Sundie Seefried: Bank Secrecy, Hemp vs. Cannabis Banking, and Credit Card Barriers – What You Need to Know for the Future

Listen Now

Sundie Seefried: If we were to be in a failing bank and they had to come in and exercise and use federal insurance, do you think they would cover something illegal? I don't think so. But SAFE Banking will change that — SAFE Banking will not let them exclude the industry, which I think is a great thing for the industry. So there is a lot of benefit to SAFE Banking. Bryan Fields: What's up guys, welcome back to another episode of The Dime. I'm Bryan Fields, and with me as always is Kellan Finney, and this week we've got a very special guest, Sundie Seefried, CEO and President of Safe Harbor Financial. Sundie, thanks for taking the time, how are you doing today? Sundie Seefried: I'm doing great, it's good to be back. Excited to see you Kellan, how are you doing? Kellan Finney: I'm doing really well, really excited to talk to Sundie about banking and regulations and rescheduling. I think we've got a lot of really cool topics, and I'm even more excited that she's located in Colorado — fellow West Coast folks, right? Bryan Fields: That's great, and I think it's super important to always talk about where someone currently is, but it's always important to know where they grew up. So Sundie, if we had to talk East Coast versus West Coast, could you tell us where you grew up? Sundie Seefried: Well, I did grow up in Upstate New York, so I am definitely a New Yorker by birth. Let the record of flight count, but nice try though. Bryan Fields: So before we dive in, can you give a little background about yourself and how you found your way to the cannabis space? Sundie Seefried: Well, I'll tell you, it was never anything planned. Everything I've done in this last 15, 10 years has been a complete surprise to my entire career. I got into banking in 1983 — now I'm really aging myself, fellas — and I liked it, it was a good fit for me. I like numbers, and I started actually in IT, and was in Germany with a credit union over there, Service Credit Union, and I just stayed with them from '83. I worked my way up to branch manager training, and then VP of Marketing, which I never understood why they'd put me in marketing. But I get it now — toward the end of my career I'm like, okay, I am an idea girl after all. I proved that with Safe Harbor when we started that. When I came back to the States I came into operations, and then I went to CEO at Partner Colorado, and I was getting ready to retire in 2014 — truly, I was going to retire at the same time my husband was retiring, and we thought we would just go into marital bliss at the end of our careers. In hindsight, I don't think anyone ought to make that decision together like that. But I was out with a couple of lawyers in Denver, and they started talking to me. They said, let me take you to drinks one night, and I said okay, why not, I can talk to you about marijuana, because of course that's what we called it in 2014, right? And they said, why won't you bank our clients? And they had cannabis clients at that point in time, and I'm like, oh no, don't even talk to me about this. So many financial institutions were jumping in trying to get into it, do it right, and then moving out of it. So it was a scary endeavor to even think that I could do something that others were not doing, let alone that it would extend my life and my job — no retirement. And then the more I learned, I couldn't unlearn it. The more I learned what it's like to do business in cash, the more I learned that they were being forced to bank in a criminal manner. I thought, this is wrong. And as a credit union, you're kind of trained to do what's right for the community, so I started educating my board. The most prevailing story that really got us was — they became our first client — they would get up in the middle of the night, pack their kids in their car seats, and go to three different ATMs, and they would deposit under $10,000 in each ATM because they were told by their banker, if you go over $9,000 you're going to be flagged and your account will be closed. So that's where I say you're getting banked criminally, and you're being told how to skirt the system, and I said, I can't do this, I can't be that banker. And when I told the board all this, they immediately went into, let's do some more research and education. And before you knew it, they said the only problem is your contract is up — and I wouldn't even let them give me a contract because I wasn't sure I could do it. But I said, I think I can, even though they called me a little crazy at that point. I said, I think I can do it, and the reason I thought I could do it is because I had 20-plus years of experience with regulators and auditors, and I said, I'm not delegating this to anybody — if I'm going to prison, it's going to be because I didn't do it right. So I ended up making sure I wrote all the procedures and policy, and implemented it, and I onboarded the clients for the first two years. And I tell you, I wanted to quit — I wanted to quit in January when I launched. But after I interviewed those owners and they were all legitimate business owners, I thought I was getting mom and pops. I had the same stigma attached to marijuana that everybody