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Building a Resilient Cannabis Banking Program
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Building a Resilient Cannabis Banking Program

Introduction to Cannabis Banking Webinar

Opening Remarks

  • Chris Van Djk introduces himself as an attorney at Cojen Law Group and thanks attendees for joining the webinar.
  • The presentation is scheduled for one hour, with 45 minutes of discussion and 15 minutes allocated for questions. Attendees are encouraged to submit questions via chat.

Introduction of Co-Presenter

  • Danielle Bole is introduced as a regular speaker at cannabis banking conferences, highlighting her extensive experience in the field over the past six years.
  • Dart Bank, where Danielle works, is noted for having one of the largest cannabis banking programs in the U.S., recently featured in Crane's Detroit newspaper.

Danielle Bole's Background and Experience

Professional Overview

  • Danielle shares her role as Specialty Banking Manager at Dart Bank, emphasizing her 14 years of experience focused on compliance, operations, and risk management.
  • Dart Bank supports customers across 37 states with a strong emphasis on compliance (AML/BSA) and customer service.

Historical Context

  • Dart Bank has a legacy dating back to 1930 when it was the first financial institution to finance automobile purchases. It became Michigan's first bank to offer services to cannabis-related businesses.

Chris Van Djk's Background

Previous Experience

  • Chris discusses his background as a former financial regulator in Maine, where he worked during the issuance of the 2014 FinCEN guidance on marijuana banking.
  • He transitioned from regulation to starting one of the first cannabis banking programs at a smaller financial institution in southern Maine.

Program Development Insights

  • Chris recounts how their cannabis program grew significantly due to being one of the few options available for cannabis banking in their area.
  • By the time he left that institution, deposit fees from their cannabis program accounted for 25% of total Return on Assets (ROA), showcasing its financial success.

Cannabis Banking: Key Considerations and Insights

Overview of Cannabis Banking Programs

  • The speaker advises banks and credit unions on entering or expanding cannabis banking programs, focusing on compliance and lending opportunities.
  • Assistance is provided to financial institutions facing regulatory challenges with their cannabis banking programs, emphasizing remediation and efficiency development.

Importance of Board Buy-In

  • Gaining buy-in from all levels of the bank or credit union, especially the board, is crucial for initiating a cannabis banking program.
  • Effective communication must flow through the board to ensure awareness of market entry motivations, such as addressing underserved markets or seeking liquidity.

Evaluating Risks vs. Rewards

  • Financial institutions must assess the risks versus rewards when considering entry into the cannabis market, particularly given its federal illegality.
  • Compliance burdens include robust monitoring and auditing requirements to ensure client adherence to regulations in this federally illegal space.

Managing Perceptions and Risks

  • Reputational risks associated with public perception of cannabis must be considered by boards when evaluating potential market entry.
  • Concentration risk arises from a large portion of deposits coming from a single industry; this needs careful evaluation during decision-making processes.

Understanding Risk Management Tools

  • Many banks hesitate due to uncertainty about managing risks; understanding which risks are critical versus less significant is essential for informed decision-making.
  • Institutions should have appropriate tools (e.g., software, resources for BSA departments) in place to handle compliance obligations related to cannabis banking effectively.

Potential Benefits of Cannabis Banking

  • Engaging in cannabis banking can lead to increased revenue through deposits and fee income while differentiating financial institutions in the marketplace.

Understanding the Role of Banking in Cannabis-Related Businesses

Importance of Banking for Cannabis-Related Businesses (CRBs)

  • CRBs face challenges due to a lack of secure banking options, which can lead to financial instability and risks associated with cash handling.
  • Banks and credit unions play a crucial role in supporting regulators and law enforcement by providing necessary financial data through filing requirements.
  • The legal gray area surrounding cannabis banking raises concerns about potential legal repercussions, including aiding and abetting or RICO violations.

Legal Risks and Compliance Considerations

  • While there are risks involved, the likelihood of prosecution against banks for servicing cannabis businesses is extremely low based on historical precedent.
  • The primary risk lies in compliance; ensuring that all regulatory requirements are met is essential for maintaining operational integrity.

