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Good morning, everyone. Thank you for joining us this morning.

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Well, good morning. Welcome, members of the

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public media and those of you who are representing financial institutions, the cannabis industry,

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and public agencies. I am John Chung. I am the state treasurer, and I'm going to introduce

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Tim Schaefer, my senior deputy, for a few remarks housekeeping matters. Okay, thank you, treasurer.

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We have a, we have a full house today and just want to let everybody know that there is an overflow room.

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If you go out the door here, my colleague Blake Johnson, who's got his hand up, will direct you to the overflow room, which is just a couple of doors down the hallway.

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And that will save the standing room only.

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Second thing is, if this is like church, so we're going to request that everybody's silence your cell phones, please, so that we're not interrupted by the chirping and chiming of the latest tweet.

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And then finally, finally, the treasure will introduce members of his staff to pick up speaker slips.

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He'll do that periodically throughout the proceedings this morning, but if you would just make sure that you, if you have a wish to be heard, please identify yourself to someone on the staff and they'll get you a speaker slip and we'll get that underway.

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And I think that's all the housekeeping that we have at this point. Did I miss anything? I miss anything? I think we're good. Okay, Mr. Treasurer, there you go.

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Thank you, Tim.

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I also want to extend a warm welcome to each of you who may be joining us via live video,

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a streaming.

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And thank you for all participating in this cannabis banking working group.

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This is our second meeting of this group.

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I want to first encourage all of you to stay involved.

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This is a difficult challenging but critical issue.

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And so the greater input that we gather from all of you, the better the decision making that

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this body can come to.

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What we are learning will help our 16 person panel develop the recommendations at the end of these series of meetings on how to provide banking services to the newly legalized cannabis industry.

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We have much to accomplish and as I mentioned the task is not easy.

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Let us take a moment to orient us all and remind everyone of the mission of this working group.

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On November 8, California voters pass Proposition 64 and legalize the recreational use of cannabis.

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The legal sale of cannabis for recreational use is officially scheduled to start on January 1, 2018.

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Between now and that date, we will be delving into depth into the problem posed by what we might describe as a potentially significant disconnect between federal policy and the will of California voters.

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The crux of the problem is that the federal government continues to regulate cannabis as an illegal schedule one controlled substance drug.

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while dozens of states have moved to decriminalize its use for medical use, recreational use, or both.

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Now, one of the unique features of constitutional law is a recognition that individual states may engage in just such social and economic experiments as this,

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independent of the nation as a whole. That much is clear. However, the independence of a state is not absolute in such cases.

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The United States Constitution contains a supremacy clause that holds federal law is the

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supreme law of the land.

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This supremacy clause may be invoked by the federal government to trump state law.

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Legal scholars, however, note that the supremacy clause is not always so easy to successfully

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apply.

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I mentioned this this morning to acknowledge that the supremacy clause is out there, however,

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However, covering as we were deliberating over our considerations.

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We do not need to be entangled in or sidetracked by this concern at this particular point in time.

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But we do need to understand the effect of it.

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The disconnection between Washington and the states has existed since voters here passed the first medical marijuana law two decades ago.

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ago. These initiatives combine now with California's and a handful of other states that produce

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a situation in which possession, cultivation, or distribution of marijuana remains a

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federal crime, yet the same acts are legal under state law, which brings us to the present

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state of affairs and the urgent questions we are ourselves facing. People working in the cannabis

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this industry may be considered violators

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of the Federal Control Substances Act.

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This worries banks.

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Banks are answerable to the federal government

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in a variety of ways.

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The Obama administration attempted to call

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these worries by issuing the so-called

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coal memoranda and other guidance.

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The coal memoranda said the federal government's

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enforcement priorities should probably not include

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the prosecution of those engaged in marijuana activities

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as long as those activities were in compliance with individual state laws.

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This meeting example of prosecutorial discretion, however, did not provide this

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necessary certainty for financial institutions to serve the cannabis industry.

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Furthermore, such memorandum could be quickly curtailed in a hard line on cannabis

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reinstated by the incoming Trump administration and the Attorney General and the

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Attorney General Jeff Sessions.

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So there in short you have a summary of what has been brought to us here in Los Angeles today for the second in our series of meetings on this social and economic issue of great import to our state.

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Today we welcome and we will hear from Professor Julie Anderson Hill of the University of Alabama School of Law who will walk us through the federal state disconnect as well as the federal efforts under the prior administration that aim to provide us with guidance and where we stand now.

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Now, with the Professor's help, we will hope to clarify what the supremacy issue is important

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to us in our ongoing discussions.

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We will also hear from the Director of the Washington State Licker and Cannabis Board

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which permits the state to retain significant control over its marijuana industry.

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As a result of their regulatory scheme, the Board is performing a level of due diligence that

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I can give a financial institution needed reassurances

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that it knows its customer.

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And I use that in quotes, right, because it's an important

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legal provision.

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In addition, we will learn from a representative

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of from the Oregon Treasury.

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At our first meeting, this working group heard

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from the cannabis industry, financial institutions,

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and public agencies about problems created by federal law

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that maintains use of legal cannabis is a crime. Test the money from our

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working group members, panelists, and public comment provided vivid details

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about the real impacts resulting from that conflict. It is clear to me there is

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great urgency to the work that we are doing. As chair of this working group I want

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to begin by addressing our expectations for our meeting today and to detail how

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our state is recommending how we proceed.

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Before we begin, I will call on the members of the working group, asking them to briefly

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introduce themselves.

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Then I will describe for members of the public how to ensure that you are heard today

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and the process that we will be following during the public comment period that comes in

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the afternoon.

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I hope you can move risk-like through these matters, after which we will get down to our

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Our main business of defining the banking industries that they industry, financial institutions

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and public agencies are grappling with.

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We will also cover legal hurdles to finding a solution to these problems and

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discuss what Oregon, Washington, and other states are doing to address these problems.

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At the conclusion of the public comment, I will offer if you closing remarks and

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at that time, working group members may also wish to offer their concluding thoughts.

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We have specifically reserved time for this discussion.

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Now, assuming we keep everything on schedule, staff assures me that we can finish by approximately 1 p.m.

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Now, speaking of staff, could all the staff members supporting the cannabis banking work and group please stand up so that you can be acknowledged?

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Anyone with a suggestion, idea or complaint, especially complaints, please see one of these individuals.

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Tim Schaefer, to my right, Mark Lipscher, my chief of staff, Colin Lung, Martina Sin, next on his right, Vanessa from our lead shop.

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We have Robbie from our Southern California office.

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I know Audrey, somewhere in shop and a whole host of others.

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At this point, I want to invite the members of the working group to please identify themselves and

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briefly tell us a little bit about who you are.

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I am going to suggest that we go alphabetically, and if you don't mind,

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We will start with Laurie Ajax, Laurie.

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Good morning.

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I'm Laurie Ajax.

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I'm the chief of the Bureau of Medical Cannabis Regulation, and I'm happy to be part

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of the working group.

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Thank you.

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Thanks, Laurie.

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Alex.

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Good morning.

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My name is Alex Allenese.

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I'm the vice president of government relations with the California Bankers Association.

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Thank you, Alex.

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Hezekiah.

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Good morning, folks.

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My name is Hezekiah Allen.

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I'm the executive director of the California Growers Association.

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Thank you.

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Matt.

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Good morning, Matt Cate, I'm the executive director of the California State Association of Counties.

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We represent all 58 counties in the state.

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Thanks, Tim.

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Tim, come on down on behalf of the League of California cities.

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We represent about 90% of the 400 and 82 cities in California.

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Tim, David?

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All right.

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Who am I on?

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David Hanescock representing the California Community Banking Network.

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We represent community banks of California.

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Patrick? Patrick Kenting Director the employment development department for the largest tax collector

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in the state for employment. Courtney? Courtney Jensen with the California Credit Union League

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and the Vice President of State government affairs. Kursheed? Kursheed Co. General Counsel with the

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California Canada Business Administration and Board Member of CCIA and the National

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from Canada's Institute Association.

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Thank you.

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Selvi?

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Selvi Stanislaus from the franchise fax board.

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We are pleased to be part of this working group

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and this very important discussion.

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Thank you.

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Thank you Selvi.

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Jennifer?

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Good morning, everyone.

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I'm Jennifer Lee from the California Attorney General's office.

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Thank you Jennifer.

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Fiona?

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Fiona Ma, Chairwoman of the State Board of Equalization,

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representing District 2, 23 counties from the Oregon border

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to Santa Barbara.

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Nicole?

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Good morning.

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My name is Nicole Howell.

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I am a cannabis business attorney, my firm Clark Burt focuses on representing the industry

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throughout the state.

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Thank you.

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Jan?

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Good morning, Jan O. and Commissioner for the California Department of Business Oversight.

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We are the Banking Credit Union Regulator for State Chartered Institutions.

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And Peter,

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perhaps I'll join us later.

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So our first meeting was focused primarily on one question.

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What impact has the lack of banking access had on your group organization or industry?

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Today, I would like our group to begin our conversation by briefly revisiting that question.

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I would then like us to take a deeper dive into the legal challenges we face in providing banking services to Canvas businesses.

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We are fortunate to have with us today a professor of law who has published an important paper that sheds light on these very matters.

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I want to use those challenges to guide our efforts in identifying solutions.

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We cannot survive that solutions without first understanding the problems.

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I would like to take this opportunity to remind the working group and the public that

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the purpose of this working group is not to address licensing issues.

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We are not here to consider IRS taxation issues.

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We are not here to discuss public safety or policing issues, while those matters are not irrelevant

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and to our efforts, what we are here to do is to gain an understanding of how to effectively

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align things to do so that the cannabis industry may fully avail itself of baking services

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every other business in California enjoys. That's the mission of this working group.

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If you're following along with this agenda, I'm alerting you to my jumping down to the item

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described as public comment. I want to give you early instructions. If you wish to make

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Make a comment, we request, as I mentioned earlier, that you fill out the speaker request

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form.

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You should have been offered as you entered today.

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Please be sure to include your name, your organization, as well as your contact information.

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This information will aid our working group.

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As we will revisit those comments and ideas expressed here today, it is the thought of our meeting

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that we want to make sure that we proceed to this afternoon smoothly.

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Now, what's within the comment period opens this afternoon?