else did, and then I realized, wow, this is the real industry, that's legal. I couldn't turn back at that point because of the people involved in the industry, and that's what kept me going — the people. Bryan Fields: I love that, and I think the story about trying to get up the hill in the early days, and how hard that is, is so critical, because I think people sometimes forget we are in such an early stage of the industry. So before you dove in, speaking to your board, did you reach out to any of your relationships with regulators and feel them out — hey, we're doing this, how would you feel about this — where did you lean on your regulatory relationships and previous experience to figure out where your team could make the biggest difference right away? Sundie Seefried: You know, it's interesting, because when I went to the regulator in Colorado — because you don't do anything without talking to your regulators, especially something in a high-risk business like this — I went to him and I just expected him to say, oh no, don't go down that path, I've seen another credit union get themselves in trouble and over their heads. And I went in, and I just figured I'd make the best attempt and report back to my friends, can't do this. And he gives me a handful of papers and says, somebody needs to do it, go do it. And I'm like, that's not the right answer, that's not what I was expecting. But he later told me there were like three CEOs in the state of Colorado he actually really knew, who could get down to the details of it operationally, and he said I was one of those CEOs — he was just waiting for one of us to come in the door. And he talked to my board, and he said, I've got to get this done, the governor wants this done, Colorado needs to be safer, and I'm going to be the regulator that walks right by your side, learning everything you learn, and we'll get this done together. So he took the regulator threat out of it, so long as I did the hard work — and I did. I talked to our federal insurer, NCUA, I talked to my CPA — I was going in transparent. If you folks don't want me doing this, kick me out fast, because I don't want to get into something and get shut down. So the transparency is one of the things that really worked in favor of Partner Colorado Credit Union moving in this direction. Kellan Finney: For our audience, could you just briefly describe the difference between the regulator at a state level versus a federal level from a banking and credit union perspective, just to set the landscape a little better for everyone? Sundie Seefried: Sure. A lot of people thought we were a state-chartered credit union, and everybody thought because we were state chartered that we could do this, and federally chartered couldn't do this — but that's not the truth. It was illegal at either level, you were just subject to prosecution whether you were state chartered or federally chartered. And the fact of the matter is, we are federally insured, like FDIC and NCUA, so we're still subject to federal law. The biggest concern at the federal level we had was, will they revoke our insurance certificate, will the entire membership no longer have federal insurance because we're going into cannabis — which is why I went to see them, and they made no threat of that whatsoever. So even if you're federally chartered or state chartered, you were still subject to the rules of Bank Secrecy, and that's the regulation we all feared getting fined on. So I really studied that regulation a great deal. But federally chartered versus state chartered — it really doesn't matter, because there were federally chartered institutions who were trying to do it at the same time, and have done it since 2014 when I got into it as well. Kellan Finney: Has there been clarity on that rule so that there's more transparency, or does it remain the same? Sundie Seefried: Still the same, can you believe it? So I know everybody's like, are you really excited about SAFE Banking? And I said, well, so far so good, ten years later. It hasn't made a difference other than — there are things that are not tested, like, is there federal insurance coverage for the cannabis industry? I don't know that there is, because that only comes into play if your bank fails. So you want to have a solid banking partner in that situation that's not losing a lot of money, not under a lot of scrutiny — that's where that comes into play. But if we were to be in a failing bank and they had to come in and exercise federal insurance, do you think they would cover something illegal? I don't think so. But SAFE Banking will change that — SAFE Banking will not let them exclude the industry, which I think is great for the industry. So there's a lot of benefit to SAFE Banking. The other thing SAFE Banking will do — there are some Federal Reserve systems that are a little skittish about taking cannabis money. In fact, we've had only one Federal Reserve deny us an account, and I don't know why they're doing it for other people at this point, but we haven't gone back to that well. And under SAFE Banking, I don't believe they're going to be able to exclude us either. So again, there's a lot of good in SAFE Banking — they won't come after us and prosecute us just because we're banking cannabis. So those are some good things. What