According to The Missouri Banker “More than 200 bankers attended the Missouri Bankers Association’s seminar on marijuana and banking Wednesday, March 20, in Columbia.” One session featured a regulatory panel with representatives from the Federal Deposit Insurance Corporation, the Missouri Division of Finance, the Office of the Comptroller of the Currency and the Federal Reserve Bank of Kansas City. Chuck Lewis, MBA vice president of compliance services, moderated the discussion. In Washington, D.C., a bipartisan bill would provide a safe harbor for banks offering financial services to marijuana-related businesses.
MoCannTrade had multiple members and board members in attendance including Jeana D. Ochsner, CPA from COR Consultants LLC | Kansas City MO. Jeana has provided the following observations and best practices for prospective MMJ licensees and MoCannTrade members. Her synopsis essentially details that Missouri Medical Marijuana regulations and FinCen (The Financial Crimes Enforcement Network) have rules which, if followed, will alleviate Missouri Bankers’ concern. The following notes and tips may be a great first step in making your Banker comfortable with your marijuana related business (MRB).
Bankers are risk adverse by nature. Help your Banker see your Marijuana Related Business (MRB) as worth the investment she must make to “bank” your MRB.
First know what the Bank auditors consider a MRB and what they are looking for on the part of their clients, the banks.
Per the bank regulators, the Federal Reserve Bank (FRB), Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC), as stated in a recent Banker’s Meeting in Columbia, MO, MRBs are those businesses that touch the marijuana (cannabis). Per the regulators, MRBs are those businesses that grow, process or distribute the marijuana.
Per the regulators, the classification of MRB does not include HVAC suppliers, horticulture supplier, accountant, landlord, service providers or other “ancillary business” who supplies or assists the MRB. MRB classification also does not include the employees or contractors of the MRB.
Per the regulators, MRBs require a higher level of customer Due Diligence which is required to be performed by the Bank or its designee. The higher level of Due Diligence must be well documented, reviewed consistently, and updated as necessary as the MRB grows and evolves.
In addition to a face to face meeting with your Banker, the following should be provided to your Banker:
- Un-redacted copy of your MRB MO State License Application
- Personal information on all Investors, in state and out of state – sources of the investments
- Personal information on all Management personnel of the MRB
- Budgets and projections not already included in the Application Package
- Cash vs Debit Card transaction estimates – monthly, quarterly, annually
Once your business has been approved by your Banker, you will need to provide the following items monthly, quarterly, or annually as the Banker deems prudent for their Due Diligence:
- MO State License Renewals
- Changes to the Ownership and Management
- Revised Budgets and projections
- Financial Statements – Budget vs Actual Income Statement, Comparative Income Statement, Comparative Balance Sheet
Key to making your Banker, and therefore the regulators, comfortable with your MBR is full disclosure and accurate accounting. Keep all cash transactions segregated per Licensee location. Do not co-mingle cash from different locations. The Bankers and regulators want to see the Cash Projections of the Business Location agree to the Cash Deposited to each location’s bank account.
Bankers will charge high monthly fees to offset the cost of the additional bank employees need to perform the Due Diligence and continued monitoring of the MBRs.
As long as you help your Banker stay comfortable with your business and pay the higher fees, it will be a win – win situation for everyone in the MO Medical Marijuana industry and the Bankers brave enough to join the industry.
Presented by Jeana D. Ochsner, CPA