Independent Banker - July 2024 - 26

PORTFOLIO
" It's a lot of work from a BSA and
compliance perspective, but it means
there's full transparency between
us and the clients, " explains Kim
Rossa, chief compliance offi cer of
$1.3 billion-asset Cogent Bank in
Orlando, Fla. " We're forthright with
them, and they are with us. It makes
the banking relationship very open
and easy. "
CRBs are opening new markets
for banks
The intense scrutiny that marijuana
license holders undergo contrasts
strongly with hemp and CBD
businesses. The passage of the 2018
Farm Bill removed hemp and hemp
seeds, including low-THC derivatives
of cannabis, from the DEA's
schedule of controlled substances.
The resulting proliferation of
CBD-oriented businesses hasn't been
all positive for banks.
" Everybody and their brother
decided to get into that business, "
says Chris Hartman, EVP, CDO of
Cogent Bank. Hartman adds that
since selling CBD products doesn't
require a cannabis license, many
providers off er a limited range of
these products online or through
businesses that also sell various other
goods or services.
Hartman adds that banking CRBs
has opened new markets for Cogent.
" There's a whole ecosystem that
supports that industry that have come
to us for banking services because we
have knowledge of the industry, " she
says. " Whether it's a manufacturer
that manufactures containers or a
marketing company that is servicing
the industry, or attorneys and
CPAs, it's opened up an avenue to
new businesses. "
Currently, most banks limit
their CRB banking relationships to
depository services. Any lending is
limited to a real estate entity that is a
separate legal entity from the business
that holds the marijuana license
and derives income directly from
marijuana and cannabis sales.
" We're doing some real estate
lending to mortgage holders who may
be leasing space to a dispensary, "
Hartman says. " We lend on hard
assets such as equipment or vehicles,
but we are not doing any lending on
an actual grow house or the property
it sits on unless the property can be
used for another purpose. "
The somewhat fragile equilibrium
between state and federal legal status
of cannabis looks to continue for the
foreseeable future. Community banks
value their CRB customers and intend
to maintain the relationships, however.
" We believe in the cannabis
business and will continue to invest
resources into the program, " Shreffl er
says. " We're here for the long haul. "
Judith Sears is a writer in Colorado.
The SAFER Banking Act
at a glance
On Sept. 27, 2023, the Senate
Banking Committee passed the
Provisions of the Secure and Fair
Enforcement Regulation (SAFER)
Banking Act. As of this writing,
the Senate floor vote is pending.
If passed, this bill would prohibit:
f Regulators from limiting or terminating deposit insurance or
share insurance of a depository institution under the Federal
Depository Insurance Act
f Regulators from taking corrective supervisory action on a loan
solely because a borrower has ties to the marijuana business
f A cannabis-related transaction from being considered an
unlawful activity if the transaction is conducted by a statesanctioned
marijuana business or service provider (for the
purposes of federal law)
It would require:
f FinCEN to revisit its 2014 guidance and issue new guidance to
ensure consistency with the purpose and intent of the SAFER
Banking Act
f FFIEC to issue exam guides for cannabis banking programs within
one year to ensure uniform guidance and exam procedures for
depository institutions that provide financial services to cannabisrelated
legitimate businesses and service providers
26 // ICBA Independent Banker // July 2024
Illustration by Becris/Adobe
Independent Banker - July 2024

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