are some of the bad things? It doesn't really open the banking industry the way I think the industry would like to think it will, because what keeps financial institutions at bay is Bank Secrecy, and if that doesn't change, you're still under the level of Bank Secrecy scrutiny, and those obligations are severe, as well as the penalties for not doing it correctly. So it's kind of like, you do a lot more reporting on the cannabis industry — but this is where the whole descheduling or rescheduling conversation comes into play, and the fact is that descheduling doesn't deregulate, because given Bank Secrecy, this is how you handle high-risk businesses — this is still how you handle casinos, or check cashers, or grocery stores, gas stores, tobacco shops — all these are high-risk businesses that require a lot more compliance work in the background to do it correctly and avoid enforcement actions. And I don't believe they'll change that, because there is still a great deal of black market activity out there in the industry, and until we minimize the black market — banking isn't the determining factor. If you can't get a bank account, law enforcement just has to say, why can't you get a bank account, right? Kellan Finney: Do you think descheduling helps mitigate the black market? Sundie Seefried: No, I think descheduling won't. I think rescheduling is the next step — I really support that for the industry, because I think even more important than banking, that will assist the growth of the industry and solidify it legitimately. I think that's important because it takes away the tax burden they have now under IRS regulations, and that will help them actually grow and support their own growth. And let's be honest, the more money they can make on the bottom line, the less they're subject to selling out the back door or black market activities. So there are reasons to help the industry along. I think what will minimize black market activity is like in Colorado, where they get a lot of tax money — a very successful program they put in place — and they use a lot of that money in law enforcement to seek down the bad actors. The state has to crack down on the bad actors, that's why you see California having a difficult time, and New York having a difficult time — haven't they just kind of turned their head the other way for so many years? How do you undo that? That's going to be the difficult part. I always say, you're going to have to go back to — you may be too young to remember this — when we were kids they had those frying pans, and they put an egg in it and fried it on TV, like, this is your brain on drugs. Now they have to go back to that and say, this is your brain on illegal, unregulated drugs, right? They've got to support the industry one way or another and crack down, and utilize some of that tax dollar to actually minimize black market activities, and they can find them. Kellan Finney: Does descheduling open up banking, as a lot of people have made claims out there? I know it helps with the tax burden from a 280E perspective, and I spoke with a PR representative at Wells Fargo, and he said they would never even touch it until descheduling happens. Are there other steps that need to happen after descheduling to solidify things from an institutional perspective? Sundie Seefried: No, again — descheduling, well, rescheduling, I think is a better way to put it — that will get some more banks looking at it, but then you go back to the fact that Bank Secrecy isn't changing. Bryan Fields: Sorry, can you just describe what Bank Secrecy is? Sundie Seefried: So Bank Secrecy is a regulation that's been decades in the making, and what it really states is that illicit money is going to help us find criminals, but the banks are responsible for helping find the illicit money. So somebody comes in, they're putting money in, and we are responsible for all the money they're putting into their account — do we know it's legitimate, do we know they're licensed, do we know they're not doing any criminal activities on the side? Cannabis is one of those gateway... let's put it that way — if they're going to be doing illicit activities in cannabis, they might also be doing human trafficking or arms sales. This is what they're looking for. Bank Secrecy says, banks, you're going to report all this information to us so we can help find the criminals across the country. It's where the banks have a relationship with a government agency called FinCEN, to protect the American financial system as well as Americans — that's the whole idea of Bank Secrecy. And that's the most important part of banking high-risk industries — when we talk high-risk, we're talking casinos, gas stations, potentially laundromats, anyone dealing with cash is grouped into the secrecy aspect, because anyone dealing with cash may also be in trafficking and guns. Bryan Fields: Is that kind of the concept — they want to make sure any cash available is tracked? Sundie Seefried: Right. Bryan Fields: Wouldn't banking then be more important and easier to follow if, let's say, there's a digital process, like with credit cards? Sundie Seefried: Absolutely, absolutely. The more documentation, the more you can digitize your transactions, the more it can be traced. But then it's kind of like, who really