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I will call speakers up in groups of three.

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Also, if your comment has already been covered by another speaker,

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we will ask that you help use all of our time efficiently

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and for goal repeating that point.

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But feel free to come forward

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and let us know you agree with a previous comment.

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With time management in mind,

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I encourage those of you who believe you have solutions

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that address some of the problems

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we have already identified

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to send your thoughts in writing to me or my staff.

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At this point, I want to make sure

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that we get started in earnest.

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I will begin with our first panel.

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Today we have local representatives of the cannabis industry and government.

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Together they can provide personal testimony as to how they have been impacted by the

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problems in the banking legal cannabis revenue.

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Thank you all for your participation.

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If you could please begin by introducing yourselves, the organizations that you represent and identify

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by how you and your organization has been impacted

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by the current state of banking cannabis.

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Hi, my name is Donnie Anderson.

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I am the founder of California Minority Alliance,

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and we have two pre-ICO dispensaries.

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My name is Jared Kylo,

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I'm the president of the UCBA,

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which is the United Cannabis Business Alliance,

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we're a trade association here in Los Angeles.

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I'm also an owner of a project.

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Thank you.

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Thank you. Thank you for having us. Good. Don't you want to see? Yes. We need banking. Really bad. We had a major break in at our dispensary. This was about a week ago.

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Well, probably about $6,000 in damages, it was just fortunate that our dispensary repurchase

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we purchased it from a former NYX checkhassing.

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So it was well secured, but the sheriffs came and our community scared them off, but these

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are the problems that we have and that we need to fix with financing and banking and as

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well as making sure that we can have banking for people that's trying to get in from the

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small business side from loans as well.

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So, you know, this is concerns in my community.

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In my community, you know, we're dealing with a lot of issues.

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And one of the issues is people want to learn and find out

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about the industry, but banking will fix a lot of it

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when it comes to being able to put barriers

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where people can have financial, you know,

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what word I'm looking for is,

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We can have assurance from the banking side because dealing with a lot of cash is rough when you're dealing with cash is very rough

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So you're gonna elaborate a little bit more about that rough?

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Yes, okay, let me explain to you one of our managers got robbed coming out of our shop one day

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And it was just so happy. It was blessing that our neighbors and our community came out and they didn't get nothing.

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But these are the things that we have to deal with. One of the main things is with security.

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You can't have a security guard in your shop. You have to have them on the outside. So he can't be armed.

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So we need to have some things fixed with this in the cannabis industry because we need to be looked at the same as alcohol liquor or any of the things, so you know.

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Yeah, thank you.

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Any other comments?

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I see for now.

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Thank you.

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Jared?

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00:17:37,460 --> 00:17:41,200
Well, I'm long-winded, so hopefully I won't go too far.

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I wanted to make aware that we here in Los Angeles had passed a proposition D about three

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years ago with about 64% of the voters voting for it.

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What that did is that reduced the number of collectives here that were operating down

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to 135 and changed the tax base.

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And I wanted to make sure that the reason why Prop D now isn't going to be really put into

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the state MCRSA laws is because of the semantic words of limitly immune. Prop D gave limited

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immunity to these shops in Los Angeles and MCRSA laws really only give permits to local

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permit or license dispensaries. So the reason why our trade association was formed was

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to make sure that we could go to the city of Los Angeles and back to the voters to make sure

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that we got rid of that semantic word of just limitly immune and put either license or permitted

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so that we could move into the MCRSA laws.

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But in doing that, trying to run a campaign became a serious issue because all money that

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goes towards campaign contributions must go through a bank account.

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Now, trying to have all of the members of my UCBA now pull into their personal bank accounts

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to try to pay for campaign contributions, created an increasing hardship, which is a barrier

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to entry from a lot of these cannabis groups that really are trying to make political movements.

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But they are forced out of the political movements due to the fact of the lack of banking.

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Now we have been working with the Office of Finance here in Los Angeles in a very close

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relationship.

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It's nice to have people in government look at our industry not only as an emerging industry

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but also as an existing business structure.

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Right now, the city of Los Angeles charges a 6% gross tax receipts, which now is put

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on top of the Board of Equalizations 9% sales tax.

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Now we've been working really closely with the Board of Equalization, which allows us

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to pay in cash, allows us to pay monthly payments.

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But local ordinances and local taxes sometimes are paid in full the year previous.

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So we've been working with the office to finance, trying to find solutions to the problems

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of having the kind of tax payments that are due that like to make a comparison to a retail

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shop.

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A retail shop like Macy's pays a .0127% tax here in Los Angeles where prop D shops are paying

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a 6% tax.

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Now to compare those, I will be open.

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I had $4 million in gross tax receipts.

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I have a $220,000 tax due at February 28th.

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Now if Macy's was to have the same tax liability, they would have to have $188 million in gross

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tax receipts as well and pay the same taxes due on February 28th.

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This is a huge hardship for the marijuana industry to not only pay excise taxes at a local level

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up front before they've even earned the money, and you're asking us to keep this cash in

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our vault, which Donnie had made a very clear statement that if that cash was left there

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to pay taxes at the beginning of the year, that might have been a loss.

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It's also a place where crime can start to like focus their attention, knowing that near

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the beginning of February 28th, when taxes are due, that we would have a large sum of cash

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on our site.

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So these are some of the problems we're dealing with even trying to pay our taxes.

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Now, we also run into problems when we try to pay our legal representatives.

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We pay them in cash.

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Now, they are losing their bank accounts.

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We also are having bank accounts shut down for contractors, electricians, that lay,

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security companies, bookkeepers, our tax attorneys, and all these services are necessary to run

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a business.

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And even more important to run a business that's going to be in this new era of regulations

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and to have all these supporting staff is going to be more than necessary to be in compliance

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with all the new rules and regulations.

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We have to find a way to be able to pay our supporting business people to be able to support our businesses.

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And in 15 years being in this industry, I've had eight bank accounts, I've been, I've had to move my bank account eight times.

302
00:21:56,360 --> 00:22:01,600
The last time I moved my bank account, we had 53 employees lose their Kaiser insurance.

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Now, this wasn't just employees, this was the owners of the business, this was the managers of the business,

304
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These were the vendors, and these were all the employees, having that lack of banking really created a hardship on everyone who now had to kind of maneuver back into the covered California system, and then all of a sudden we weren't in the bandwidth of November through January to be able to jump into it.

305
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And now we're looking at more of these kind of hardships.

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00:22:27,680 --> 00:22:32,680
Okay, so after these 15 years that have been in business, I've never been able to work

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00:22:32,680 --> 00:22:36,900
with a credit card company before, mostly because we've never really seen a really good

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00:22:36,900 --> 00:22:37,940
closed loop system.

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00:22:38,420 --> 00:22:44,000
Every time they're being put to the test, it seems like there is some flaws to be the true

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answer to digital banking.

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00:22:46,960 --> 00:22:52,120
For the first time in these 15 years, I finally see one company that I've been working with

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00:22:52,120 --> 00:22:56,920
called links. They've been working in Colorado for well over a year doing beta testing on a closed

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loop system. I've had them in my dispensary now for four months. The reason why I bring this up

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is because they have taken close to 20% of my cash business into digital money. Now that 20% will

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now be able to give me the opportunity to be able to pay taxes, pay my employees and pay for insurance.

316
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And I know these are trying to look for answers to this. They just so happen to be a part of a gift

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00:23:18,760 --> 00:23:25,120
card transaction, which does about a trillion dollars a year in transactions, and these gift cards

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00:23:25,120 --> 00:23:29,820
are allowing the banks to be able to see who is purchasing a gift card, but they don't care what

319
00:23:29,820 --> 00:23:35,880
you pay, what you purchase with your gift card. Been a very big help to me in my shop and trying

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to pass this along to the rest of my UCBA members. Now, we all know that we have a huge, we don't have

321
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But what I do in my shop is I post my taxes on a poster in the front of my window so every person in my community as well as all of my patients see exactly what I pay in taxes so they can see the contribution.

322
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I make not only to the city of Los Angeles, the state, but also to my local community.

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I think this is a good way to show a lot of the people who maybe not understand this industry and how much contribution we really do make.

324
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But when you see the disparity between a macy's needing to have $188 million in sales, and we pay the same taxes, I look at my local businesses, I spend, I pay more taxes than the 20 surrounding small businesses to just my one shop.

325
00:24:28,360 --> 00:24:38,200
So if we are not going to find this way of helping us with banking, you're now giving all of these other businesses an unfair advantage over the marijuana industry trying to move into the light.

326
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And if you continue to, I don't mean you, if the industry continues to kind of push us to the brink of where we have to come up with large sums of cash at the beginning of the month to pay local taxes, we really are kind of running into this problem of where we storing all of this cash who's helping us protect it.

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And I know that we're here to try to find these answers.

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But we're also looking at access to capital, like as an industry, if all we have are written

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00:25:06,700 --> 00:25:12,040
receipts, it's hard to go to a bank, well, impossible to go to a bank and get a small

330
00:25:12,040 --> 00:25:16,680
business loan to expand your business, to find ways to renovate.

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00:25:17,040 --> 00:25:21,580
And these are also problems because if we want to look and are a big part of this community,

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00:25:21,860 --> 00:25:25,440
we need to be able to show the community that we're rooted there, we're willing to put

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00:25:25,440 --> 00:25:32,580
up, you know, good renovations to show the community how well we want to represent ourselves.

334
00:25:33,140 --> 00:25:37,000
So I want to thank this group for coming together.

335
00:25:37,340 --> 00:25:43,580
I know that we're just dealing with MCRSA laws, but Prop 64 is also going to exacerbate

336
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the problems for the need for banking because the growing volume of cash here is going to

337
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continue to be a problem.

338
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And I think we are all here to try to find some answers.

339
00:25:53,360 --> 00:25:57,140
thank you again for providing me an opportunity to speak today. Thank you very much.

340
00:25:57,380 --> 00:26:00,900
Thank you very much. And then I just noticed a couple more staff people that you can also reach out to.

341
00:26:01,000 --> 00:26:03,920
So Eric, if you raise your hand and like and Andrew.

342
00:26:05,100 --> 00:26:05,640
Thank you.

343
00:26:05,860 --> 00:26:06,140
Yeah.

