Worcester Business Journal

10 Worcester Business Journal | November 13, 2023 | wbjournal.com Banking on CHANGE e cannabis industry now has more banking options, but players are hoping for more BY ERIC CASEY WBJ Staff Writer A er a ballot initiative to legalize medical marijuana was approved by Massachusetts voters in the 2012 election, finding a bank that was willing to provide services to a cannabis business was a bit like trying to buy marijuana before it was legal. To put it simply, you had to know someone. Aer the election, It quickly became apparent that the results didn't end the uncertainty and stigma surrounding the substance. Cannabis businesses faced a struggle to find a bank that would be willing to work with a company that sold a federally illegal drug. For years, only a single bank in Massachusetts - Century Bank in Medford - was quietly taking on cannabis clients. Dispensaries that could even find a bank willing to consider taking their money oen faced high monthly fees just for having an account, a side effect of the fact that banks are required to go through the laborious process of filing a suspicious activity report with federal regulators for every marijuana-related deposit. e lack of banking options clearly didn't slow down the cannabis industry. In the years that have followed full legalization, at least 12 Massachusetts-based banks have entered the cannabis space, according to a review of publicly available information conducted by WBJ. Even with the new competition, there's still a lot of cash to go around: Combining both adult use and medical sales, companies sold approximately $152.8 million worth of marijuana this September, according to data provided by the Cannabis Control Commission. Major Improvements ose who have been in the space for a while are not exactly nostalgic about the early days of cannabis banking. Ulysess Youngblood, owner of Major Bloom dispensary in Worcester, remembers having his personal account with a large bank shut down aer using it to fund some expenses while the business was still in its planning stages. Financial institutions who were willing to play ball with marijuana companies weren't being much friendlier. "I remember going to Century Bank and seeing a $5,000 monthly fee," he said. Today, things are a lot different, as banks are actually seeking him out to see if they can obtain his business. "Banks are trying to be innovative now," said Youngblood, noting that his current provider has dropped its fees, "I oen get representatives from other banks hitting me up." Still, things are far from perfect, as federal illegality continues to throw obstacles at the feet of cannabis business owners. Youngblood described the current process that Major Bloom has to go through to deposit cash as "clunky," as it is complicated by the fact that cash- in-transit service providers who are federally insured oen refuse to work with cannabis companies. But even with the headaches, at least operators in the space now have no shortage of local banks who are willing to accept their business. One of the institutions that has jumped into the cannabis space is Marlborough-based Main Street Bank, which has 25-30 cannabis business clients. e bank waited until 2019 to get into the space. Making sure existing customers and employees were comfortable with the move was a key factor, according to Renee Jaworek, vice president of MSB's bank secrecy act department, which handles cannabis transactions. "I think reputational risk was one of the biggest concerns of the board. It was still quiet," she said, "Even when I went to compliance seminars, no bank in the room would raise their hand and say that they were in the cannabis space yet." Entering the sector has led to dealing with business owners who are a bit more eccentric than the average customer. at makes the regulatory burden a bit easier to tolerate, according to Brandon Curran, MSB's vice president of cannabis banking. "I get to deal with a lot more unique, fun people. I get to know someone who's running a cannabis store rather than someone who is a financial advisor on Wall Street," he said. Guidance through compliance Central Massachusetts is also home to the first institution to offer financial services to adult-use cannabis businesses: Lighthouse Biz Solutions, a subsidiary of Gardner's GFA Credit Union. When Century Bank — which has since merged with Boston's Eastern Bank and stopped offering cannabis banking — decided they weren't going to accept clients selling recreational marijuana, GFA saw an opportunity. Being the first mover has allowed the bank to accumulate a large portfolio of cannabis clients, according to Melissa Maranda, president of Lighthouse. e company tries to make banking a straightforward experience for cannabis customers, even if it's anything but that from a compliance perspective. "We do our best to make these accounts feel as normal as we can," she said, "but for our cannabis clients, on the backside, there's nothing normal about them." It's easy to forget that all this economic activity is in direct violation of federal law. "Here in Massachusetts, cannabis is legal and it's no big deal. In reality, you are technically breaking federal law every single day," said Maranda, noting that she receives a few calls a week from people she believes are attempting to use the bank to launder money from the illicit cannabis market or other illegal activities. Banks get creative MSB has worked to find ways to reduce any regulatory burdens on cannabis customers. "at was a big piece when we got PHOTO | MATT WRIGHT Main Street Bank's foray into cannabis is led by Brandon Curran, vice president of cannabis banking, and Renee Jaworek, vice president of the bank secrecy act department.

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