gets all those arms that shouldn't be out there, that they're not doing in a legal way — that's where the cash comes in. If criminals are going to try to keep cash out of the system so we don't find them, so we don't scrutinize them — when they put millions of dollars in cash through us and into our financial institutions, we're asking them questions all the time, we're forcing them to show the legitimacy of that money. So I once met with a prosecutor from the DOJ in Washington, and two hours of, are you really going to put me in jail, what's my prosecution risk — and he admitted that he wondered whether we could prosecute you, and whether a US attorney could come after you. Nothing you really want to hear, right? But you got to know your risks. And he said, until I read the book — because again, transparency is what I use to stay in the business, I wrote a book — and he said, then I realized you were doing it for the right reason, to protect the consumers, protect the states, protect the financial system. And he said, I don't think they could. One of the very last questions I asked him was, do you really think the cartel is getting money into the credit union? And he said, because you scrutinize the money so much, because you make them validate the money so much, and you're focused on the money, I think they'll stay away from you. So where are they going to go, unless they find a financial institution that has a lack of BSA obligation implementation? That's why you have regulators that go in regularly and look at these banks and credit unions, to make sure we're not doing something so high risk that it puts everybody else's money at risk. Kellan Finney: Isn't this where the system is flawed? You're doing all this research, all this investigative work, and you're not touching the plant — all you're doing is making sure someone doesn't have to take their three kids in the middle of the night to deposit $9,000 across ten different ATMs. Aren't you doing exactly what the system is designed to do, and isn't that part of the problem? Can't you communicate that to regulators and say, hey, this is why they have to do this — if we adjust these regulations, people don't have to do this? Is there any way those conversations land, or do they fall on deaf ears? Sundie Seefried: Well, if we go back to the fact that illicit activities usually breed more illicit activities, then they're going to keep their eye on the cash, and you can't blame them. I once went to a meeting and the DEA was there — there were only two financial institutions in Colorado doing this at the time, and we were at this big session, regulators were there, DEA, law enforcement, everyone. And finally I put my hand up and said, I have a question for the fellow from the DEA — is this money better banked or unbanked? And he admitted that what we do in Bank Secrecy helps them do their job immensely. But then he said to me, but if you're going to bank marijuana, then you're going to go out there and bank heroin and cocaine. And okay, but here's the funny thing — now everybody's gateway drug to bank is bad, but now psilocybin is coming to the forefront, right? Nobody wants to touch psilocybin, and it's legitimately legal in two states now — somebody's got to bank it. Bryan Fields: I can only imagine when you walked into that room and saw the DEA, if you wondered if this was the time they were going to say, hey, we've got you. Sundie Seefried: You know, I think for the first two years I constantly looked over my back, and I believe I was under some pretty severe scrutiny from the federal agencies to see if I was taking any kickbacks — because I onboarded the clients for the first two years myself, so I could learn the industry, know the people, and kind of regulate who's coming in the door. And I had this one fellow who tried to give me some marijuana — I was at his grow, and he's like, what if a little bird flew over your car and dropped some really good stuff in the back of your trunk? And I'm like, oh no, oh no, oh no, don't, don't do that. And he really tested my resolve on whether I would take any kind of product. He did become a client, but he also trained our bankers on some illicit activities to watch for. I think he was testing me because he knew there were bankers in town who were taking kickbacks to bank the money secretly, and it does happen. So I think they wanted to be in a legitimate banking program as much as we wanted legitimate owners in our program. Kellan Finney: It's wild to me that you have to take all this risk, again, like Bryan said, when you're not touching the plant. In essence I look at it as an analogy to enforcing a speed limit — we have speed limits because if you drive too fast and kill someone it impacts their life, and now with these industries operating there's so much more cash on the street that it creates opportunities that can destabilize communities, gang activity, and other things linked to large amounts of cash — and you're essentially playing the speed limit enforcer, creating and monitoring the system that helps get cash off the street and helps the community. Have you been able to express this to regulators? Have you had open conversations about that? Sundie Seefried: Oh yeah. During the first seven years of the program we went through 16 