahead in their personal life was having a solid education that allowed them to get better jobs and succeed, you know, and provide for their families. So I said, "Let's start a foundation and let's have it employee-run, all volunteer, and then let's raise funds and give it out to educational purposes."

We also do some community donations as well, but for the most part, we've been giving nearly $600,000 out in grants to students for the last several years. But then the foundation took it one step further when we got into cannabis and created a separate arm called Growing Hope because the industry also needed good PR and do-good activities to help legitimize their place in the community. So Partner Colorado Credit Union Foundation created the Growing Hope arm of the foundation and started raising funds via golf tournaments and fundraising and providing it to, like, vets, you know, who needed access to cannabis. And so, good things like that is what we try to do. So it really kind of has two arms to it and two purposes of doing well and good for the community.

Joe: And wanted to touch time one final point when it talks about giving back. You also spent something I read that I found was fascinating, you also spent a decade establishing two orphanages in South Africa. What was that experience like, and how are things going with that?

Sundie: Well, the real fact of that matter is my parents have been missionaries since I was young, very young. And so their last mission project has been South Africa and building orphanages. So what I did was help them strategically and on a financial level and assisted with the banking activities, that type of thing in establishing those orphanages. So I've been over there since...probably five times. You know, I try to volunteer about three weeks every chance I get and assist with the kids. So the kids know me when I go over there because they're used to seeing me, but I will tell you, the flight is excruciatingly painful.

Joe: And you're based in Colorado.

Sundie: Mm-hmm.

Joe: So how far of a flight is it?

Sundie: Well, first you have to fly to Atlanta. And so that takes a couple of hours there. And then I think the longest flight I had was, like, 21 hours coming back. We got stuck in a storm. So usually, it's anywhere from 15 to 19 hours each way, non-stop in coach.

Joe: Oh, wow. That is a long flight. Coach or first class, that's a long flight. I can do about three or four and that's it. I'm spent.

Sundie: I don't know how my mother still does it. It's a long flight.

Joe: And do they still do it going over to South Africa?

Sundie: Yes, my father has since passed away, but my mother is very...you know, it's near and dear to her heart, and so she's over there as the director of the project. She's in her mid to late 70s at this point in time, but those children really rely on her as their grandmother. So she is just giving all of her attention and time to mission, still.

Joe: And two great stories of giving back and such a fascinating story behind Safe Harbor Financial here in the industry. If you're in the cannabis industry and seeking out banking services, I invite you to visit shfinancial.org to learn more about Safe Harbor Financial. And I think the website might have just got a little bit of update, if I'm correct.

Sundie: We're working on a launch for a whole new update here. So you're seeing some changes start to occur.

Joe: As I was putting together the points for the podcast, I was like, "Hey, it's changing as I'm on the website." So, again, that's shfinancial.org, learn more about Safe Harbor Financial. Sundie Seefried, my guest on this episode of the "CPG & CBD University Podcast." Thank you for joining me, great discussion, and really enjoyed hearing the philanthropy stories on the side.

Sundie: Thank you for having me. I enjoyed it too.

Joe: And thank you for tuning in to this episode of the "CPG & CBD University Podcast." Couple of reminders, you can catch full video episodes of our podcast on the Global Widget YouTube channel. And please subscribe to our podcast wherever you get either the audio or video version on YouTube. You'll get notifications of new episodes each week. I'm Joe Agostinelli, host of the "CPG & CBD University Podcast." Thanks for tuning in.

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