‘You’re best having a cannabis banking program, not a project’: The ins and outs of banking cannabis with Regent Bank’s Keri Cain

Even as more states legalize marijuana, banking cannabis customers is still a major undertaking. Regent Bank is a small bank with 5 branches in Oklahoma and Springfield, MO. As Regent sensed an opportunity to work with cannabis customers in its communities, it tapped Keri Cain to build out its program. Keri has a background in retail and moved to OK after a stint directing store operations at The Gap’s headquarters in San Francisco. She also has muscular dystrophy and has used cannabis to manage her pain in the past and will likely need to do so in the future. She’s passionate about working with cannabis because of the medical benefits it can provide. 

To launch and manage its cannabis program, Regent worked with Green Check, a firm that works with banks to service customers in the cannabis industry. Green Check founder and CEO Kevin Hart joins Regent’s Keri Cain with me on the podcast to talk about cannabis banking, how to start up a program, and what banks need to be successful working with this new industry. 

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The following excerpts were edited for clarity.

Regent Bank

Keri Cain, Regent Bank: Our asset size is around $800 million to $900 million. And we have five different locations throughout Oklahoma and Missouri that we’re always expanding. This bank has had just exponential growth year over year: 10% to 20%. We are definitely looking at new markets and growing rapidly.

Green Check

Kevin Hart, Green Check: My name is Kevin Hart. I’m founder and CEO of Green Check which was founded to solve the banking challenge that cannabis industry had by focusing and working exclusively within the banking system and never around it.

Because we knew that compliance and the regulatory landscape was going to need to constantly evolve and change. And so we had to be partners with financial institutions to make sure the cannabis industry could achieve their goals of financial and business services.

I started with the idea in late 2016. I was approached to build a point of sale system for the cannabis industry. And everywhere I went, I heard about the banking challenge. Look at the single largest commercial opportunity and solve the single biggest challenge. And you look at what technology can enable — that became a much more fascinating business to try to attack.

The challenge of banking cannabis

Keri Cain, Regent Bank: Banking cannabis is definitely a subject that’s very complex. So, for example, Regent Bank is a state charter bank. In Oklahoma, we have a medical marijuana program. And same for Missouri. But it’s not your traditional banking methods. You are going in, you’re looking at every single client, and you’re really trying to understand who they are. Are they above board? Are they selling to folks who have patient cards? And are they buying product for folks who are licensed by the state authority?

If you’re a financial institution in different states, then you really have to be an expert to successfully bank this industry because of such regulatory compliance around it. It’s very complex with a lot of things that you have to pull away to understand how it all needs to come back together.

From retail to banking

Keri Cain, Regent Bank: I actually come from a retail background. So very non traditional, but I found that those that are in the cannabis industry also have non-traditional backgrounds. They didn’t start as experts in cannabis. I actually used to work for a major retailer, The Gap, in the corporate offices out in San Francisco. I was director of store operations out there. So I have a pretty in-depth history, working in retail for over 20 years.

Operations, compliance, and working with technology teams was really kind of my core competency. And I was approached to build out this program for Regent Bank, once the board of directors decided to go into it because of my past experience.

Personal story behind the story

Keri Cain, Regent Bank: But for me, it’s not just about what I do. It’s also about who I am. I actually have muscular dystrophy. It was something I was born with and it progresses over time. And most folks who are born with muscular dystrophy die in their late teens or their early 20s if they have more of the the progressive forms. I have been super blessed because I’m 44 and I’m still working. I’m still doing those things.

But at the same time, cannabis is at the very top of the narcotics that I can legally take. People talk about the opioid epidemic. And I’m certainly on the other side of that, because I do take opioids responsibly and they’re used to manage my condition. I’m not a cannabis user today, but living in California, I had used it before, and it definitely takes the pain away. But it is something that will be in my future based off of my medical condition.

So for me, I don’t just do this for work. It’s a subject I’m extremely passionate about because of the medical benefits and the economic benefits that it can provide states. In Oklahoma, we did over $127 million, just in tax revenue off of cannabis sales in 2020.

Creating a partnership

Kevin Hart, Green Check: Keri is an understated and amazing person. I’m not saying that because we’re on the podcast. When Keri and I first met face to face, we talked about our our past, and we came to realize our supply chain history. And when you look at supply chain and logistics, thinking it’s very applicable to cannabis banking, it may not be obvious. When you talk about seed to sale — I always refer to it as seed to shelf or seed to sack. It really didn’t have to do with the sale, it didn’t help the financial institution. So, we applied a seed to safe as in the bank.

Carrie and I, our conversations would just ping pong back and forth, back and forth. And you look at the supply chain of commerce against the supply chain of a product, that’s what a financial institution has to do.

The mandate

Keri Cain, Regent Bank: One thing I love about Regent Bank is that it has that entrepreneurial spirit. And so the board had decided to go into this industry because it was really was a way to fund Regent’s growth. And we didn’t know a lot about it. In fact, there was only one other financial institution that was banking this industry. So for me, it was about learning as much as I can about banking because it was a new subject matter. And parallel process that with learn as much about cannabis as I could.

So I did a lot of studying — a lot of learning. We started with a whiteboard, blue sky — tell us what you need. And so I was able to go into it. And I wanted to understand. I initially built a proof of concept of the program. And I was able to bank a few clients and learn so much, but I’ll tell you what, I was able to partner with a cannabis retailer in Oklahoma. He took me out to his processor. I was able to see everything from the supply chain perspective to how it gets to the dispensary and all the complexity — it really became clear. And I knew once I got a couple of clients and word got out, this would — no pun intended — grow so big, so fast.