or 17 state and federal examinations, and oddly enough, even though we were state chartered, the feds took over — they were the ones scrutinizing the program more than anybody, but they were learning off of a financial system that wasn't taking any of this money legitimately, from somebody who was taking this money legitimately. So they grew with us, but not without a lot of debates. One of the first debates I remember — we had probably 200 dispensaries we were banking at one time, and one of the regulators or examiners comes in and says, we want your private bankers to go on-site to every one of these dispensaries and risk-rate each one. And I said, no — you want our eyes on the money, or you want our eyes on the product? The product regulators are the state regulators issuing licenses, that's their job. We are working with the state to make sure they're licensed, we're watching the money. And you know, they didn't disagree, but those are the types of things we had to discuss during 16 examinations — which way to do it, and which way was right. Kellan Finney: It's wild — you're essentially teaching them how to do their job, essentially where the line is between what's your job and what's theirs. Sundie Seefried: Well, isn't that the truth about anything new? We know you've been in the industry long enough — somebody told me right from the beginning, education is key to success in cannabis. So I was prepared, I said fine, I'm going to be the educator, and my senior team became the educator, and we made sure we understood everything, and we did educate. I will say, as painful as it was — and it was painful — the last exam, I only lost my temper one time in an examination, and it was exam number 14, where I was tired of being penalized, and they brought some new examiner in who really knew Bank Secrecy but didn't know anything about cannabis, and she literally looked right at my employees and said, you guys are money launderers, you're doing something illegal here, and kind of talked down to them, probably put one of them in tears. And I went into that boardroom and I said, I want you to take this personally — I never want you in my office again, we've been doing this for seven years now, we have a clue what we're doing, and it's not illegal in Colorado, which means we're doing something right. Then I had to go back and apologize to the regulators the next day. You know what they said to me? You were bound to lose it at some point with all the scrutiny you've been under. So the regulators are not our friends, but they're not the enemy either — they're there to protect the financial system and find the rogue players who don't want to do things by the rules, and I'm like, Miss Rule Follower. Bryan Fields: So how do we put ourselves in alignment with them to figure out solutions going forward — is it a collaborative educational process — and if so, what would you change if you could make any recommendations to improve where we are today, to lift some of these challenges? Sundie Seefried: I spent probably the first seven or eight years doing nothing but educating regulators — not only in my own shop, but I'd go to FDIC seminars — it was all about education. The interesting thing was, when I first tried to get into NCUA and said, let me come to DC, let me educate, let me tell you how transparent we're being and how we're protecting the system, they said no, we're not allowed to have any kind of formal webinar because it's illegal. I think the regulators are in a good place now — in the ten years it's popped up in enough states that they've got to know what they're looking at at this point. The standards in banking have been set — the golden standard is there now. I look at my staff and say, we probably can loosen up a little, we're over-compliant. So I think that's not the problem — I think it really is in legislation, and on the political side of acceptance, and there are just so many different opinions there. I really did think something was going to pass before the election cycle, I was really disappointed for the industry. I really thought they might need the votes — and who knows, the Republicans may need those votes soon, both sides could use those votes. Kellan Finney: Just continuing on cannabis banking and Visa/Mastercard — if cannabis is allowed to bank via SAFE Banking, can Visa and Mastercard still play, or do they have to have some other regulation or changes happen? Sundie Seefried: I'm not from Visa or Mastercard, but I understand the financial system enough — you can go out there as a broker and put those little card machines anywhere, and it's a matter of how you represent to Mastercard or Visa or other major credit cards. In other words, this is really a flower shop — literally, not far off from a cultivation — it's a flower shop, and they get categorized that way, but that's really lying to the financial system, misrepresenting it. So what Mastercard and Visa then do is take on the risk of not knowing where that money is really coming from — it's not coming from a gift shop or a true flower shop, and how do they know it's being monitored before it gets put into the system? So if you go to SAFE Banking, that may not change it — it may have to go all the way to deregulation, unless some of that compliance is taken off them