A swift bank teller might count cannabis-industry cash at 120 bills a minute. An electronic smart safe from San Francisco-based Union Bank hooked to a high-capacity feeder gobbles 800 bank notes a minute. In 20s, that amounts to $16,000 a minute or nearly $1 million an hour.
Counting cash fast matters, now that cannabis is legal for adult use in California and local and state government agencies will collect millions of dollars in taxes on a multibillion-dollar industry. Santa Rosa sits at the heart of CannaCom Valley, the North Bay’s emerging home for cannabis commerce.
CannaCom Valley business leaders and government officials in the Cannabis Banking Working Group met on May 4 in Santa Rosa to hear from banking executives and entrepreneurs how to manage cannabis cash. It’s a complex problem that makes bankers cringe as they contemplate huge business potential along with possible technology solutions.
The group was organized by John Chiang, California’s treasurer. Because cannabis remains illegal under the federal Controlled Substances Act, most bankers refuse cannabis cash as if it were toxic. A bank that accepts deposits of huge wads of cash inevitably draws scrutiny from federal regulators eager to shut down money laundering or other financial crime.
Union Bank, with headquarters in San Francisco and North Bay branches in Sonoma, Mill Valley, San Rafael, Tiburon and Vallejo, sees a high-tech way to bank cannabis revenue with smart safes, said Jay Goldstone, managing director of public finance. The bank has about 400 branches in California, Oregon and Washington, states where voters approved legal medicinal and adult-use cannabis. Union Bank is owned by Bank of Tokyo-Mitsubishi UFJ.
Union Bank initially rejected any connection to the cannabis industry. Then the bank explored “smart safes” from outside vendors that provide an electronic safe on the premises of a tax-collection agency or dispensary.
SUPERIORITY OF SMART SAFES TO TELLERS
A smart safe reports deposits in detail and can connect to smartphones, said Steven Wildemuth, Union Bank’s managing director of payable and receivable products, and validates U.S. currency. The safes were developed to manage cash at food companies and gas stations.
Cash stored in safes is picked up by an armored-transport company such as GardaWorld, Loomis, Brink’s or Dunbar. Dispensary employees would have no access to the safe. Only transport-company employees can open it. Daily deposits are credited on the day of deposit to a checking account in the bank.
“It reduces internal theft,” Goldstone said.
The bank is working with clients in southern California to set up the system, he said.
A smart safe, compared with a human teller, counts faster and validates the authenticity of each bill to detect counterfeits. Bills go into 1,200-note cassettes that each hold about $20,000. Smart safes, with steel walls a quarter-inch thick, can be bolted to a cannabis-dispensary floor.
Texas-based Tidel makes smart safes. Tidel started as part of Dallas-based Southland Corporation, which operated 7-Eleven stores. The chain is now owned by Seven & I Holdings Co. in Tokyo.
BANKERS WORRY ABOUT CANNABIS CONNECTION
While Union Bank considers technology to handle cannabis cash, some bankers worry about any cannabis connection.
James Brush is CEO and president of Santa Rosa-based Summit State Bank, with branches in Santa Rosa, Petaluma, Rohnert Park and Healdsburg, and assets of nearly half a billion dollars.
Read other coverage of North Coast cannabis commerce: nbbj.news/cannabis