344
00:26:06,820 --> 00:26:07,300
Thank you, Jared.

345
00:26:07,620 --> 00:26:07,920
Todd again.

346
00:26:08,400 --> 00:26:08,580
Thank you.

347
00:26:11,420 --> 00:26:17,580
So just for the record, I just want to start out by saying that with my colleagues here, I am not an expert on marijuana.

348
00:26:19,340 --> 00:26:23,680
I'm, as you heard, deputy treasurer for the city of Los Angeles.

349
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My office, the city finance office, is essentially the treasurer tax collector of the city.

350
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So, of course, primarily oversee the treasurer and

351
00:26:32,960 --> 00:26:38,240
cashiering functions of the operation, and actually been in this role less than a year.

352
00:26:39,160 --> 00:26:42,660
But, and so my experience might be a little bit different than some others, but

353
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I'm going to talk to you a little bit about the thought process that I've gone through.

354
00:26:46,840 --> 00:26:52,140
that our office has gone through in terms of the perspective of cash acceptance from the

355
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marijuana industry in particular.

356
00:26:54,440 --> 00:27:00,240
So upon arriving about a year ago, I began doing what any newly arrived finance professional

357
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would do.

358
00:27:00,860 --> 00:27:05,500
I started reviewing operations with an outside vent and one of the areas that identified

359
00:27:06,000 --> 00:27:07,540
if need was cash acceptance.

360
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Not so much for the concern of the improper handling of cash but the inefficiency that we had.

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00:27:13,460 --> 00:27:18,380
So we had controls that have been in place for probably 10 plus years and they were working

362
00:27:18,380 --> 00:27:22,560
but failed to recognize a lot of advances in cash handling and equipment and practices

363
00:27:23,160 --> 00:27:24,520
and thus was highly inefficient.

364
00:27:25,140 --> 00:27:29,580
So we've said about educating our staff, reviewing our options, procuring equipment, adopting

365
00:27:29,580 --> 00:27:33,980
new procedures and of course with government processes this does take a little time to ramp

366
00:27:33,980 --> 00:27:36,100
up to but we're well underway at this point.

367
00:27:36,100 --> 00:27:43,080
So, in terms of what this has to do with marijuana, our office collects gross

368
00:27:43,080 --> 00:27:48,600
receipts tax on marijuana dispensaries. The passage of Prop 64 has increased the spotlight

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00:27:48,600 --> 00:27:52,920
and urgency in what we do. Fundamentally, we're merely striving to be more efficient

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00:27:52,920 --> 00:27:57,800
in collecting cash. Otherwise, things are not so different. It's not a secret. We've been

371
00:27:57,800 --> 00:28:02,980
collecting medical marijuana taxes for years, in fact. Many of the same issues exist for

372
00:28:02,980 --> 00:28:08,040
For any cash we collect, cash is dirty, it's counterfeited, cash shrinks, cash is expensive

373
00:28:08,040 --> 00:28:10,720
and time consuming, cash represents risk.

374
00:28:11,260 --> 00:28:14,700
We'd all probably rather not have to deal with it, but we have and we do.

375
00:28:15,480 --> 00:28:18,860
There's also the need to separate some fact from fiction on this topic.

376
00:28:19,460 --> 00:28:24,040
Truth be told, our experience has been that the marijuana industry is not primarily a cash

377
00:28:24,040 --> 00:28:24,820
area of taxes.

378
00:28:25,460 --> 00:28:28,260
In fact, we're seeing about 20% of taxes paid in cash.

379
00:28:28,260 --> 00:28:33,660
I think that's an experience similar to what the BOE executive director stated in your December meeting.

380
00:28:34,500 --> 00:28:38,360
This is much less than one might expect, but certainly still much more than we would like.

381
00:28:39,420 --> 00:28:46,160
So from our perspective, we're continuing to refine and improve processes and equipment so that we can more efficiently process the cash

382
00:28:46,160 --> 00:28:51,700
We're already handling while preparing for the future. But this was not necessarily our first impulse.

383
00:28:51,700 --> 00:29:16,600
You know, originally we sought to engage our regular business partners, major financial institutions and services that we're accustomed to dealing with, and they certainly have the experience offer the resources and reliability that we in government expect from our business partners and of course knowing the issues presented by for a law, but we figured they must have some creative solutions, right, and that turned out to be not so much.

384
00:29:16,600 --> 00:29:19,140
As you all know, they won't touch the cash.

385
00:29:19,880 --> 00:29:21,840
That is, of course, unless we touch it first,

386
00:29:21,980 --> 00:29:25,920
which does give one pause, certainly an awkward paradigm

387
00:29:25,920 --> 00:29:27,420
for us all to be operating in.

388
00:29:28,020 --> 00:29:30,560
So what do we do when our tried and shoot business partners

389
00:29:30,560 --> 00:29:34,280
aren't an option, who's willing able to intercede

390
00:29:34,280 --> 00:29:36,740
and support fund acceptance from marijuana industry?

391
00:29:37,280 --> 00:29:39,020
And as it turns out, there's a number of players

392
00:29:39,020 --> 00:29:42,840
out there and Jared mentioned one, but why wouldn't I assume

393
00:29:42,840 --> 00:29:45,560
that many of the same obstacles major financial issues have

394
00:29:45,560 --> 00:29:50,920
wouldn't also apply to these firms, and of course with any new industry, where do you place

395
00:29:50,920 --> 00:29:54,680
your chips? The government typically looks for stability, experience, proven results in this

396
00:29:54,680 --> 00:29:59,900
partners, and these are things that are difficult to demonstrate in a new industry. Then you hear about

397
00:30:00,000 --> 00:30:29,040
A major technological failure, such as what happened in Nevada recently. And you have to ask, you know, just how much can we impose and should we at what costs and at what risk. Now, we then we go to look at maybe at what other California agencies are doing. And in some ways, further complicating the matter is the fact that you have multiple layers of government moving in tandem with potentially overlapping and certainly divergent interests and priorities. The state may require certain technology and reporting.

398
00:30:29,040 --> 00:30:33,440
accounting me out their own set of requirements in the city there. So I've

399
00:30:33,440 --> 00:30:37,580
spoken to and met with both state and county officials yet I have limited

400
00:30:37,580 --> 00:30:42,660
insight into what either are going to do ultimately. How do I establish

401
00:30:42,660 --> 00:30:45,920
requirements in the vacuum as we're all effectively racing against this clock

402
00:30:45,920 --> 00:30:50,080
that's striking January 1st and then you bring in the government procurement

403
00:30:50,080 --> 00:30:54,520
process into the equation and you'll be lucky to see advanced technological

404
00:30:54,520 --> 00:30:55,860
solutions in place by then.

405
00:30:57,040 --> 00:30:58,760
So what path should we follow?

406
00:30:59,260 --> 00:31:02,100
The Los Angeles City Council has asked this question of us.

407
00:31:02,820 --> 00:31:05,120
My office is reporting back to Council at the end of this month,

408
00:31:05,440 --> 00:31:07,960
and we'll present a range of options from new cash registers

409
00:31:07,960 --> 00:31:11,340
at our counters to point of sale software at the spend streets.

410
00:31:12,180 --> 00:31:14,260
But how long term do we plan for?

411
00:31:14,460 --> 00:31:16,500
Do we invest in building out a bank-like facility?

412
00:31:17,040 --> 00:31:19,640
How much some cost do we put in with so much uncertainty

413
00:31:19,640 --> 00:31:20,460
at the federal level?

414
00:31:20,980 --> 00:31:23,540
Does all get wiped out either because it gets shut down

415
00:31:23,540 --> 00:31:26,880
or because financial institutions are now allowed to bank marijuana money,

416
00:31:27,300 --> 00:31:30,980
do we align with new financial services supporting the marijuana industry?

417
00:31:31,440 --> 00:31:33,520
There's way more questions than answers.

418
00:31:34,040 --> 00:31:39,600
And it's difficult to commit to too much not knowing how the long term is playing out.

419
00:31:40,620 --> 00:31:44,600
And in terms of the city of Los Angeles, I can't tell you what the city will do yet,

420
00:31:44,960 --> 00:31:51,440
but in my opinion, the answer is that which we can mostly rely upon in a swift and prudent fashion.

421
00:31:51,440 --> 00:31:56,040
So I'll be putting my money on our tried and true processes, introducing some more

422
00:31:56,040 --> 00:32:00,360
best practices and taking some new approaches, all of which will be under our control.

423
00:32:01,100 --> 00:32:05,540
So this approach begins with upgrading our equipment, likely installing smart saves,

424
00:32:06,140 --> 00:32:10,480
shifting from annual payments to quarterly and monthly to break up payments, increased

425
00:32:10,480 --> 00:32:16,140
staffing to meet the increased workload, facility improvements, security improvements, and

426
00:32:16,140 --> 00:32:20,480
taking new approaches such as instituting an appointment system to better manage workload

427
00:32:20,480 --> 00:32:21,860
and the customer experience.

428
00:32:22,740 --> 00:32:24,780
Another key is engagement.

429
00:32:25,620 --> 00:32:27,620
We need to supplement our efforts with the experience

430
00:32:27,620 --> 00:32:29,820
and knowledge of marijuana industry professionals.

431
00:32:30,460 --> 00:32:32,800
To this end, we've engaged with local business people,

432
00:32:32,940 --> 00:32:35,500
such as Jared here, to discuss challenges

433
00:32:35,500 --> 00:32:37,340
and solutions to mutual issues.

434
00:32:37,760 --> 00:32:39,260
It's been very productive for us,

435
00:32:39,660 --> 00:32:40,680
and it has led us to make changes

436
00:32:40,680 --> 00:32:42,920
and initiate new approaches to how we do business.

437
00:32:43,660 --> 00:32:45,480
Establishing this work in the relationship

438
00:32:45,480 --> 00:32:48,100
allows transparency, fosters understanding,

439
00:32:48,100 --> 00:32:51,280
funding and working together ultimately allows us to be more successful.

440
00:32:51,900 --> 00:32:55,400
This is something we'll need to continue to do going forward as our experiences grow

441
00:32:55,400 --> 00:32:56,900
and new challenges develop.

442
00:32:58,420 --> 00:33:03,100
The final key within our collective control is for us as government agencies to communicate

443
00:33:03,100 --> 00:33:05,080
with each other across jurisdictions and level.