and Bank Secrecy is changed. What responsibility do they have if they get hit — some of the fines out of FinCEN for not knowing the money going into the system are upwards of a hundred million dollars, if you look up enforcement actions. Nobody wants to pay that kind of fine, so they have to be cautious, it hurts at a deep-pocket level. Bryan Fields: Is there any credit card secrecy that needs to happen, just like Bank Secrecy? Sundie Seefried: No, I think it really boils down to the money, and them moving money into the system and digitizing whatever's coming out of whatever shop, and how do you make sure every one of those machines that's taking their card recognition is taking it into a digitized transaction, so they know exactly what they're putting through the system. Bryan Fields: Is this all established on a state level? I know in Colorado you can't pay with a credit card, but in some other states I've been able to. Is it a location-to-location thing, or am I not going to the right locations? Sundie Seefried: I don't believe so — the major credit cards have made it very clear that we're not supposed to use them for any cannabis product across the country. It's a matter of them finding it and blacklisting it, saying this isn't the appropriate way. Now, will they let us use a debit card, so I can give my clients a debit card to go pay their bills, go to Home Depot and get dirt or whatever they need — that's one thing. But taking money in a merchant processing environment where they're paying for cannabis product, that's not allowed right now. If you're going into a place, they might have a workaround where you're actually funding a little account from your Mastercard and then paying from an application — a workaround so Mastercard or Visa doesn't actually know it's in a cannabis shop. Usually in that case, the receipt doesn't say ABC Cannabis Shop, it says something else altogether, and that's the difficult one to weed out. Bryan Fields: I think the most fascinating aspect is, I had two friends go recently to New York stores — one went to a legal store, had to pay cash, was uncomfortable with paying cash, and another went to a gray market store, paid with a credit card, and didn't recognize it was illegal. Having to explain to both of them how it works was super fascinating. What can I say to the public — if you use a credit card, it's likely an illegal shop — is that the way we're going to have to define this, so people can recognize the difference between illicit and legal? Sundie Seefried: That's interesting, because I know there are some legitimate shops using what they call cashless ATMs, and they have found their way into the system. But I will tell you, I also know that Visa and Mastercard are very actively looking for those machines, and what we tell our clients is, you might get away with it for a little while, but let's have a backup plan. There are closed-loop systems, you can put a legitimate ATM in your shop — but if they find you, you're going to get shut down. So it's not something you necessarily want to count on long term. Kellan Finney: What about banking differences between hemp versus cannabis — is there any difference from a regulation standpoint? Do you have any big hemp clients, how does that work? Sundie Seefried: You know, it's more difficult to get a hemp account than it is to get a cannabis account. Kellan Finney: Why? Sundie Seefried: Because there are so many checkpoints on cannabis — highly regulated at the state level, if you have a license at the state, you're reporting everything to the state. Hemp — what do they want to know? That your crop comes in under 0.3% THC. But now they're pulling these derivatives, Delta-8, Delta-9, and they're intoxicating, and they're selling it at gas stations, putting it in drinks at restaurants, and it's not regulated, and it can fall into the hands of minors. So that becomes the real big problem — unregulated intoxicating derivatives from the hemp environment. I went to a big regulator conference and they're like, how do we do this, this is not on equal ground — cannabis is over here being highly regulated like intoxicating alcohol, but now you've got intoxicating Delta substances out of hemp and they're not regulated because there's a loophole in the Farm Bill. So we've made it very clear that we can't bank anyone producing those derivatives in an unregulated environment. Now if they're just cultivators, we probably can bank them, and we do have hemp accounts — not a lot, but ones we can trust and know aren't actually doing the manufacturing. Bryan Fields: Have you ever had any clients you had to terminate mid-relationship, based on a feeling or information that came up? Sundie Seefried: You know, this is the thing about Bank Secrecy, and what's really important about it — people think Bank Secrecy is all about keeping them out of the financial system, and that's really true, but a good Bank Secrecy program finds them as well. They slip in — look how long we've had money launderers in the system, right? The bank's obligation is to find that person slipping in. So a sign of a good program is that you do find somebody, and yes, we start to recognize — the question is, how do you terminate that relationship safely for everybody. But again, if somebody's doing something