Choosing a partner

Keri Cain, Regent Bank: So we started shopping technology. I brought the executive team along on the journey, who then in turn brought the board along in the journey. The person I report to sits on the board, so it definitely made those conversations easier.

Regent has been very supportive — it’s not just my team that’s impacted by banking this industry, you also have to think about your individual branches. Because with the influx of cash, if you decide to accept cash deposits within each of your branches, you have to prepare for that, as well. So we did see some additional headcount in some of our other locations.

But along with that, we also now have some of our clients who were able to take deposits straight to the Fed in specific areas. So that’s been helpful as well, in order to kind of drive out some of the cash. But the more financial institutions that bank cannabis, the less cash there will be in this industry.

You can bank this industry without technology. It’s doable. But you certainly can’t scale your program without technology. So you will only have a handful of clients (five or 10) versus 200 or 300. And it really depends on what your bank is going after.

We interviewed and went out to bid or RFP with several industry providers. And with Green Check, one thing that I loved about their program was not only was it solid, but the folks that work there — Kevin and his team, Mike Kennedy and Paul Dunn, all of those folks — all have that entrepreneurial spirit. They’re very agile. And I love that. Because as we went on this journey together, I’m looking at the different service provider and Green Check’s system is, first and foremost, client friendly.

So they’re here to help banks, and I pay for their services. But they’re also here to help the cannabis industry and anybody who is out there. If you’re a dispensary grower processor, you can get on Green Check for free. I loved that because it definitely felt more in line with who I am and what’s important to me.

Their platform has been very user friendly, because it’s purpose built for that. It allows me to scale the program and not just onboard the clients. So there’s a place where they can share their financial documents, records and business licenses and the Green Check system tells me, yes, they’ve uploaded everything. My team can then go and review. Once we approve the client, there is also a place where Green Check’s technology then turns around and integrates with the grower, the processor or the dispensary, so that we see sales most of the time in real time.

And we can get down into the sale to see if it meets that specific state legal requirements for the medical marijuana program. And that just says something that’s so fascinating in and of itself. Of course, you know, HIPAA laws: we don’t know that Mary Jo Smith bought this with a patient card. All of that data, of course, is hidden and protected by a Green Check platform. But we can get down in there and make sure that the businesses that we are banking are doing it via whatever rules and regulations are set out by that state. That, in turn, allows us to show, hey, look, the cash that we’re accepting from this business is aboveboard cash. It’s not money laundering or sales from illicit drugs.

How to set up successful programs

Kevin Hart, Green Check: Keri touched on scale. As she said, you could attempt to do this manually. It’s just really complex and it becomes very expensive. But if you’re going to enter into this line of business, you’re best having a cannabis banking program, not a cannabis banking project. Keri’s team at Regents has always been very vocal as to where they want to go and where they expect to take this. It’s our job to be able to facilitate that and work with them in tandem.

So when we started, we had our framework, we had our foundation, we had our ideas. Working with Regent has certainly made us better, because Carrie has brought forward some ideas. And because we are a technology company, we’ve been able to rapidly scale the program to suit their needs. They run an exceptionally compliant program. And so at the heart and the brains of Green Check is a compliance management system. We have to be able to take in all this variable data from different point of sale systems, and then be able to extract, transform and load that information, run it through the compliance rules engine, and present it in a way that’s meaningful for Regent to accept the deposit, report on it and then be able to monitor all the activity within those accounts.

Because it is a complex business with all the regulatory reporting that’s required, you don’t want to make that onerous or arduous or painful for anybody. You want the bank to be able to focus on running the bank, growing their business of being the bank, without having to worry about all the nuances of the rules and regulations. Our goal really is to enable them to scale as far as they would like to go, and where they just look to us as the enabler to do all of that for them.

We have a lot of interesting metrics on when banks come to talk to us. Regent started their program with 18 clients or so on board and scaled dramatically since that point in time. When we look at the industry, there are 191 manual programs out there that we’re aware of. And each one of those has to spend a ridiculous amount of time focusing on compliance. And so they have cannabis banking projects. 90% of our clients are actually cannabis first time businesses. They’ve never even started with a manual program.

Keri Cain, Regent Bank: If I may add on to what Kevin said and as a financial institution that started with semiannual program and then moved to the technology front, we definitely had to slow down in order to speed up. And I highly recommend starting with that technology. We started out manually because I knew this was an area where I needed to bring the board and the executive team along on the journey, so that they can see the benefit of paying for the technology in order to make this industry.

Regents looking ahead

Keri Cain, Regent Bank: We did start out with a small number of clients. Today, we have over 150 licensed entities, and we also bank indirect entities, those that support the cannabis industry, whether you’re a legal firm or CPAs or packaging providers — we have about 200 of those. We’ve got a pretty large program. But we’re just getting started. And I’m excited because I do expect within the year to get to a little over 225 businesses, and then from there, we’ll just get higher and higher each year, no pun intended, again there.

This is definitely an industry that’s growing. In Oklahoma alone, there are over 10,000 business licensed. This is definitely an area where there’s nothing but growth and doing it the right way. And I’m also excited to see what’s coming from the legal and political realm with the SAFE Act and the More Act. I think we’re just gonna see the cannabis industry continue to evolve. It’s always exciting to be on the forefront of something.

First off, anybody can call me, contact me. I’m totally happy to help. But I would say start with your plan in place before you bank any clients. Definitely look at programs like Green Check and get an understanding of all of the regulatory compliance that you have to meet. I unfortunately see a lot of banks get into the cannabis space and then they’re audited, and they get out of the cannabis space. Because, unfortunately, FinCEN requires us to report every 90 days on every single business that you bank. So you’re talking about a lot of reporting, and it’s just way too challenging to do it by hand. And that’s what the technology allows you to do. That would be my key piece of advice.