FINCANN Chief Executive Officer Nathaniel Gurien said he’s always been a risk-taker. At 65, he’s spent most of his career in global consumer electronics commerce. Although the marketplace was hyper-competitive, he succeeded by taking advantage of differences in pricing, distribution, and banking practices in international markets. He also became an active member of national banking compliance and anti-money-laundering trade associations.
Naturally, it seemed like a no-brainer to segue into the cannabis industry with a potential banking solution. He certainly isn’t the first executive looking to tame the banking beast, but he said he thinks his approach is significantly different. Drawing upon what he learned during banking compliance training, Gurien theorized foreign banks might be willing to provide banking services even when American banks were not.
He set about exploring and conducting research and development for a banking and payment solution in late 2015. Then, he spent 2017 building a network of banks, developing and demonstrating a compliant hybrid U.S.-foreign depository solution, test-marketing, and providing consultation to a dozen cannabis clients. Investors were intrigued. By the end of 2017, Gurien felt he had rounded up sufficient infrastructure and financing to launch a new system. FINCANN debuted in January 2018.
“By December of last year, we had sufficient banking bandwidth to go to market,” he said. “So we raised a seed round and launched.”
Gurien said he is bullish on FINCANN’S future because most business owners in the cannabis industry don’t like being told they can’t do something and are smart and resourceful enough to find solutions. In the face of banks’ intransigence, they found ingenious, but risky, workarounds to conduct electronic transactions. When money is involved, though, sometimes the cure can be worse than the disease.
“All these ingenious workarounds ignored a vital compliance component and so constituted de-facto money-laundering, fraud, and non-compliance and were ultimately unsustainable,” Gurien said. “FINCANN is well-advised via its collaboration with industry, government, banking, payment processing, regulatory, law enforcement, and legal professionals. We understand and convey to our clients that the highest standards of compliance and accountability equals the highest sustainability.”
FINCANN takes businesses clients through a number of steps before approval. First, potential clients complete a pre-qualification questionnaire, then FINCANN helps them prepare their bank account application and supporting documents. From there, FINNCANN shepherds the package through the bank’s federally mandated “know-your-customer” (KYC) process and “enhanced due diligence” (EDD) measures, plus a compliance review and physical site inspections. All of the legwork ensures that when a bank approves a new accountholder, the account functions normally and transparently.
When applicable, FINCANN suggests customers also install one or more merchant processing or business-to-business electronic payment solutions to minimize excessive cash transactions. Tethered to a compliant, supervisory bank account, such solutions also become compliant and sustainable.
“There are about a dozen and a half community banks and credit unions around the country known to accept cannabis customers,” Gurien said. “Our clients have engaged us to find banks where there were none. Once established, [the banks] become part of our network.
“We are continuously presenting potentially cannabis-friendly banks with the basic facts about the risks and opportunities of banking the industry,” he continued. “We have demonstrated a working model of our proprietary hybrid U.S.-foreign banking solution and are building out more to fully service our community.”
Most banks still consider cannabis a shady industry like pornography, male enhancement, and online gambling, so they aren’t eager to serve cannabis businesses. Gurien said he’s heard every rationale when making his pitch: the business is too complicated and risky or too expensive, banks might be slapped with criminal charges for aiding and abetting narcotics trafficking, or they could even lose their licenses or Federal Reserve accounts simply for working with a federally illegal industry.
“All of which is, of course, nonsense,” Gurien said.
The simple truth, he pointed out, is both banks and licensees that are committed to the highest levels of transparency, compliance, and accountability have nothing to fear.
Last summer, for example, he proposed to all fifty financial institutions in Nevada that he present to them, without obligation, a concise outline from which to base decisions now and in the future. “Not one of them would take the meeting,” Gurien said. The following September, he made another presentation to a half-dozen leading Nevada bankers and asked how they would handle an existing excellent customer’s request to deposit a new (cannabis licensee) customer’s retainer. In other words, how much of their current overall business portfolio were they risking if they decided against allowing any, even indirect, cannabis proceeds in their banks?
“They now realized that they would have to learn more [about the cannabis industry] ASAP,” Gurien said. “So the challenge is that one is obliged to first change the way they ‘feel’ about the industry and the prospect of banking it before any meaningful dialogue can proceed. And part of that is bringing them to fear the real consequences of not banking the industry more than the perceived consequences of providing accounts.”
FINCANN has grown rapidly. The company now offers legitimate, compliant checking accounts to cannabis licensees and ancillaries who provide goods and services to licensees in all legal states. In sixteen of those states, FINCANN also can facilitate cash deposits. Word is spreading that FINCANN can help.
Recently, one of FINCANN’S clients bid on an exclusive cultivation and research contract in a southern state with a newly authorized medical program and was required to have a local bank commit to providing depository banking. Gurien began working the local angles, provided the bank commitment within a week, and then a week later added a backup for good measure. His client won the contract.
Another Gurien client, a national ancillary goods wholesale distributor with customers across the country, lacked banking and so wished to pay for six-figure orders in cash. Gurien was tasked with finding a local bank that would maintain an account for the company that accepted the six-figure cash payment. He also had to organize due diligence and compliance for the buyers, and arrange local transportation for all that money, and bank the cash for credit to the seller’s account.
“The bank we introduced them to decided a couple months later to exit the cannabis sector,” said Gurien. “The second bank my client was referred to withdrew their willingness to open the account after the Cole memo rescission. Since our hybrid banking solution was operational by then, we were still able to structure a cost-effective global solution for them.”
Of course, many obstacles remain. Gurien knew from the outset that cannabis professionals have been presented with so many banking schemes that FINCANN would have to differentiate itself from the noise. That’s why, pre-launch, he presented FINCANN to industry veterans for review and suggestions. Costs were a big issue, he learned.
“Currently, the cost of obtaining a legitimate cannabis-friendly, transparent checking account for a licensee costs a few thousand dollars up front,” he said. “As much as they need a proper and sustainable bank account, some licensees are initially hesitant to move from their less-expensive but non-compliant banking arrangements. It’s worth noting, however, that these costs will inevitably track downward over the next eighteen months, benefiting from both increasing access to cannabis-friendly financial institutions as well as emerging technology solutions.”
Gurien likes to note that starting a company is like “drinking from a firehose.” But little guys like Gurien have an advantage—for now. It doesn’t appear big banks like Wells Fargo or Bank of America will be pulling the trigger on accepting cannabis accounts anytime soon.
In 2018, Gurien is intent on providing as many cannabis companies with compliant, sustainable bank accounts and merchant processing as possible. In collaboration with a couple dozen happy warrior colleagues doing complementary work, Gurien hopes to make 2018 the year banking and electronic payments are no longer an issue. Meanwhile, he also intends to acquire equity stakes in complimentary verticals: banks, payment processors, compliance software, and blockchain technologies.
“We expect to offer FINCANN branded products and services,” he said. “Entering the public markets for increased liquidity and velocity of capital is under consideration. Clearly customer retention will be important, especially following federal de-scheduling [of cannabis]. We believe implementing best practices in all respects, including customer experience, is a good place to start.”
For more information: FINCANN.com