criminal and you're saying you're too high risk for us, they're usually not going to fight it — they don't want reports out there in terms of getting kicked out of a financial institution. Bryan Fields: It must be a really difficult balancing act. Is there ever a time where it's a little too gray, even in a gray area, where you're like, listen, I don't know if you are or you're not, I'm not assuming you are, but just because of the situation we have to move in a different direction? Sundie Seefried: Absolutely, yes. When we can't explain something, we must take action of that nature to protect the financial institution and the system. That's the whole suspicious activity process — if you're a legitimate licensed operation to support the sales of the money you're putting into the financial institution, it's there. That's why I say it's easier for a cannabis shop to process their money, because I see what you're telling the state, I see what's in your point of sale, I see how you're paying your taxes — I see all these points of validation that show me you're legitimately putting legitimate money into the system. That's my obligation, to make sure the money's legitimate. Kellan Finney: So banking has partially changed over the last ten years since cannabis regulation started. Where do you see the industry from a banking perspective going in the next ten years? Is it going to continue to open up slowly, continue to be a hyper-regulated industry with all these touch points, even once federal legalization occurs? Sundie Seefried: Right now I think it's — until the cash decreases, and the younger generation may be the generation that takes a lot of the cash out of the system. I often tell the story, if my husband goes out and buys me wine — which is rare — he pays for it in cash. Why? This older generation doesn't necessarily want everything on a statement, they don't want to digitize it, they don't want people scrutinizing their business. So there's still a very big cash industry out there, until maybe the next generation comes in and says, I don't want to carry cash, I want to do this digitally, and we have full legalization and the major credit cards enter the business — I think then the scrutiny may go down, so long as the cash goes down. It really is dependent on how much cash comes into a financial institution — if you get a financial institution with ten times more cash than the one down the street, the obligations are going to be greater on the one taking the cash. So the preference of the financial institution is to find entities and operations that deal less in cash and more digitally, more business-to-business, more transactions that are digitized. A lot of that you already see in cultivators — the biggest cash element is obviously in dispensaries, retail. Those are the ones with the higher risk. So somebody who doesn't want the risk can say, I'm only going to bank cultivators. They'll find a way to do what's easier, that protects the financial system and the institution, and eliminate the rest — a lot of financial institutions will bank an ancillary company, a service provider, but won't bank a plant-touching entity. Bryan Fields: There's got to be education there too, right? Because for them to understand the differences means you need an organization like yourself that's more creative in saying, okay, there are differences here and we need to understand how they all play together — because we've had experiences where insurance providers said, hey, you're a cannabis company, we know you don't touch the plant, we know you just do content, but you're a cannabis company. What's necessary from an educational standpoint — is it federal guidance, where does the education start and who's responsible for adhering to it? Sundie Seefried: It falls to the financial institution — you don't do it right, you pay the price. So the regulation, I don't believe, is going to lighten up severely — maybe they'll require fewer reports, there are things they can do, limits can be changed. But again, if they're looking for criminals across the country, that's their charter — how do you have the DOJ do their charter if we take away their tools? So that's how we're working in conjunction with them. It boils down not necessarily to education with the financial institution, but resources — how much do they want to spend on compliance, at what point is it not profitable? We have over 700 accounts, we have enough volume that it makes it profitable for us to do the business, but if somebody's in a community with 25 accounts and has to do all this compliance, have so many people with eyes on the business, it becomes a non-profitable business for them to enter. You have to have sufficient volume to support the demands of compliance. Bryan Fields: Wouldn't it be beneficial for a large player like Visa or Mastercard to look down and say, hey, there's a big financial opportunity here — or do you think in their mind they're fearful that the upside doesn't outweigh the downside of getting slapped with a massive hundred-million-dollar fine? Sundie Seefried: Here's what I've said to somebody from one of the major credit cards — I said, you ought to do a test and do it with Safe Harbor, because we're watching every dollar going into those accounts. They could go in