Building Support Within Financial Institutions

  • Gaining buy-in from senior management and employees is critical; understanding the public policy reasons behind cannabis banking can foster support.
  • Transparency from leadership regarding business decisions related to cannabis banking helps align expectations across the organization.

Setting Realistic Expectations

  • Establishing realistic goals is vital; many institutions fail when they set overly ambitious profitability targets too early in their programs.
  • A long-term perspective is necessary for success in cannabis banking, as building trust with clients takes time.

Defining Objectives for Cannabis Banking Programs

  • Clear objectives should focus on deposit growth, customer acquisition, and enhancing reputation within the industry as key performance indicators.

Operational Capacity and Compliance in Cannabis Banking

Importance of Operational Capacity

  • The speaker emphasizes the necessity of having sufficient operational capacity when taking on numerous cannabis-related businesses (CRBs).
  • It is crucial to hire early to ensure adequate resources are available for effective operations.

Utilizing Software Resources

  • The discussion highlights the importance of leveraging compliance software to streamline operations and reduce manual workload.
  • Key functionalities include monitoring seed-to-sale tracking, identifying discrepancies in numbers, and keeping track of regulatory fines or license statuses.

Risk Management and Regulatory Expectations

  • The speaker addresses misconceptions about banking cannabis, clarifying that regulators are aware of public policy reasons supporting it.
  • Regulators focus on ensuring risk management practices align with FinCEN guidance and state regulations, particularly examining policies and procedures.

Board Engagement and Policy Updates

  • Policies should be dynamic documents that evolve with the program; regular updates can facilitate discussions with the board.
  • Keeping the board informed about the cannabis program is essential for demonstrating robust governance to regulators.

Comprehensive Risk Assessment Strategies

  • A thorough risk assessment is vital before onboarding new businesses; contingency plans must be established for potential changes.

Understanding Stress Testing and Risk Assessment in Banking

Importance of Stress Testing

  • Stress testing is crucial for adjusting capital reserves and liquidity planning, especially in scenarios involving loss of fee income or rising compliance costs.
  • Proactive stress testing helps banks maintain service continuity, protect their reputation, and retain customer trust by avoiding abrupt losses.

Key Elements of Risk Assessment

  • A comprehensive risk assessment should identify potential risks and outline mitigation strategies; this is foundational when starting a banking program.
  • The risk assessment document is critical for examiners to review, alongside the strategic plan which should include an exit strategy for unforeseen circumstances.

Relationship with Regulators

  • Maintaining a healthy relationship with regulators involves open communication about starting or expanding cannabis banking programs without needing formal permission.
  • Informing regulators about new initiatives demonstrates respect and can facilitate smoother operations within the regulatory framework.

Compliance Monitoring and Documentation

  • Banks must have clear oversight structures in place, detailing responsibilities for identifying, assessing, mitigating risks, and documenting policies to manage additional risks from entering new markets.
  • Thorough documentation is essential; if actions are not documented, they are considered unrecorded. This includes justifying any changes made to existing programs.

Policies and Procedures Clarity

  • Clear delineation of authority within the bank's structure is vital; BSA officers play a key role in balancing profit motives with regulatory obligations.

Understanding the Role of BSA Officers in Financial Institutions

Decision-Making Authority of BSA Officers

  • The ultimate decision to file a termination against a Cannabis-Related Business (CRB) lies with the BSA officer, despite potential financial incentives from the institution.
  • It is crucial for BSA officers to consult with their staff and external resources before making such decisions.

Risks Associated with Lending to CRBs

  • Engaging in lending activities increases the complexity of relationships between financial institutions and CRBs, heightening conflicts of interest.
  • Financial institutions should carefully select high-quality CRB borrowers to mitigate risks when entering the lending space.

Pricing Strategies for Cannabis Banking Programs

Importance of Pricing Considerations

  • After securing board approval and developing policies, pricing becomes a critical factor that cannot be overlooked. Understanding market needs is essential.
  • Regulatory landscapes vary by state; institutions must assess local market conditions, including saturation levels and licensing opportunities.

