Robbie Guard sees a green opportunity in Missouri’s newest industry — medical marijuana.

He runs the Cape Girardeau office for MRV Banks. The 13-year-old institution has just three locations along the Missouri side of the Mississippi River. 

As a relatively young bank with a small footprint, it struggles to bring in new accounts. Guard hopes the newly legal medical marijuana industry will change that. 

“Since they are considered unbankable by many banks, it does create a supply and demand, and therefore there is some revenue to be made,” he said.

Aside from MRV Banks, it’s hard to know exactly where marijuana-related businesses across the state will put their money. Most banks are staying quiet about their interest.

That’s because marijuana is still federally illegal, and Missouri banks are federally insured. The contradiction between laws leaves it up to banks to decide whether the risk is worth the reward.

Looking for guidance

Banks are in the business of making money, and the medical marijuana industry is expected to generate a lot of it. The Missouri Cannabis Industry Association anticipates it will grow into a $480 million-a-year industry.

But banks also don’t like risk, and the marijuana industry — which operates largely in cash — is considered high risk. That’s why many banks are reaching out to the state for guidance.

Dave Doering, chief examiner at the Missouri Division of Finance, said he’s been hearing from banks interested in the new market since November 2018, when voters approved a constitutional amendment legalizing medical marijuana. 

Doering, who was serving as acting commissioner of the division when interviewed for this story, said the big problem for banks is that marijuana is still federally classified as an illegal drug.

“From a state’s perspective, there’s not a whole lot we can do about what’s required on the federal level, and that’s where our banks are running into trouble,” he said. 

Doering said the federal government needs to pass safe harbour protections for bankers. 

Congress is considering such a measure, but momentum has stalled in recent months.

Max Cook, president and CEO of the Missouri Bankers Association, is also fielding calls from bankers. He said he doesn’t advise them whether to pursue the business or not; he tells banks to do their homework.

“The risk is it’s against the law, plain and simple,” he said. 

“Those who have chosen to put blinders on and engage at some level are running the risk of federal regulators, federal prosecutors — any number of agencies — saying, ‘All right, enough’s enough. We’re cracking down,’” he said.

Cook said he doesn’t think that will happen, but the uncertainty is enough for most banks to hold off until the federal government provides clearer guidelines.

For now, he said interest in banking marijuana-related businesses “seems to be fairly low.”

But that will likely change over time. In some of the 32 other states with legal medical marijuana markets, banks have had years to figure out how to do it.

Across the country, more than 550 banks and 150 credit unions currently bank the marijuana industry, according to the U.S. Treasury Department’s Financial Crimes Enforcement Network. 

Lots of requirements

For bankers considering serving the new medical marijuana market, there are lots of concerns: What will our shareholders think? Will it alienate other customers?

But Julie Stackhouse, executive vice president of the Federal Reserve Bank of St. Louis, said the biggest worry she hears about is whether banks can meet all the requirements.

“The marijuana business is a heavily cash business, and banks know that as they look at banking the business they will have very heightened requirements under the Bank Secrecy Act and anti-money laundering,” she said.

Stackhouse, who is also the Fed’s managing officer of supervision, credit, community development and learning innovation, said cash businesses can be a front for illegal ones if they’re not properly managed.

She said the Fed is one of several regulators that review banks’ processes for high-risk accounts, like those in the marijuana industry.

That means banks hoping to get in on the green have to keep a close eye on marijuana-related businesses. 

They’re responsible for making sure businesses have state licenses, knowing the kinds of customers they serve and tracking their activity to make sure revenue is legitimate.

Whether banks suspect irregular activity or not, they must routinely file suspicious activity reports to the Financial Crimes Enforcement Network. 

The added paperwork is a time-consuming and expensive process, which weeds out some banks. 

Assessing risks vs. rewards 

As banks scramble to figure out how to bank marijuana-related businesses in the Show-Me State, they need help.

That’s where consultants like Stan Rubbelke come in. He works for cannabis consulting firm Avenir, which assists banks in figuring out whether getting into the new industry is worth it. 

“The doctors who certify the patients — do you want to continue to bank them? The landlord that provides the dispensary location, the employees who are getting paid by a legal Missouri business — do you want to bank them?” he said. “These are all things that a bank should be thinking about right now.”

They also have to think about the cost of opening highly monitored accounts, which could mean hiring more people or buying software to streamline the process.

With all the risks, banks aren’t being vocal about their interest in the medical marijuana industry. Rubbelke said that’s a good thing; there’s not much to gain from going public.

Guard, of MRV Banks, said he does have concerns about planting his flag in the ground around medical marijuana. He doesn’t want to hurt the reputation of his small-town bank.

“There still is a stigma about medical marijuana and marijuana in general, but this is something that’s going to be legal in the state of Missouri,” he said.

Ultimately, Guard hopes taking the risk will help his bank stand out.

Missouri’s Department of Health and Senior Services has already issued some licenses for marijuana cultivation and transportation. More are expected for dispensaries by the end of the month.