Noah Carey and Bill Erwin are two Chicago entrepreneurs with backgrounds in finance, insurance and risk management. The goal of their company, Shield Compliance, is to offer financial institutions and marijuana businesses the ability to automate their banking regulatory compliance, have transparent record-keeping systems and reduce of the risks associated with working in the marijuana industry. Do you think that their program will be popular among cannabis entrepreneurs?
One of the hardest things for a legal marijuana business to do is open a bank account, because Federal law prohibits it. In Washington state, which will sell about $1B of marijuana this year, just a handful of small banks and credit unions offer banking to cannabis businesses.
Two entrepreneurs in Chicago with backgrounds in finance, insurance and risk management are hoping to change that. Noah Carey and Bill Erwin say the goal of their company, Shield Compliance is to offer banks and cannabis businesses fully automating banking regulatory compliance, transparent connections between all the businesses’ record-keeping systems and the reduction of the risk and worry that come from working in cannabis.
Those risks and worries are very real to entrepreneurs in the industry. Despite Donald Trump’s comments during the campaign that he is in favor of medical marijuana and states’ rights, recent statements by Attorney General Jeff Sessions show the justice department might crack down on legal businesses growing, processing and selling cannabis.
Drawing on experience from the technology and finance sectors, the Shield Compliance founders are asking what a bank needs to feel protected, going into the industry. Chief executive Noah Carey says that his 30 years of financial risk management experience indicate that banks and their customers want to easily track the money flowing through the business, and to meet the strict audit requirements each state has set up for legal marijuana companies.
That’s the goal of the company’s software, called Shield Compliance System.
Using the system, the bank vets their client in the usual way, understanding their cash flow, business plans, management team and all the other information they need to work with them. The Shield Compliance system stores this information. It’s main function however, is to connect the Point of Sale systems (cash registers) to inventory systems to make sure every dollar is accounted for going in and out of the business, and that the proper reports are automatically created to comply with state laws.
Storing both the bank and vendor information in the Shield Compliance system means that If there is an audit, the system contains everything the bank needs, said Carey. If a license or permit is about to expire, the Shield system reminds the customer to get it renewed. If a financial error or alert pops up in the system, the bank and customer can communicate about it via a chat box that pops up.
Biggest opportunity for the company? No one has solved the banking challenge of cannabis companies yet. “We’re working to reduce the risk for banks to get into the industry and saving them time by automating the actions they have to take to manage the relationship,” said Carey. If banks adopt the software and Shield Compliance gains first mover advantage in the market, the upside would be sizable.
Biggest risk? Jeff Sessions could direct the department of justice to attack the industry, or at the very least, the political and legal climate will continue to keep banks from entering the marketplace.
Just one bank in Chicago is using the Shield Compliance system so far but the company is working with others who may adopt the system. As is the norm in the industry, banks working with marijuana-related companies don’t want their names publicized however. “Reputation is everything” in the banking world, said Carey, “and banks are not ready to say they are in the cannabis business.” Soon he hopes, that could change.