selectively like that if they can get the comfort up. So we continue to work in that direction, that says, if you trust the financial institution banking that entity, you should be able to trust that when we put machines in there, it's good money. Bryan Fields: Were they open to that, or were they like, I'm not really sure? Sundie Seefried: It's one of those things where, if people have taken such a strong stand for so many years, moving to a different position is difficult, especially in a large organization, but we keep trying, explaining. It's a tough one for everyone — new facts are hard. Kellan Finney: How much influence do you think some of the bigger industries potentially getting involved — big pharma, big tobacco — I know big alcohol and big tobacco have made investments into the industry but haven't fully gotten involved — how much influence do you think that has on the financial sector? Sundie Seefried: I think they already know how to do business in those types of sectors, so it has a big influence. But when it comes to banking and finance, it's really going to boil down to how do you manage the cash, how do you eliminate the cash — that's really what it's going to boil down to in the end. If they can take the cash out of the business, they can lower the risk. Bryan Fields: What question do you wish more people asked you? Sundie Seefried: I think the education process really comes in at that level, when you get new clients coming in saying, what type of compliance and why are we held to a higher standard? What I like to tell them is that in the very beginning, we help legitimize your business. When you flow through a compliant financial program or banking program, regulators know you're doing something legitimate when you're not sitting in so much cash without a bank account. The why — why compliance is important to you — we help legitimize them, they can produce statements, financial statements, once they have bank account statements and banking activity. So the compliance is necessary — I think that's the thing that's least understood out there. Kellan Finney: How much does that benefit from an accredited investor standpoint? Do you guys get investors calling you, questioning some of the potential clients they're looking to fund? Is that some of the relationships you manage? Sundie Seefried: That's a really good question. Investors will absolutely question — obviously, being in financial services, we're not allowed to release anybody's name, financial privacy says your privacy with a financial institution is secure, we can't tell you who's banking here. But if they're working with investors, they can tell the investor where they're banking, and yes, it makes a big difference — if you're investing in a company, you definitely want to know they have legitimate bank accounts. The same thing goes if you're putting a pool of investors together — let's say a couple million dollars, or tens of millions of dollars of investors — you want to know you're not going to take on one client or one investment that could put everything at risk. You only need one bad player in that pool to throw everybody's money at risk. Bryan Fields: The challenges in cannabis are just endless, right? You've got these poor people starting their business, super excited, they got their license, getting their dispensary up, then they go to open a bank account and they're like, all I need is a bank account, why can't I do this? It's mind-blowing, and I feel for some of these people, especially in newer states who are trying to get started, and can't even imagine some of the conversations and experiences you've had. Sundie Seefried: Well, we are doing business in 41 states at this point in time, and I hate to make it sound so difficult, because we've got it down to a science with ten years of practice, and we're going to help them stay out of trouble by being transparent. So I hope I didn't make it sound too bad — cannabis has its own challenges. Bryan Fields: Which states are you not doing business in — Kansas? Arkansas? Sundie Seefried: Arkansas we're doing... Carolina, yeah. There's also a lot of ancillary service providers in other states too, so it falls over state lines, but obviously those not moving toward legalization don't necessarily have anybody that supports it in-state. Bryan Fields: What is the number one takeaway for people who assume one thing but are completely lost on the topic? Sundie Seefried: Banking is available to the cannabis industry. I think it's been such a fear factor used in lobbying and everything else that people really think it's difficult — if you're doing the right thing, if you're compliant with your state, banking is available to you. Is it more expensive than a normal business? Yes. But the compliance is a lot more difficult, the risk is higher, so you're going to pay a premium for the time being. Bryan Fields: I love it, Sundie. For our listeners, if they want to get in touch, want to learn more, where can they find you? Sundie Seefried: shfinancial.org, or you can find me on LinkedIn, and I'll get you to the right people. Bryan Fields: Awesome, we'll link it up in the show. Thanks for taking the time, this was a lot of fun. Sundie Seefried: Thank you for your time, thank you, I enjoyed it. Kellan Finney: Thanks, guys.