444
00:33:05,580 --> 00:33:06,520
It's easier said than done.

445
00:33:07,120 --> 00:33:11,400
I'm sure many people have gotten just as lost trying to navigate LA's bureaucracy as I have

446
00:33:11,400 --> 00:33:13,000
trying to navigate the state for answers.

447
00:33:14,060 --> 00:33:17,660
I'm very pleased we've in the city we know the foster relationship with LA County on this

448
00:33:17,660 --> 00:33:21,900
topic, including with Treasurer Joe Kelly, who appeared before you in the last meeting.

449
00:33:22,500 --> 00:33:24,880
And I look forward to establishing more dialogue with the state.

450
00:33:26,000 --> 00:33:31,780
And I don't know if there's an opportunity for me to plug for a good contact at VLE that

451
00:33:31,780 --> 00:33:38,440
I can talk to after this, but we need to achieve as much transparency and ease of access to

452
00:33:38,440 --> 00:33:42,120
information as possible if we're all going to be operating in parallel and establishing

453
00:33:42,120 --> 00:33:45,180
frameworks that work together or at least aren't going to collide.

454
00:33:46,420 --> 00:33:50,740
And that's why I so appreciate what Treasure Chung and this working group are doing.

455
00:33:51,460 --> 00:33:55,860
It's been fascinating to me to and helpful to hear the relatable experience of others.

456
00:33:56,220 --> 00:34:00,880
And while the ideal solution may be outside of our control, there's still much we can do

457
00:34:00,880 --> 00:34:04,940
to improve our success in managing the challenges presented by lack of thinking support for the

458
00:34:04,940 --> 00:34:05,760
marijuana industry.

459
00:34:06,300 --> 00:34:09,820
And transparency in what we're doing and communication amongst us are key.

460
00:34:10,260 --> 00:34:13,900
And I think it starts here with this group and now it needs to extend to all of us in the

461
00:34:13,900 --> 00:34:18,720
course of executing our plans. So, I hope I've been able to provide some useful perspective

462
00:34:18,720 --> 00:34:24,720
in terms of the City of Los Angeles and how we intend to approach the cash acceptance

463
00:34:24,720 --> 00:34:33,100
portion of our duties in noting that my comments don't pertain necessarily to audit, as much

464
00:34:33,100 --> 00:34:38,280
as how we're going to accept the cash. And, you know, thank you for taking the time to listen

465
00:34:38,280 --> 00:34:43,120
to me today. Thank you, Todd. Thank you for joining us. To my left is the Chairperson of the Board

466
00:34:43,120 --> 00:34:47,540
of Equalization, Fiona who's been incredibly active on this effort, so she is available.

467
00:34:47,880 --> 00:34:52,220
And then David Gao, David, if you would stand, David's the Executive Officer at the Board

468
00:34:52,220 --> 00:34:57,240
of Equalization, so I'm sure to go to Fiona, and then David's also available.

469
00:34:57,360 --> 00:34:57,700
Thank you, Mike.

470
00:34:58,240 --> 00:35:03,820
Yeah, we've been going through this similar exercises that you have, and so we're more

471
00:35:03,820 --> 00:35:07,320
than happy to share with you some of our trials and tribulations.

472
00:35:07,800 --> 00:35:12,600
I also do want to introduce a couple people from my staff, Tim Morlin, if you could just

473
00:35:12,600 --> 00:35:19,220
I understand he's my ledged director and all things cannabis goes through Tim, my chief

474
00:35:19,220 --> 00:35:24,820
of staff, Genevieve Jopanda is with me, and then Seth Dalton is part of our outreach team

475
00:35:24,820 --> 00:35:26,920
who also does a lot with the cannabis industry.

476
00:35:27,100 --> 00:35:31,840
So please feel free to reach out to all of us and again, David Gow is our executive director.

477
00:35:31,840 --> 00:35:33,740
He is taking this very seriously.

478
00:35:34,360 --> 00:35:40,620
He's a CPA as well and has been with the BOE for 30 plus years so kind of knows the ins and

479
00:35:40,620 --> 00:35:45,040
of the agency and hopefully we can try to make this better for everyone.

480
00:35:45,280 --> 00:35:48,000
Appreciate it. Thank you. Fiona's really big into CPAs.

481
00:35:48,780 --> 00:35:55,680
Yes, I just have one last thing with California being in the cannabis industry since 1996.

482
00:35:56,260 --> 00:36:02,620
It's time for us to get it together and LA needs to have a communication with Sacramento

483
00:36:02,620 --> 00:36:07,240
because for the only way for us to get it together is through dialogue.

484
00:36:07,240 --> 00:36:15,280
It's no way that Colorado or Oregon or Washington should be showing California how we are impacted.

485
00:36:15,580 --> 00:36:21,980
We are the mecca for cannabis around the world and when I say the mecca, I'm being

486
00:36:21,980 --> 00:36:27,300
reached out to Atlanta, Georgia from the mayor and we're going out there to speak to them

487
00:36:27,300 --> 00:36:28,760
about cannabis also.

488
00:36:29,280 --> 00:36:33,620
So it's time for us to be the green bear that we should be.

489
00:36:33,620 --> 00:36:37,120
So, so what is that Mayor Reed doing in Atlanta that we should be?

490
00:36:37,460 --> 00:36:43,440
Mayor Reed is ready to come up full, we're cannabis, they're ready and they ask us to come

491
00:36:43,440 --> 00:36:50,400
and help with how we're helping in LA with the ordinance for Proposition M with the City Council

492
00:36:50,400 --> 00:36:51,620
with her blessing in them.

493
00:36:51,980 --> 00:36:56,540
So they want to make sure we've been reached out by Guam as well.

494
00:36:56,540 --> 00:37:03,440
So, it's a few things that we just need to get L.A. and the state to work together,

495
00:37:03,580 --> 00:37:06,760
because there's no way that there's been 20 years, two decades.

496
00:37:07,540 --> 00:37:08,620
It shouldn't been this long.

497
00:37:09,680 --> 00:37:14,360
And we are the shining star for this new industry.

498
00:37:14,960 --> 00:37:16,200
So, Cassine, I'm sorry.

499
00:37:16,400 --> 00:37:21,340
So, Don, can you elaborate further on what's Cassine doing in specific in regards to banking in Atlanta?

500
00:37:21,560 --> 00:37:23,360
They haven't started on that part yet.

501
00:37:23,360 --> 00:37:31,740
they just interested about getting an ordinance going, they just reached out and asked us can we come up there and speak to them about what we're doing in L.A.

502
00:37:32,140 --> 00:37:39,380
So that's what we're taking up there next week to speak to them about what L.A. is doing. Everyone is waiting to see L.A.

503
00:37:39,520 --> 00:37:46,300
Come online when I say everyone everyone is waiting to see what L.A. how we get it together after 20 years.

504
00:37:46,300 --> 00:37:52,840
We're still dealing with things with pre-ICO dispensaries that didn't make the Prop D shops,

505
00:37:53,100 --> 00:37:59,180
didn't make it to the Prop D because they didn't have, we was getting landlord threat letters back in the day.

506
00:37:59,540 --> 00:38:03,400
We was getting ready, my partner won the six years in federal prison,

507
00:38:03,720 --> 00:38:07,300
but behind running a pre-ICO dispensary.

508
00:38:08,040 --> 00:38:11,740
And when the Feds came in, they came in taking everything.

509
00:38:12,560 --> 00:38:17,060
So now we need to make sure that this is a budding industry.

510
00:38:17,560 --> 00:38:18,280
That's all.

511
00:38:18,500 --> 00:38:21,880
And if we get banking online, I know it's all about the Feds.

512
00:38:22,420 --> 00:38:28,880
But if we get our stuff together down here, I think they're going to respect us a little better with this industry.

513
00:38:29,520 --> 00:38:30,120
Thank you.

514
00:38:30,520 --> 00:38:36,320
I wanted to commend Todd and the Office of Finance here in Los Angeles.

515
00:38:36,840 --> 00:38:40,460
They brought seven members of their team to our UCBA Trade Association.

516
00:38:40,460 --> 00:38:45,760
We've had direct communication with them about making appointments for cash deposits.

517
00:38:47,040 --> 00:38:52,260
We've gone through full discussions on how we are going to pay taxes.

518
00:38:53,580 --> 00:38:57,320
And when you have the government officials who are willing to listen to the industry,

519
00:38:57,760 --> 00:39:00,420
we do come up with compromises and we come up with solutions.

520
00:39:00,880 --> 00:39:05,760
So I really think that we need to start to try to have local offices like the Office of Finance

521
00:39:05,760 --> 00:39:10,500
to really make contact with the people who are paying these taxes, because they are

522
00:39:10,500 --> 00:39:14,200
going to tell you their hardships, and I can't tell you how much it has been a relief

523
00:39:14,200 --> 00:39:19,840
to have someone not only listen, but also compromise their position to allow us to become

524
00:39:19,840 --> 00:39:22,880
a part of the tax-paying people of Los Angeles.

525
00:39:23,120 --> 00:39:27,880
So I really thank Todd for being here and for being a part of this process.

526
00:39:28,280 --> 00:39:32,320
You want to elaborate further on what type of issues have been resolved through that collaboration?

527
00:39:32,320 --> 00:39:37,700
Yes, I mean being able to make an appointment to deliver cash gives them an opportunity to staff up

528
00:39:37,700 --> 00:39:42,860
They also told us that if we brought in 50s and hundreds that now they have to photocopy each one of those

529
00:39:42,860 --> 00:39:47,260
So bringing in 20s not only increases the size of this supposed duffel bag

530
00:39:47,260 --> 00:39:53,140
We're bringing in but it also it also it also decreases their time so based on that

531
00:39:53,140 --> 00:39:57,620
We have tried to as an industry make sure that we bring in 20s to reduce that staff

532
00:39:57,620 --> 00:40:01,900
We've also tried to talk about what it looks like to bring in the amount of money we're

533
00:40:01,900 --> 00:40:05,500
bringing in and how much we're bringing in at either time, and they've given us the reassurance

534
00:40:05,500 --> 00:40:09,000
that only three people in their office are going to know who's coming in during the

535
00:40:09,000 --> 00:40:12,920
appointment and how much money is being brought in, to give us the safety and security necessary

536
00:40:12,920 --> 00:40:18,660
to feel like we can trust the tax collectors, and it's not just going to be everyone in

537
00:40:18,660 --> 00:40:20,980
the office, it's going to know who's going to be there and how much money.