Developing a Sustainable Pricing Model

  • Institutions need to analyze all associated costs when establishing pricing strategies, ensuring they can sustain their programs financially. Options include tiered pricing or all-inclusive fees.
  • Compliance overhead, technology costs, staffing requirements, and vendor relationships must be factored into pricing models as these elements contribute significantly to overall expenses.

Navigating Market Competition and Sustainability

Assessing Competitive Pricing

  • As competition increases within the cannabis banking sector, financial institutions must ensure their pricing remains sustainable while being competitive against other firms offering lower fees or no fees at all.
  • Institutions should be cautious about providers offering services at unsustainably low prices; this could indicate instability in their business model or future viability in the market.

Long-Term Viability of Cannabis Banking Programs

  • A program's ability to withstand regulatory scrutiny over time is vital for building trust among cannabis customers; stability signals reliability in service offerings.

Understanding Financial Sustainability in Cannabis Banking

The Importance of Sustainable Programs

  • Financial institutions face pressure to lower fees from regulators, yet they must ensure that CRB (Cannabis-Related Business) fees are sufficient for sustainability.
  • Competitors' pricing and services should be analyzed, but the focus should also be on service quality and building positive relationships with CRBs.

Building Relationships with Customers

  • Attracting the right customers involves understanding their needs and providing value beyond just financial transactions.
  • Offering educational resources and connecting customers with trusted professionals can enhance customer relationships and add value to their businesses.

Navigating Compliance Burdens

  • Banks have a significant compliance relationship with CRBs due to regulatory requirements, which can foster a close partnership if managed positively.
  • Understanding the financial health of CRBs through ongoing due diligence is crucial for managing risks associated with these relationships.

Structuring Cannabis Banking Departments

  • Different banks adopt various structures for cannabis programs; some may centralize within BSA departments while others create dedicated teams for compliance and relationship management.
  • Dart Bank has established a specialized cannabis compliance team that collaborates closely with BSA to manage client relationships effectively.

Key Considerations for Team Structure

  • Ensuring adequate staffing for enhanced due diligence is essential, as well as maintaining cross-departmental collaboration between compliance, operations, and legal teams.

Regulatory Perspectives on Cannabis Banking

Separation of Business Services and Compliance Departments

  • Regulators emphasize the need for a clear separation between business services (front-facing cannabis program staff) and compliance departments (back-end staff handling SAR filings) to avoid conflicts of interest.
  • Close relationships with cannabis-related businesses (CRBs) can develop in front-end roles, but back-end teams must objectively assess transactions for unusual or suspicious activity.

Communication Between Departments

  • Effective communication is crucial between departments; decisions regarding SAR filings should be made by the back-end BSA department based on objective analysis.
  • Weekly meetings among business services, back-end BSA, and front-end BSA departments help ensure alignment on compliance issues and CRB assessments.

Lending Considerations in Cannabis Banking

  • Institutions should not rush into cannabis lending; they must first establish a solid compliance track record with CRBs before considering loans.
  • Good underwriting practices are essential, supported by software tools that enhance risk assessment during the lending process.

Staffing and Internal Audit Importance

  • Adequate staffing is vital to prevent late filings of CTR or SAR reports, which are common pitfalls for examiners.
  • A robust internal audit program is necessary; both internal employees and external firms can provide valuable insights into policy adherence.

Continuous Improvement Through Audits

  • An effective audit program should drive continuous improvement within the organization, ensuring feedback loops to management and the board about findings from audits.
  • The board's awareness of audit feedback is critical for maintaining oversight and making necessary improvements in the cannabis banking program.

Open Invitation for Further Discussion

  • The speaker invites questions from participants, emphasizing their availability for further discussion via email or phone regarding cannabis banking risks.

