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Banks reluctant to serve Michigan's cannabis industry, but options exist

Conner McClain and his business partner at In Between Dreams LLC plan to open an indoor growing facility for medical marijuana early next year in Vicksburg.



Some of the community banks and credit unions that serve the marijuana industry use third-party service providers that assist them with compliance and reporting to federal regulators.


One of those companies is Seattle, Wash.-based Shield Compliance LLC, which offers banks and credit unions a platform that connects to databases of state regulatory agencies. The service can gather and analyze information on licensed businesses and monitor their sales on behalf of banks. The platform also enables businesses to upload financial information and other data they need to regularly provide.


“We’ll help keep them safe and we will allow them to focus their time on their riskiest aspects of the business instead of all of the fetching and organizing of data,” said Tony Repanich, president and COO of Shield Compliance.


The company works with three state-chartered community banks in western and southwestern Michigan and “we have some prospects that are in the southeast side of the state that are progressing,” said Repanich, a former chief banking officer of a $1.5 billion community bank in Washington state.


In addition to Michigan, Shield Compliance also operates in Colorado, Illinois, Massachusetts, Ohio and Washington. The company entered Michigan a year ago, viewing the market as having a “very strong” base of community banks and credit unions that are competing hard for deposits.


Those smaller, often closely held institutions, particularly those based in rural markets with limited growth prospects, are more apt to serve the marijuana industry than their larger counterparts, Repanich said.


“Growth has been hard and they see this as a unique, sort of one-time growth strategy,” he said.


As licensed recreational marijuana businesses now begin to open across the state, Repanich shares the belief that more financial institutions will eventually enter the market. He hopes to work with a few dozen more by the end of 2020 and credits trade associations and state regulatory agencies with helping pave the way “to make sure the businesses have access to financial services.”


“You’re going to have more banks and credit unions in Michigan serving this market in a very short period of time,” he said. “You guys are going to be a great market and, hopefully, other markets will flow toward Michigan as an example.”


If Congress ever legalizes marijuana at the federal level or enacts legislation enabling banks to serve the industry, “you would see a number of banks come off the sidelines,” Repanich said.



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