538
00:40:21,600 --> 00:40:24,560
So those are just a couple of the issues.

539
00:40:24,560 --> 00:40:26,980
I mean, Todd, do you want to elaborate on some other stuff?

540
00:40:26,980 --> 00:40:27,620
Yeah, gladly.

541
00:40:28,020 --> 00:40:30,760
I think it's been very productive, very helpful for us.

542
00:40:31,160 --> 00:40:32,860
They have obviously unique.

543
00:40:33,020 --> 00:40:34,880
Todd, I'm sorry, the end of framework, right,

544
00:40:34,960 --> 00:40:36,640
because I think it's probably the first time people are

545
00:40:36,640 --> 00:40:39,000
checking and describe treasury management functions.

546
00:40:39,620 --> 00:40:41,120
You're going to have these types of discussions.

547
00:40:41,680 --> 00:40:43,740
So can you describe that framework?

548
00:40:44,720 --> 00:40:47,540
The framework in regards to the application here.

549
00:40:48,760 --> 00:40:49,840
Oh, the application process?

550
00:40:50,240 --> 00:40:50,380
Sure.

551
00:40:51,380 --> 00:40:58,300
So this is something that came about from dialogue with Jared in his group and others in

552
00:40:58,300 --> 00:40:58,840
the industry.

553
00:40:59,760 --> 00:41:03,720
And so, you know, in the past, we never had anything of that effect.

554
00:41:04,080 --> 00:41:09,420
You basically, you come in and you pay your taxes, you know, or get in the queue or what

555
00:41:09,420 --> 00:41:12,160
have you if you're coming to a counter and pay.

556
00:41:12,280 --> 00:41:17,960
But normally people are paying with check or credit card, maybe a very small amount of cash

557
00:41:17,960 --> 00:41:23,940
That's that's being paid at a public counter and in the vast majority of people of course pay online or via the mail

558
00:41:23,940 --> 00:41:24,820
so

559
00:41:25,400 --> 00:41:32,540
Their challenges particularly unique no one no one comes in with the type of cash that they come in with and

560
00:41:33,000 --> 00:41:34,760
And so we really had never

561
00:41:34,760 --> 00:41:38,980
adjusted to that reality and and and

562
00:41:38,980 --> 00:41:44,500
Jared and his group brought forward the challenges that they face with regard to

563
00:41:44,500 --> 00:41:46,860
to delivering cash to the city,

564
00:41:47,420 --> 00:41:51,260
and it caused us to recognize a number of shortcomings

565
00:41:51,980 --> 00:41:54,480
that we had in our own processes or equipment.

566
00:41:55,280 --> 00:41:57,620
Jared mentioned, for instance, the fact that

567
00:41:58,100 --> 00:42:00,920
there was no, there was a requirement

568
00:42:00,920 --> 00:42:04,160
that we were photocopying bills, for instance.

569
00:42:04,880 --> 00:42:09,260
And because of that being brought to attention,

570
00:42:09,420 --> 00:42:13,520
we were able to resolve that issue by proper equipment

571
00:42:13,520 --> 00:42:19,220
for a counterfeited detection and have eliminated that process actually at this point.

572
00:42:19,800 --> 00:42:26,180
And so another issue, of course, is when people are coming in and people tend to come

573
00:42:26,180 --> 00:42:32,240
in around the same time of year or same time of months, and they do stand out in a crowd.

574
00:42:32,620 --> 00:42:40,140
And sometimes we will have cues outside of City Hall and even outside the block.

575
00:42:40,340 --> 00:42:42,240
And so it's very conspicuous.

576
00:42:42,240 --> 00:42:49,140
And so it was obviously apparent to us that there would need to be some extra precautions

577
00:42:49,140 --> 00:42:54,700
and extra measures put in place for cash acceptance for folks in this situation.

578
00:42:55,200 --> 00:43:01,500
So we've actually been piloting a new program with a number of dispensaries in order to allow

579
00:43:01,500 --> 00:43:08,460
them an opportunity to call in or email into us, establish a time that they'd like to come

580
00:43:08,460 --> 00:43:13,280
and then we'll confirm with them and then ensure that we have the proper staffing available,

581
00:43:13,520 --> 00:43:18,620
so that they can come in and be dealt with immediately and expedited out of there.

582
00:43:18,940 --> 00:43:23,860
And that's something that we're going to look to expand from here because I think it has worked out

583
00:43:23,860 --> 00:43:31,240
quite well so far. Go ahead. I mean, this wasn't an email sent to us. This was seven members of the

584
00:43:31,240 --> 00:43:37,440
office of finance that came to our group and laid out the plan to us while we negotiated and or

585
00:43:37,440 --> 00:43:41,020
compromise with different points that we're going to be a hardship for our group.

586
00:43:41,760 --> 00:43:46,240
We were talking about how we can bring security guards with us to make sure that the people

587
00:43:46,240 --> 00:43:51,000
who are to ensure the safety of our employees were bringing cash from mittens back to the

588
00:43:51,000 --> 00:43:51,660
office of finance.

589
00:43:51,840 --> 00:43:56,580
We discussed armored cars, like what it would mean like for a group like ours to hire our

590
00:43:56,580 --> 00:43:58,920
own armored car and bring it to the office of finance.

591
00:43:59,340 --> 00:44:03,700
We also talked about the different locations that would be more secure and that would feel

592
00:44:03,700 --> 00:44:07,980
feel more comfortable for the employees that would be remitting these taxes, where that

593
00:44:07,980 --> 00:44:09,580
would be the most safe and secure place.

594
00:44:10,120 --> 00:44:14,220
When you discuss all these things and we have understanding of why government made these

595
00:44:14,220 --> 00:44:19,960
decisions and how they will compromise to make sure that we have the same safety that they

596
00:44:19,960 --> 00:44:24,000
do, that is what this dialogue really created.

597
00:44:24,340 --> 00:44:28,540
And I think if we can encourage this dialogue to happen on a municipal level with the people

598
00:44:28,540 --> 00:44:33,360
inside their community in this industry, we'll find these kind of little nuances of

599
00:44:33,360 --> 00:44:38,060
answers that will be available because these are not the same answers that another city will have.

600
00:44:38,400 --> 00:44:43,180
The City of Los Angeles had some very unique ones due to the building size, the location, the

601
00:44:43,180 --> 00:44:48,180
security at that location, the ability to staff up and have the number of money counters and the

602
00:44:48,180 --> 00:44:55,100
size of the safe. That was really had to be discussed on the kind of minutias. So that being the

603
00:44:55,100 --> 00:44:59,920
communication there, having seven of their members come to talk to us personally really makes

604
00:45:00,000 --> 00:45:29,560
It says feel like they really care about what the answers are for our industry as well as for their employees. Thank you, Jared. Different, different focus. So the interface between you and your banks, the city of Los Angeles is made. So with the increase in cash that you are now handling, the, what is that requiring in regards to the PY, your staffing, what does it, what does it do to the costs for your banking, and how are you planning for that? Yeah, it, we've been dealing with it for a number of years.

605
00:45:29,560 --> 00:45:36,480
And so, you know, some of those costs have been kind of set for us in terms of our experience.

606
00:45:37,120 --> 00:45:41,900
Certainly, we would like to attempt to reduce those to the extent possible, and hopefully

607
00:45:41,900 --> 00:45:44,760
that's something that eventually, eventually we can get to.

608
00:45:45,860 --> 00:45:50,600
The banks have effectively told us, and not just our bank, but, you know, many banks

609
00:45:50,600 --> 00:45:55,140
that we've talked to on this issue, as well as armored carriers.

610
00:45:56,520 --> 00:46:02,060
effectively said that they can't have any direct relationship with it, and there were

611
00:46:02,060 --> 00:46:08,100
things that we sort of explored, well, you know, what if, you know, we could arrange

612
00:46:08,100 --> 00:46:14,040
armored carrier service, you know, and you pick it up for us or what if we arrange and

613
00:46:14,040 --> 00:46:20,830
it's delivered to you, and you know, time and again, we were told essentially that, you know,

614
00:46:20,830 --> 00:46:28,490
It's got to go through you first and unless that happens, there's no way around it or hands

615
00:46:28,490 --> 00:46:28,970
are tied.

616
00:46:29,970 --> 00:46:35,350
There are other companies out there that apparently are providing some of these services.

617
00:46:35,550 --> 00:46:43,170
I think it's definitely worth continuing to evaluate and have dialogue as to what they can

618
00:46:43,170 --> 00:46:43,890
bring to the table.

619
00:46:44,570 --> 00:46:49,630
But I know that we're not there yet and it's something that we need to continue to have discussions

620
00:46:49,630 --> 00:46:56,110
with and understand how they work relative to others that we deal with in the financial

621
00:46:56,110 --> 00:47:02,750
industry. But going forward at this point, we're kind of accepting this as sort of a cost

622
00:47:02,750 --> 00:47:12,730
of doing business. And our hope, of course, is that the industry continues to find ways

623
00:47:12,730 --> 00:47:18,370
as it has to mitigate or limit the amount of cash actually coming in. And I'm pretty sure

624
00:47:18,370 --> 00:47:24,950
That's what they want to, I know that none of them want to be in a position with a large

625
00:47:24,950 --> 00:47:29,250
amount of cash and having to transport that all over the city.

626
00:47:29,910 --> 00:47:31,230
Any member of questions or comments?

627
00:47:31,450 --> 00:47:31,710
Yeah, Jan.

628
00:47:33,050 --> 00:47:37,270
No, and Department of Business Overside, Todd, thank you very much for your work.

629
00:47:37,910 --> 00:47:42,770
You talked a little bit about POS machines, can you elaborate a little more of what you're

630
00:47:42,770 --> 00:47:43,130
thinking?

631
00:47:43,130 --> 00:47:47,770
and it sounds like you want them in the dispensaries or in the businesses.

632
00:47:48,590 --> 00:47:53,610
That is a topic of discussion and that is something that our city council has

633
00:47:53,610 --> 00:47:57,610
asked us to weigh in on and I think there's different perspectives on it.

