BUSINESS , CANNABIS POLICY , MARIJUANA LAW Interview: Answers on Cannabis Banking and Payment Processing with PayQwick

One of the biggest issues looming over Cannabis Businesses in California and throughout the legal areas of the country is banking. Since the Federal Government has not moved to pass one of the many bills on the floor that removes Cannabis from the CSA (Controlled Substance Act) and decriminalizes it, financial institutions still block all aspects of Cannabis Banking. However, a state-wide cannabis banking bill is still alive and has some potential to be passed into law. While we wait on that decision though, compliant businesses and the Bureau of Cannabis Control are in a flux over how this legal industry can function in a cash-based ecosystem. To get some insight on the subject, I spoke with Ken Berke, the co-founder of the Cannabis Payment Processing firm PayQwick.

Below we discuss PayQwick, Banking Regulations, Payment Processing, the new Cannabis Banking Bill in Sacramento and a quick tip on banking compliance.

1) What got you into the Payment Processing World with PayQwick?

PayQwick was co-founded by myself and Keith Marks. I was a corporate transactional, real estate and compliance attorney for 28 years before co-founding PayQwick. Mr. Marks, who also is an attorney, has more than 30 years’ experience in real estate, corporate finance, and restructuring. Over his career, Mr. Marks has completed in excess of 500 transactions valued at more than $6.5 billion.

Mr. Marks and I began looking into the cannabis industry 8 years ago. We were initially struck by the profound medical benefits cannabis provided. Cannabis was truly a miracle drug for epilepsy, grand mal seizures, PTSD, insomnia, pain relief and a host of other medical conditions. Believing in the benefits of the plant, we decided to get involved in the cannabis industry.

It soon became clear that one of the biggest “pain points” was the lack of access to banking and other financial services. There was just no legal way for any financial institution to serve the cannabis industry. Over time, the Cole Memos and the FinCEN guidance were created. Then, using our legal backgrounds, we realized we could provide financial services to cannabis businesses if we built a compliance-based electronic payment hub that went in line with the Cole Memo, the FinCEN Guidance, the Bank Secrecy Act and state law.

2) Why did you choose to focus on Cannabis Banking for PayQwick? Did this idea spawn from your history of Cannabis Banking Advocacy?

Having embraced the medical benefits of cannabis, we needed to focus on the “pain points” faced by cannabis businesses and the things that were preventing the normalization of the cannabis industry. We realized that the cannabis industry would never “normalize” if it was forced to deal only in cash. Moreover, we knew that handling large amounts of cash would create substantial risks of violent crime. Therefore, we chose to focus on cannabis banking to make our communities safer and empower cannabis businesses to operate like any other business.

3) Why can PayQwick safely and securely accept Cannabis Transactions, but other banks and platforms cannot?

PayQwick is a compliance-based electronic payment hub. The key terms here are “compliance- based.” PayQwick has the most robust BSA/AML Compliance Program in the country specifically tailored to the cannabis industry. BSA/AML stands for Bank Secrecy Act and Anti Money Laundering. It’s our compliance programs that empower us to handle cannabis transactions.

4) What convinced your Banking Partners to work with your company in this venture?

Our banking partners have told us how impressed they are with our compliance programs and our focus on compliance. Moreover, by working with PayQwick, our banking partners are able to more efficiently and effectively satisfy their own BSA/AML compliance obligations when serving their cannabis clients.

5) What is the biggest fear and obstacle for Cannabis Banking?

The biggest fear and obstacle for cannabis banking is the entry into the industry of “fly-by-night” operators who are looking to make a quick buck in the cannabis industry and then disappear. We’ve seen a number of them already and often have to explain why PayQwick is different. Because it is difficult for cannabis businesses to distinguish the legitimate players from the scam artists in the cannabis banking space and because they’ve already been approached so many by scam artists, it takes longer for PayQwick to prove it is a legitimate, long-term player in the cannabis space.

6) Senate Bill 930 for Cannabis Banking has passed in the Senate and is circulating the Assembly floor as we speak. Do you think this bill will be good for California and the Cannabis Market?

Yes, I think the bill is good for California. For maximum functionality and usefulness, however, it would be best if the SB930 system is connected to the federal banking system. Here’s why. Suppose a business with an account in the SB930 system receives a check from a business that is not a part of the SB930 system. If the SB930 system cannot accept that check for deposit, the broad appeal of the SB930 system is greatly reduced. Similarly, a check written by a business with an account in the SB930 system cannot be deposited by a business that does not have an account in the SB930 system. So, while a state’s creation of the SB930 system is certainly a step in the right direction, the best solution is where the SB930 system or any similar closed-loop system is connected to the federal banking system.

7) Do you think banks will be interested in business loans for Cannabis Companies if the bill passes?

I don’t think SB930 will have an impact on whether banks decide to make loans to cannabis businesses.

8) What’s the future of Cannabis Banking and how do you think it will evolve?

Cannabis banking will continue to slowly evolve. The compliance burdens faced by financial institutions serving the cannabis industry are significant, so banking cannabis is not right for every financial institution. Moreover, while a bank cannot “outsource” its compliance obligations, it certainly can lessen its compliance burdens and risks by requiring its cannabis clients to have a PayQwick account. That way, the bank knows another company (PayQwick) is conducting Know Your Customer due diligence, expanded transaction due diligence and has implemented anti-money laundering controls with regard to the bank’s cannabis clients.

9) What’s next for PayQwick?

PayQwick is expanding to every state that has legalized medicinal or adult-use cannabis. We expect to be operating in 8 states by the end of 2018 / 1Q2019 including, California, Washington, Oregon, Alaska, Arizona, Nevada, Michigan, and Massachusetts.

10) Do you have some quick Banking or Compliance tips for our viewers?

Yes. This could be an entire podcast session by itself. To summarize, cannabis businesses must be open, honest and transparent with their banker, and never surprise their banker. Show your banker how important compliance is to your cannabis business, both in theory and more importantly, in practice.

We are all hopeful that Cannabis Banking Bill SB-930 gets passed through so compliant businesses can finally get away from a cash-based market. That aspect alone will help to legitimize companies and be a great leap forward in overall acceptance since stigma is the biggest adversary in our industry. However, while we wait on that decision, Cannabis Businesses can work with compliant payment processing solutions like PayQwick to help move towards a cashless market.