Todd Gunderson, CEO of Credit Union 1, shares his experience serving the legal cannabis industry.
When the Illinois legislature legalized adult-use cannabis in 2019, state leaders embarked on a campaign to encourage local banks and credit unions to provide banking services to this emerging industry. Following a meeting with the State Treasurer and months of careful due diligence about the industry, the risks involved, and how to serve it compliantly, Credit Union 1 (CU1) CEO Todd Gunderson and his board made the decision to launch a cannabis banking program in January 2020.
CU1 now provides a full range of banking services to cannabis-related businesses (CRBs) as well as banking services to all CRB employees, including mortgages, auto loans, credit cards, home equity loans, and other banking products. Shield spoke with Todd about his experience serving this industry and why cannabis banking makes good business sense.
Why did you launch your cannabis banking program?
Todd Gunderson: CU1 has physical locations in three states, two of which (Illinois and Nevada) have legal adult-use and medical cannabis programs. We saw a lack of availability for an entire banking solution in these states and across the country for the cannabis industry. In Illinois specifically we knew that when the legal adult-use program started in January 2020, demand would only grow. We have always sought to serve underserved people and organizations, so banking this industry was a natural extension of our mission. Our members operate like any other legal business. The only thing standing in their way of accessing banking on a broad scale is a discrepancy with federal law on cannabis.
"We have always sought to serve underserved people and organizations, so banking this industry was a natural extension of our mission."
What made you confident you could serve this industry compliantly?
TG: Once we took the time to understand the industry, we realized that banking the cannabis industry is no different from any other aspect of banking, especially in terms of the need for data transparency to detect fraud or potentially fraudulent scenarios. Shield’s compliance management platform enables us to track the movement of money across our cannabis member accounts in real-time. It complements our other internal processes to ensure we’re operating efficiently while meeting our compliance requirements. We also use Shield for new member underwriting, which allows us to offer a better onboarding experience while providing transparency to our regulators. Beyond the technology itself, Shield has helped us develop s for serving the industry, stay ahead of industry and regulatory changes, and realize a better overall return on investment from our program.
How does CU1 support social equity goals?
TG: CU1 is the only full services banking institution currently providing lending to social equity applicants in the State of Illinois. CU1 is partnering with the Department of Commerce and Economic Opportunity (DCEO) to meet the needs of social equity applicants with loans available up to $1 million to help with startup costs related to entering the cannabis space. CU1 can provide banking, ATM, payroll, cash delivery services, and lending options to these applicants depending on their business needs.
What final thoughts do you want to share about banking in this industry?
TG: As we began to meet with potential members, we quickly realized that many of the business leaders in this industry are extraordinarily well educated with solid business models and great work ethics. Many of them have experience running successful businesses in other sectors and have extensive connections in the community. It made no sense that these entrepreneurs would suddenly try to do the illegal, nefarious things that some people associate with cannabis. We approached these business partners just as we would someone who owns a gas station, a shoe store, or a restaurant. We talked about their business plans and what they needed from a banking partner. We were also open about our services and our pricing, being clear that our costs are associated with the compliance burden required by the government and that we were not trying to take advantage of them.
Partnering with experts to assess risk, evaluate and implement compliance technologies, and develop policies and procedures will help financial institutions create the foundation for an effective and competitive cannabis banking program.