634
00:47:57,750 --> 00:48:02,130
One is from the cash acceptance perspective which is more mine and then

635
00:48:02,130 --> 00:48:06,350
there's another perspective maybe from the audit perspective of our office.

636
00:48:07,130 --> 00:48:12,230
And so with these point of sales and there's multiple options out there

637
00:48:12,230 --> 00:48:27,810
And in a way, even the company that Jared mentioned is also, you know, in that regard point of sale because they're with the card and you're basically like a type of gift card type of situation that they're recording out there at their dispensary.

638
00:48:28,150 --> 00:48:36,070
But there's a number of different options that have developed over the course of the past few years.

639
00:48:36,070 --> 00:48:52,450
And so there's, I think where we kind of have a concern around the cash acceptance perspective is still how how is that cash getting to the city ultimately and do they have?

640
00:48:53,910 --> 00:49:04,910
Do we legislate something like that where we're requiring them to bring cash in these current carriers who may or may not have all the required?

641
00:49:04,910 --> 00:49:10,510
insurance, et cetera, and given kind of the backdrop with the federal government.

642
00:49:11,190 --> 00:49:14,390
And so that is, I think, still a question that we have to understand better.

643
00:49:14,930 --> 00:49:22,530
But from the audit perspective, I think that point-of-sale equipment makes a lot of sense

644
00:49:22,530 --> 00:49:31,250
because it allows you, per view, into what is happening at the dispensaries or other aspects

645
00:49:31,250 --> 00:49:38,470
of the vertical for marijuana, and so one of the concerns you have in audit, of course,

646
00:49:38,690 --> 00:49:40,550
is, you know, how are we going to audit these firms?

647
00:49:40,850 --> 00:49:44,930
You know, how are we going to send people out there, you know, to what inherent risks

648
00:49:44,930 --> 00:49:46,290
that does act create?

649
00:49:47,810 --> 00:49:58,950
And so as Jared said, there's receipts, but not necessarily a lot of really validated information

650
00:49:58,950 --> 00:50:03,890
that we may be tend to rely on in terms of how we're auditing firms.

651
00:50:04,510 --> 00:50:09,510
And so having a point of sale system that captures everything that's coming through,

652
00:50:10,030 --> 00:50:14,730
that would potentially allow us to capture that information and

653
00:50:14,730 --> 00:50:20,610
or review that information and establish whether or not we're receiving the tax payments

654
00:50:21,050 --> 00:50:23,490
that we should be relative to the sales that I've made.

655
00:50:23,490 --> 00:50:29,290
I think to the conversations we've had about point of sales has really helped with the

656
00:50:29,290 --> 00:50:34,590
analytics and also helps with kind of the accountability when it comes to seeing patterns.

657
00:50:34,990 --> 00:50:40,250
Patterns of flows of people versus how much per patient come in so that we can see patterns

658
00:50:40,250 --> 00:50:44,050
because right now we're trying to make sure that if we understand these patterns we can

659
00:50:44,050 --> 00:50:48,110
see who is under reporting, who's double booking, and so these point of sales systems are

660
00:50:48,110 --> 00:50:52,390
going to be super important for us to come online as soon as possible because now this is

661
00:50:52,390 --> 00:50:53,270
This is what we've talked about.

662
00:50:53,370 --> 00:50:57,230
We even talked about even offering some point of sale systems to create partnership letters

663
00:50:57,230 --> 00:51:03,450
in case there were some tax problems or increasing tax payments over time that there's going

664
00:51:03,450 --> 00:51:04,630
to have to be some accountability.

665
00:51:05,170 --> 00:51:07,070
These point of sale really do give us accountability.

666
00:51:07,650 --> 00:51:11,630
I gave the office a finance, not only my P&L statements on our last meeting so they could

667
00:51:11,630 --> 00:51:16,430
see not only what I operate as a business, so they could see that I'm not stuffing cash

668
00:51:16,430 --> 00:51:17,050
in a mattress.

669
00:51:17,050 --> 00:51:22,050
like I really do operate as a not-for-profit under Prop 215 and they need to understand that.

670
00:51:22,350 --> 00:51:27,570
I think when you deal with taxes and insurance and all the other things that a normal business has to go through,

671
00:51:27,810 --> 00:51:31,350
it's the illegal businesses that aren't paying taxes that don't have insurance,

672
00:51:31,570 --> 00:51:37,950
that may be stuffing cash in their mattress, but the legally operating ones are trying to stay above board.

673
00:51:38,230 --> 00:51:43,450
We have accountability through a point of sale systems and we want to make sure that we don't get pushed into a taxation

674
00:51:43,450 --> 00:51:46,610
that pushes us, pushes this industry back to the black market.

675
00:51:46,970 --> 00:51:50,630
So if you can see our analytics and you can start to make decisions on what taxation

676
00:51:50,630 --> 00:51:55,450
will be appropriate based on our previous receipts, then you'll be able to start making

677
00:51:55,450 --> 00:51:57,490
decisions on what taxation will be appropriate.

678
00:51:57,970 --> 00:52:01,890
So, and that's the discussions we get to have with the office of finance and we get to offer

679
00:52:01,890 --> 00:52:06,450
this kind of information coming from a group that has legally operating dispensary owners.

680
00:52:06,750 --> 00:52:10,170
We get to offer these kind of things because as a group we hold each other accountable.

681
00:52:10,510 --> 00:52:12,210
We give each other good business practices.

682
00:52:12,210 --> 00:52:17,510
And when you allow business trade associations like ours to really flourish, we now get

683
00:52:17,510 --> 00:52:22,070
to hold each other accountable and it's self-regulating, and we get to take that self-regulation

684
00:52:22,070 --> 00:52:26,250
to the office of finance and tell them what we've done, and then we get to come to a conclusion

685
00:52:26,250 --> 00:52:26,670
from there.

686
00:52:27,030 --> 00:52:30,110
I hope that answers your question from my standpoint.

687
00:52:32,030 --> 00:52:33,350
I have two questions.

688
00:52:33,570 --> 00:52:34,990
First is for you, Todd.

689
00:52:35,030 --> 00:52:35,910
I understood you correctly.

690
00:52:36,270 --> 00:52:40,150
You said that only 20% of marijuana businesses pay taxes and cash.

691
00:52:40,150 --> 00:52:44,730
I wonder what what are the other forms of payment look like from the other 80% fair?

692
00:52:48,980 --> 00:52:51,280
And this is speaking for say last year

693
00:52:51,880 --> 00:52:56,180
Primarily by check we had about 66% that came in by chief and

694
00:52:56,660 --> 00:52:58,920
a small portion by ACH

695
00:52:58,920 --> 00:53:02,980
very little credit card and electronic transfer

696
00:53:03,700 --> 00:53:08,820
Thank you, and Donnie you mentioned something that pertains to payments and

697
00:53:09,320 --> 00:53:16,560
With regard to on-site security, you said that you cannot have security guards inside your place of business and they cannot be armed.

698
00:53:16,560 --> 00:53:17,080
Why is that?

699
00:53:17,460 --> 00:53:18,560
They have to be outside.

700
00:53:18,920 --> 00:53:20,600
I don't know. We still try to figure that out.

701
00:53:20,600 --> 00:53:22,540
Is that so to look Lord Ned's or State Law?

702
00:53:22,700 --> 00:53:25,100
I think it's from Sacramento State Law.

703
00:53:26,930 --> 00:53:27,530
Thank you.

704
00:53:27,710 --> 00:53:28,030
You're welcome.

705
00:53:30,730 --> 00:53:31,670
Yes. Thank you.

706
00:53:31,910 --> 00:53:37,150
I have, ultimately, three questions, mostly for you, Mr. Bowie.

707
00:53:37,850 --> 00:53:41,810
The first one, you listed a number of procedural changes that you make.

708
00:53:41,930 --> 00:53:43,130
Is that something you could share with us?

709
00:53:43,130 --> 00:53:45,690
I hope to review that could be very helpful.

710
00:53:46,570 --> 00:53:46,730
Sure.

711
00:53:47,510 --> 00:53:51,590
It's a number of different things that we did.

712
00:53:51,710 --> 00:53:58,670
I don't know if I have a document that captures all of them, but I think effectively, it wasn't

713
00:53:58,670 --> 00:54:05,110
so difficult because, honestly, our processes were so antiquated, and so I think we've probably

714
00:54:05,110 --> 00:54:12,590
reduce about, on large sums of money, we've probably reduced by a good 33% of the time

715
00:54:12,590 --> 00:54:23,230
it takes to go through it. And that was primarily by adding counter-fancy devices or counting

716
00:54:23,230 --> 00:54:30,890
devices. So lack of that or having enough of those was causing us to take other ancillary

717
00:54:30,890 --> 00:54:37,010
types of precautions when it came to kind of see and that really added to the

718
00:54:37,010 --> 00:54:40,030
time. So instead of having instead of running through a machine we have

719
00:54:40,030 --> 00:54:46,830
people you know doing bill by bill by bill by bill and $100,000 is a lot of

720
00:54:46,830 --> 00:54:54,010
bills and and so it was taking hours you know to go through one you know you

721
00:54:54,010 --> 00:54:59,870
know deposit. So like I said just that alone is significantly reduced the amount

722
00:54:59,870 --> 00:55:07,810
of time. And then I think with regard to something we haven't done yet that we're really looking

723
00:55:07,810 --> 00:55:14,390
at and probably going to do is the utilization of smart saves, which I think will even further

724
00:55:14,390 --> 00:55:19,710
reduce our exposure with the cash as well. And of course get the money into the bank quicker

725
00:55:19,710 --> 00:55:21,030
and reduce our handling.

