Pub. 13 2018-2019 Issue 5

WWW.NEBANKERS.ORG 12 more troubling, some Nebraska banks may be unaware that they already are banking cannabis related businesses. This could hap- pen either because a customer changes the nature of its business or simply lies to the bank about the nature of its business (and is not caught in diligence). Is that supposed greenhouse customer actually growing cannabis instead of flowers? Legitimate Businesses/Customers Banking or not banking a cannabis‑related business is not always as simple as deciding whether or not to bank a dispensary or a grower.  Banks might in fact have a policy against doing business with any customer that “touches the leaf” such as a dispensary, a grower, a testing lab, or an edibles manufacturer. But what about banking the many other types of customers that profit off the industry but are only indirectly involved? Landlords are the classic example of such an ancillary business. A bank’s financial institution customers that provide financial services to cannabis-related businesses may also need to be considered in this category. 10 Where does it stop? Will a banker bank an electrician or security company that provides services to can- nabis businesses? What about the thousands upon thousands of workers in the industry? Is the power company that sells electricity to a grower or dispensary off limits? Are states themselves implicated if they are depositing cannabis-generated tax dollars? Even within Nebraska, what about the many small retailers selling CBD products—a number of which have been in the news recently in connection with action taken by Nebraska law enforcement authorities? 11 Competitors Although the media continues to report on problems that cannabis related businesses have in finding a bank, there are clearly banks with cannabis-related customers. As indicated above, there may be around 500 financial institutions nation- wide that are already banking cannabis-related businesses. Some of those institutions are likely profiting handsomely off of their cannabis-related customers, with substantial monthly fees for maintaining an account (justified, among other things, by the high compliance costs associated with those customers). As former Speaker of the House John Boehner and others tout the investment potential of the cannabis sector, 12 some financial institutions will find it necessary to bank wealthy customers that want to be active in that area. Furthermore, as increasingly large and sophisticated corporate finance transactions are structured to support the cannabis sector (and they are already happening), banks will be needed to fulfill their customary roles in such transactions. Banksmay not publicly proclaim their role in these capacities, but that does not mean it is not happening. Non bank competitors also exist and appear to have fewer compunctions about fulfilling unmet needs in this area. State-owned financial institutions, crypto-currency products and fintech offerings, among many other potential solutions, have been proposed to fill the supposed void left by banks in this arena. Scams As with any other area of rapidly growing business opportu- nities and the chance “to get in on the ground floor,” scams and hucksters will proliferate. The Nebraska Department of Banking Counselor’s Corner — continued from page 11