Oklahoma State Bank is the most recent financial institution to offer banking services for Oklahoma’s medical cannabis industry. Executive vice president and chief operating officer Mel Barnes recently took the time to answer some questions about the current and future climate for banking cannabis.
Oklahoma Gazette: Please introduce yourself and explain how you came to be where you are now.
Mel Barnes: I have been in the banking industry in the OKC and Norman communities for 26 years. I began my career in the bank card department. Over the last 26 years, I have worked primarily in payments, eCommerce, corporate training and business development. With a lengthy operations background, I have been very excited about creating a program for marijuana-related businesses and providing them the tools to operate the financial end of their business just as any other industry can operate in 2020.
OKG: If a business wishes to open an account with your bank, what do they need to bring with them to get started? How much can they expect to pay for the account?
Barnes: We use a compliance management system that allows our clients an easy onboarding process. We simply send a link to a questionnaire on our secure portal, which allows the client to upload necessary entity documents and required Oklahoma Medical Marijuana Authority licenses. The client must be in compliance with the OMMA in order for the bank to provide services. The portal will facilitate ongoing communication between the bank and the client, along with providing reminders when licenses expire or more documentation is needed. We have created a tiered fee structure that we have found to be one of the most competitive in the state. The more accounts you need, the smaller the monthly fee per account. Please contact Oklahoma State Bank for fee details.
OKG: What are some of the major differences between traditional business banking and banking cannabis?
Barnes: The main difference, and the explanation for the expense involved, is the compliance aspect. Federal banking regulations require full transparency for marijuana related businesses (MRBs). The reporting requirements are similar to other cash-intensive industries. We must comply with the Bank Secrecy Act, which addresses money laundering. Unlike other traditional industries, there are requirements to submit sales records, which are reconciled with deposit activity. We ask our clients to provide the same reporting that is provided to the OMMA on a monthly basis. Compliance is expensive and requires additional technology and manpower.
OKG: Why are so many banks reticent to touch Oklahoma’s medical cannabis money?
Barnes: As discussed previously, there is a tremendous amount of compliance required of banks in this industry. The liability falls upon the bank, and all reporting must be timely and accurate. In light of this ongoing reporting, some banks do not want to commit resources to MRBs. Those banks that do not wish to provide services to MRBs are known to detect transactions related to cannabis and close client accounts. Without a compliance department dedicated to MRBs, many banks simply opt out. I encourage businesses that currently hold bank accounts at non-cannabis-friendly institutions to consider a conversation with a bank that is prepared to provide you most of the same services as they provide to any other industry.
OKG: Do you anticipate a relaxation of federal law on banking cannabis money?
Barnes: The answer to this question requires a crystal ball. I have ordered one from Amazon. Until it arrives, I will say that we do anticipate some changes in banking as the regulatory landscape changes. But this cash-heavy industry will always have more compliance reporting than is necessary for other lines of business.
OKG: Do you anticipate the ability to make cashless cannabis purchases using debit or credit cards for medical cannabis becoming available?
Barnes: The card payment associations do not participate in cannabis transactions for reasons related to federal regulations. In time, I do believe you will see Visa and MasterCard (the associations) enter this payment space. There are millions of dollars in potential transactions from which they do not benefit. But that time is not now. I hear of some interesting schemes on the part of payment providers to trick the systems and get around association regulations. MRBs beware. OSB offers a cashless payment system for consumer and B2B transactions that utilize the ACH network. This is the most reliable means of making cannabis-related payments.
OKG: What is the benefit of having a bank account for cannabis money rather than keeping it as cash or using it for purchases?
Barnes: Clearly, large amounts of cash create an enormous security risk. Making payroll and utility payments using cash creates logistics conundrums as well. Payments could be one of the biggest challenges in this industry. Having a bank account available for deposits and making payments with an online banking tool works for virtually every industry. It creates safe and reliable payment methods and reduces the security risks related to carrying stacks of cash all over town. Additionally, traditional payment methods create financial records. Your CPA will thank you.