726
00:55:21,550 --> 00:55:26,110
Okay. And the second question I guess is sort of a two-part question here. You know, currently

727
00:55:26,110 --> 00:55:31,970
currently under the property framework, the community of businesses that's able to work

728
00:55:31,970 --> 00:55:37,010
with the local government is very narrow. I think that there's many, certainly within

729
00:55:37,010 --> 00:55:42,890
our industry, that are hoping that number will expand a bit. How are you prepared to

730
00:55:42,890 --> 00:55:49,790
scale these efforts and are you reaching out to folks who are you making any efforts to

731
00:55:49,790 --> 00:55:54,210
do outreach to folks who are not currently regulated? And if not, is there a way that we could

732
00:55:54,210 --> 00:55:59,890
start talking, you know, just to flag some of the numbers, our membership in L.A. when

733
00:55:59,890 --> 00:56:04,590
we pulled them 80% don't have bank accounts. And so that's a that's a striking difference

734
00:56:04,590 --> 00:56:08,950
from what you're experiencing. And then, you know, over the next 9 to 18 months, I think

735
00:56:08,950 --> 00:56:11,130
we're going to have some tensions. So, are you ready?

736
00:56:11,690 --> 00:56:11,910
Right.

737
00:56:12,330 --> 00:56:20,730
So we don't know yet in Los Angeles with regard to the initiative in March, and of course

738
00:56:20,730 --> 00:56:26,030
what will come to pass and even what the outcome will be relative to how many

739
00:56:27,870 --> 00:56:34,290
dispensaries and other operators in this industry is going to be. Is it going to be maintained at

740
00:56:34,290 --> 00:56:44,150
the less than 200 or is it going to proliferate? So we're basically sort of guessing in that regard.

741
00:56:44,150 --> 00:56:52,510
So at this point, we're looking to scale based on some metrics around our current experience

742
00:56:52,510 --> 00:56:59,870
with cash and the payment of cash and the number of dispensaries and essentially set staffing

743
00:56:59,870 --> 00:57:00,950
according to that model.

744
00:57:01,150 --> 00:57:04,950
So if it's 200, we need exit, it's 400, we need wide.

745
00:57:06,130 --> 00:57:14,910
At some point, though, it could become so huge that potentially if it was allowed to,

746
00:57:15,290 --> 00:57:18,430
that we would have to come up with a whole different model.

747
00:57:19,150 --> 00:57:25,670
Certainly, I think we have about, speaking to your point, I think we're aware that there

748
00:57:25,670 --> 00:57:28,830
might be more cash out there that we're certainly not getting.

749
00:57:28,830 --> 00:57:36,270
We know that there's, I believe, about 1,000 dispensaries that are on the register in the City of Los Angeles.

750
00:57:37,470 --> 00:57:40,470
Only about 200 of them are paying.

751
00:57:41,250 --> 00:57:49,270
And so what that other 800 represents, I do not know, but it may well be that they are primarily cash.

752
00:57:51,910 --> 00:57:57,410
I just want to say that what we create the system for the property shops who have already

753
00:57:57,410 --> 00:58:01,890
a system of point of sale and have already been kind of regulated with taxation, we're

754
00:58:01,890 --> 00:58:05,310
creating the system to be streamlined for the rest of the industry to kind of move into

755
00:58:05,310 --> 00:58:06,850
the same space that we've created.

756
00:58:07,410 --> 00:58:12,230
After March, yes, everyone's going to have a tax up to cultivators, manufacturers, everyone

757
00:58:12,230 --> 00:58:18,930
in the industry will be part of this tax system and being able to work with this group right

758
00:58:18,930 --> 00:58:23,510
right now to create a streamlined system allows the office of finance to be able to scale

759
00:58:23,510 --> 00:58:30,650
up to what will be Prop 64 and MCRSA laws as well as measure M laws under Los Angeles.

760
00:58:31,350 --> 00:58:35,770
And so I guess you know my question then to you Jared would be are you making efforts to

761
00:58:35,770 --> 00:58:40,570
get out into the business community beyond the small group because we do see some very distinct

762
00:58:41,210 --> 00:58:45,910
differences in the characteristics and we've had some very different experiences and so are

763
00:58:45,910 --> 00:58:49,370
are we actually building a system that works for everyone's needs at the local level?

764
00:58:49,850 --> 00:58:55,610
Well, I think because most of the people who are paying taxes with bank accounts, what

765
00:58:55,610 --> 00:58:59,910
you're doing is you're limiting the people who are scared to be in that system.

766
00:59:00,370 --> 00:59:04,930
We've kind of made an estimate of about $25 million should have been received in 2016

767
00:59:04,930 --> 00:59:06,890
and only 9.7 was received.

768
00:59:07,370 --> 00:59:11,590
So we kind of are on the feeling like if we open up the system more to cash, that more

769
00:59:11,590 --> 00:59:15,490
of these players will start to feel like they have an opportunity to pay their taxes

770
00:59:15,490 --> 00:59:18,190
and not under report, or not report at all,

771
00:59:18,830 --> 00:59:20,690
or feel like they have to be pushed into the shadow.

772
00:59:20,910 --> 00:59:22,770
So I think that this streamlined system

773
00:59:22,770 --> 00:59:25,210
really does create that space for more

774
00:59:25,210 --> 00:59:27,050
of these tax remittance to be collected.

775
00:59:27,890 --> 00:59:29,770
Also to your question, I don't think I addressed,

776
00:59:29,950 --> 00:59:34,030
but is that yeah, we're certainly open to more discussion

777
00:59:34,030 --> 00:59:36,850
with others, and so if that's something

778
00:59:36,850 --> 00:59:39,330
that you'd like to have a follow-up on that today.

779
00:59:39,770 --> 00:59:41,110
To your question, Heather Kaya,

780
00:59:41,290 --> 00:59:43,990
we also go out in our community,

781
00:59:43,990 --> 00:59:49,810
the Southern California coalition and we work with churches, local churches, we work with

782
00:59:49,810 --> 00:59:56,190
neighborhood councils and we work, we go around and make sure what's the problem is and what

783
00:59:56,190 --> 00:59:59,970
the communities have issues with in my community, in my district.

784
01:00:00,000 --> 01:00:05,720
We have more rogue shops than anywhere. And that's a problem. And I'm working with Marquise

785
01:00:05,720 --> 01:00:11,680
Hare's Dawson to identify the rogue shops to make sure that we put it into it. When the

786
01:00:11,680 --> 01:00:15,920
shop is open at 1 o'clock in the morning, and it's around the corner from my mom's house

787
01:00:15,920 --> 01:00:21,640
and this issue, so we need to get out to the community and make the community feel that

788
01:00:21,640 --> 01:00:26,600
they are part of this, instead of alienating. You know what I'm saying? Making cannabis alienated.

789
01:00:26,600 --> 01:00:32,100
This is just like the local grocery store, but we're going to hire more people, trust me.

790
01:00:34,760 --> 01:00:34,960
Thank you.

791
01:00:35,180 --> 01:00:38,860
I actually had a question on the POST, but I'm going to say that for our panel C coming up.

792
01:00:39,780 --> 01:00:53,920
The old thing I think is, Boltzmann's solution is going to be a technological answer, but I was thinking about this when you're talking about the flow and how the money comes from dispensary to the city.

793
01:00:54,320 --> 01:00:59,260
And I just kind of made me think about this and kind of think about flow chart of, you know, basically you have like I keep

794
01:00:59,260 --> 01:01:04,900
had this vision of like an armored truck blown into the city hall and even the city all taking out these pallets of cash and

795
01:01:04,900 --> 01:01:07,380
taking it into the, you know, wherever that goes.

796
01:01:09,080 --> 01:01:13,960
But then you know, then you take that to the bank and the bank takes that to the Federal Reserve basically.

797
01:01:14,140 --> 01:01:15,220
I mean, that's kind of how it works.

798
01:01:15,620 --> 01:01:20,000
There's a lot of steps in there that's that's that's probably the process and my question.

799
01:01:20,000 --> 01:01:21,880
And I imagine that the bank that you,

800
01:01:22,140 --> 01:01:24,080
I know there's a couple of national, large,

801
01:01:24,140 --> 01:01:25,460
national banks that the city deals with.

802
01:01:25,680 --> 01:01:27,560
And I imagine they even threatened a closure account

803
01:01:27,560 --> 01:01:31,380
if you bring this cash in, which is kind of,

804
01:01:31,480 --> 01:01:32,620
it's interesting, you think about it,

805
01:01:32,620 --> 01:01:34,760
because there's another lot of folks who run that risk.

806
01:01:36,700 --> 01:01:38,100
But the thing that also kind of caught my attention

807
01:01:38,100 --> 01:01:40,440
is when you said that 66% was done in check.

808
01:01:40,760 --> 01:01:42,960
So that would tell me that there are some folks

809
01:01:42,960 --> 01:01:44,820
who do have a bank relationship currently

810
01:01:44,820 --> 01:01:47,020
who are able to write those checks,

811
01:01:47,020 --> 01:01:53,300
that? Is that correct? And is that it? Are those institutions that are, we have those

812
01:01:53,300 --> 01:01:56,380
relationships, are they understanding that what the business does and everything?

813
01:01:57,900 --> 01:02:04,960
I might be able. This is a conversation we had had about four months ago with the office

814
01:02:04,960 --> 01:02:10,020
of finance about why they were receiving a majority of their payments through checks and

815
01:02:10,020 --> 01:02:15,960
stuff. It's like a collective a nonprofit, collective does not have a bank account. We have

816
01:02:15,960 --> 01:02:20,400
management companies that manage all the retail sales and employees and everything of

817
01:02:20,400 --> 01:02:20,960
those accounts.

818
01:02:21,480 --> 01:02:27,540
So when the office of finance gets a check, it is probably 100% time not directly from

819
01:02:27,540 --> 01:02:28,960
the nonprofit elective.

820
01:02:29,300 --> 01:02:32,920
So what you're doing is you're now pushing, you know, you're pushing the collective to

821
01:02:32,920 --> 01:02:35,340
have a management company so that they can have a bank account.

822
01:02:36,500 --> 01:02:41,760
And really, this is not, this is a place where you tell the bank that you are a retail management

823
01:02:41,760 --> 01:02:42,180
company.

824
01:02:42,180 --> 01:02:46,800
There's no denying that you are one, but now we have to pay those with those checks.

825
01:02:47,040 --> 01:02:51,560
And so that's where the balance is, and if you don't tell the rest of the industry how

826
01:02:51,560 --> 01:02:54,960
this works, then they don't have the ability to have a bank account.

827
01:02:55,320 --> 01:03:00,600
And even then, how do you deposit money into your own management company's account?

828
01:03:00,780 --> 01:03:04,820
And so that's where part of the problem is, is we lose these management accounts all the

829
01:03:04,820 --> 01:03:07,840
time through banks because we deposit too much cash into them.