Onboarding Cannabis-Related Clients

Understanding the Application Process

  • The onboarding process for cannabis-related clients involves a separate application to gather essential information about the business and its banking needs.
  • Providing detailed information upfront helps streamline the approval process and reduces compliance inquiries, making banking feel more seamless.
  • Onboarding is not instantaneous; it requires time for approval, but once completed, clients should experience day-to-day banking similar to personal accounts.

Logistics and Vendor Management

  • Clients may utilize armored car services for cash delivery directly to the Federal Reserve, enhancing operational efficiency.
  • Assistance with onboarding documentation and procedures is available from experienced professionals who can help fast-track setup processes.
  • Banks often have established partnerships with logistical providers that can assist in creating checklists for setting up operations.

Ensuring Compliance and Risk Management

  • It's crucial to vet vendors properly due to the high-risk nature of cannabis programs; they must be insured and have a solid track record.
  • Enhanced due diligence is necessary for vendors categorized as high-risk, ensuring compliance with regulatory standards.

Competitive Pricing Strategies

  • To stay competitive, engage with industry contacts like attorneys or CPAs to gather insights on competitor pricing rather than relying solely on documents.
  • Creating value beyond just low pricing is essential; clients need to understand that fees support necessary business operations within the cannabis sector.

Market Research Techniques

  • While some financial institutions list their cannabis fees online, many do not. Direct inquiries can yield valuable pricing information through pretext calls (for non-attorneys).
  • Verify claims made by competitors regarding their fees; it's important not to take such statements at face value without confirmation.

Conclusion of Webinar Insights

  • Emphasize financial sustainability when considering competitive pricing; avoid unrealistic offers that could jeopardize program viability.

Direct Communication and Gratitude

Offering Direct Contact Information

  • The speaker provides their direct dial number, 207844196, encouraging open communication for any inquiries or discussions.

Acknowledgment of Participation

  • The speaker expresses gratitude towards Danielle for her participation, highlighting the value of her insights during the discussion.
  • Emphasizes that listening to Danielle's remarks has been very insightful, indicating a positive reception of her contributions.
Video description

This stand-alone webinar brings together cannabis industry and financial services experts for a practical, “nuts and bolts” discussion on how to build and manage a successful cannabis banking program. Hear directly from an experienced banking executive and a cannabis regulatory attorney about what’s changing, what works, and what pitfalls to avoid. Whether you’re a financial institution exploring this line of business or a CRB looking to strengthen your banking relationships, this session is designed to deliver actionable insights. Attendees will learn: How to secure board and senior management engagement Risks and realities of cannabis banking programs Key objectives for financial institutions (deposits, customer growth, fees, loans) Regulatory expectations and how to meet them (FinCEN Guidelines, Cole Memo) Pricing for sustainability and competitive positioning How to structure BSA and business services teams (sales, compliance, treasury, ops) Best practices for policies, procedures, filings, and software integration What to expect from audits and ongoing compliance reviews Meet the Speakers Danielle Boyle, CCBP, CBPA Specialty Banking Manager, Dart Bank Danielle brings 14 years of banking experience and a strong background in compliance, operations, and risk management. As Specialty Banking Manager, she leads Dart Bank’s Cannabis Related Business (CRB) compliance and support team, ensuring operations remain efficient, well-controlled, and fully compliant with federal, state, and local regulations, particularly in the areas of BSA/AML and risk management. She began her career at Dart Bank in customer service, moved into accounting, and found her niche in specialty banking. Danielle holds a BBA from Grand Valley State University with a double major in International Business and Marketing and is a 2025 graduate of the Perry School of Banking. Chris Van Dyck Partner, Cogent Law Group As a Partner at Cogent Law Group, Chris Van Dyck brings nearly a decade of hands-on experience in cannabis banking, both as a financial regulatory attorney and as a general counsel and BSA officer at a financial institution. With a deep understanding of compliance and regulatory expectations, including the 2014 FinCEN guidance, Chris has helped build and scale a successful cannabis banking program that became a major revenue driver. Today, he advises financial institutions on launching and managing compliant cannabis banking programs, mitigating risk, and driving growth in this high-opportunity sector.