830
01:03:07,840 --> 01:03:12,660
That's why I've had 8 and 15 years, because as soon as they see how much cash you bring,

831
01:03:13,240 --> 01:03:15,760
then they start to like deny you services.

832
01:03:16,340 --> 01:03:21,640
So I think that's where this is, and if we allow these nonprofit or these collectives

833
01:03:21,640 --> 01:03:25,660
to have bank accounts, then you will be seeing more checks from them.

834
01:03:25,840 --> 01:03:31,280
But this is a conversation we had had, because I wanted to finance to understand, I guess

835
01:03:31,280 --> 01:03:35,740
the loopholes or the hurdles we have, to make sure that we get you the money, because

836
01:03:36,060 --> 01:03:37,200
you know you don't want cash.

837
01:03:37,200 --> 01:03:42,920
We don't want to walk in because right now at the downtown office of finance, there's a six-story

838
01:03:42,920 --> 01:03:47,020
parking structure, 500 yards away. I have to walk through what is

839
01:03:48,140 --> 01:03:54,100
essentially a homeless encampment with a duffle bag full of cash walk across the street, go through security, and

840
01:03:54,100 --> 01:04:00,860
sometimes they then stand in line. I mean all of that is a safety risk. And so, you know, it would be really nice to be able to have

841
01:04:00,860 --> 01:04:04,460
to have this access to banking, but, you know, we are limited in that.

842
01:04:04,960 --> 01:04:08,420
So, hopefully that answers your question about why or where it comes from.

843
01:04:08,480 --> 01:04:10,080
I kind of want my assumption was, so I appreciate that.

844
01:04:10,140 --> 01:04:10,900
Understood, thank you.

845
01:04:11,360 --> 01:04:13,660
Yeah, we pay it ours, we'll catch your checks.

846
01:04:15,720 --> 01:04:15,980
Thank you.

847
01:04:17,140 --> 01:04:21,720
Jared, I'm wondering if you can walk us through one of these gift card transactions, and

848
01:04:21,720 --> 01:04:25,540
I'm wondering what the practical limitations are with those types of transactions.

849
01:04:25,660 --> 01:04:29,340
It seems like it's probably a workable solution for retail.

850
01:04:29,900 --> 01:04:31,820
Are there wholesale applications for it?

851
01:04:31,820 --> 01:04:33,540
Can you facilitate wholesale transactions

852
01:04:34,100 --> 01:04:35,780
through these gift cards or is that a non-starter?

853
01:04:36,520 --> 01:04:38,860
No, they're actually working currently right now

854
01:04:38,860 --> 01:04:41,380
to be able to pay vendors off for their products as well.

855
01:04:42,300 --> 01:04:43,900
Right now to go through the process,

856
01:04:43,940 --> 01:04:46,220
someone comes in with their credit card,

857
01:04:46,720 --> 01:04:50,200
a driver's license, and we take both of those

858
01:04:50,200 --> 01:04:51,800
and scan them through a swipe card.

859
01:04:52,160 --> 01:04:54,480
The swipe card populates all the fields

860
01:04:54,480 --> 01:04:59,880
with their name, address, and California ID number.

861
01:04:59,880 --> 01:05:04,840
And then we also slide the credit card number which also takes the same information.

862
01:05:05,020 --> 01:05:11,640
If those two things are verified, then the funds are now agreed upon that we put those funds onto a gift card.

863
01:05:11,860 --> 01:05:17,860
The gift card costs I think $3 to load the card like it would be a normal transaction fee for an ATM.

864
01:05:18,500 --> 01:05:26,040
Then that gift card now is used like a credit card for whatever amount is there, whatever's left on the gift card shows a balance.

865
01:05:26,040 --> 01:05:31,800
And then that gift card can be loaded onto through a website as well, so it doesn't have

866
01:05:31,800 --> 01:05:37,540
to come into the dispensary to add more money to it, but the initial loading of the card

867
01:05:37,540 --> 01:05:42,180
has to be a verified California driver's license and credit card that matched those.

868
01:05:42,660 --> 01:05:46,800
And this company is trying to find ways to be able to pay vendors in larger sums through

869
01:05:46,800 --> 01:05:52,240
this gift card transaction so that there can be ways of getting money into cultivators' accounts

870
01:05:52,240 --> 01:05:56,760
into manufacturers, so they're not all vendors who come into our shop, have to be paid and cash,

871
01:05:57,020 --> 01:05:59,500
and then they run into the exact same problems as bensaries do.

872
01:06:00,140 --> 01:06:03,660
I think dispensaries are just more in the limelight than the others,

873
01:06:04,060 --> 01:06:09,120
so I think we don't really understand what the hardships are for cultivators

874
01:06:09,120 --> 01:06:10,520
and all the rest of the industry and vendors.

875
01:06:11,100 --> 01:06:14,600
What's the current limitation on those transactions right now?

876
01:06:14,900 --> 01:06:17,200
How much can you put onto a gift card?

877
01:06:17,600 --> 01:06:21,120
What's the maximum that you'll be able to do for a customer application coming in?

878
01:06:21,120 --> 01:06:29,220
Currently right now, $500 is the maximum transaction per gift card, and I think that's a larger

879
01:06:29,220 --> 01:06:33,520
law than this company is trying to stay in compliance.

880
01:06:34,360 --> 01:06:35,120
Okay, very good.

881
01:06:35,520 --> 01:06:39,260
I'm going to end this line of question just because I need to get Julia so she can testify

882
01:06:39,260 --> 01:06:43,100
and catch her like back to Alabama, but I want to thank the first set of panelists for

883
01:06:43,100 --> 01:06:43,880
your terrific comments.

884
01:06:44,220 --> 01:06:44,480
Thank you.

885
01:06:49,250 --> 01:06:52,610
I'm going to have Tim make some quick update.

886
01:06:52,610 --> 01:06:59,230
Okay, we've been getting some electronic traffic that those people who are trying to stream

887
01:06:59,230 --> 01:07:05,590
this are not able to access the video stream and I'm told because I'm certainly not

888
01:07:05,590 --> 01:07:12,610
an expert in this that it works adequately and well with Internet Explorer but may not

889
01:07:12,610 --> 01:07:18,490
work with Chrome and it may not work with Firefox or Mozilla.

890
01:07:18,490 --> 01:07:25,050
I don't know about Safari, that's up in the air, but let's just, nope, I'm told that Safari doesn't work.

891
01:07:25,690 --> 01:07:32,110
All right, so if those of you who are texting your little hearts out to others,

892
01:07:32,570 --> 01:07:39,170
would please indicate to those on the other end of your communication that Internet Explorer is the way to go,

893
01:07:39,970 --> 01:07:43,230
we'll solve some of the frustration at that end. Thank you.

894
01:07:43,850 --> 01:07:47,750
Very good. Thank you. For our next section, we have just one panel member. As I referenced

895
01:07:47,750 --> 01:07:53,150
early Julie Anderson Hill, Ms. Hill has written extensively on legal issues surrounding

896
01:07:53,150 --> 01:07:56,930
the current state of cannabis banking and as among the foremost experts on challenges

897
01:07:57,570 --> 01:08:00,070
this working group seeks to address. Julie, welcome.

898
01:08:01,290 --> 01:08:06,190
Thanks for having me. It's great to be here. Do we know how I advance my slides?

899
01:08:14,160 --> 01:08:14,440
Perfect.

900
01:08:15,300 --> 01:08:20,400
Thank you. I guess that it's great to be here today. I'm primarily banking a lot

901
01:08:20,400 --> 01:08:26,460
expert. I teach at the University of Alabama School of Law and of course nothing I say represents

902
01:08:26,460 --> 01:08:34,920
anything that they think. Before I taught law I practiced law at the Washington DC office of

903
01:08:34,920 --> 01:08:39,060
Skadenarp's. I represented large financial institutions that found themselves in government

904
01:08:39,060 --> 01:08:46,700
investigations and then before I was a lawyer I worked at community banks in a variety of positions,

905
01:08:46,700 --> 01:08:50,300
including payment process, and so I've been doing banking for a while.

906
01:08:50,840 --> 01:08:58,620
And the way I came to become interested in marijuana banking was that I've often studied the intersection between what the law says

907
01:08:58,620 --> 01:09:05,420
and how regulators actually enforce the law, which I think is one of the issues that you face when you talk about cannabis banking.

908
01:09:05,420 --> 01:09:12,180
And so, a few years ago, when I was starting to think about this problem, I decided the

909
01:09:12,180 --> 01:09:18,320
way for me to get a good sense of what was going on is that I would stop at some marijuana

910
01:09:18,320 --> 01:09:23,080
dispensaries in Colorado, my family lives in Wyoming, so we traveled through the Denver

911
01:09:23,080 --> 01:09:28,240
Airport more than we would like, and so we just decided we would stop on the way to visit

912
01:09:28,240 --> 01:09:33,980
my family to many of their jokes, as you might expect, and see what was going on with

913
01:09:33,980 --> 01:09:39,380
banking and marijuana. So one of the places that I stopped was the choice organics in

914
01:09:39,380 --> 01:09:44,120
Fort Collins, Colorado, it's a dispensary. And you walk in and there's this sign right

915
01:09:44,120 --> 01:09:49,120
when you first get in that says we only accept cash, but there's an ATM located at the

916
01:09:49,120 --> 01:09:53,360
entrance. So I thought, well, that's pretty interesting. What they've done here is they've

917
01:09:53,360 --> 01:09:58,520
had some third party provide an ATM and then people who come to the shop to buy things

918
01:09:58,520 --> 01:10:03,720
can go get cash from the ATM and then use that in the shop. And I guess that doesn't

919
01:10:03,720 --> 01:10:06,980
to really solve the problem of what the business does

920
01:10:06,980 --> 01:10:09,700
with the cash, but at least from the customer's perspective,

921
01:10:09,780 --> 01:10:11,180
it makes it easy for them.

922
01:10:11,600 --> 01:10:15,100
So I go out and I look at the ATM and it's out of order

923
01:10:15,100 --> 01:10:17,380
and so I go back in and I say, what's the deal with the ATM?

924
01:10:17,720 --> 01:10:19,440
And they said, oh yeah, that worked really great

925
01:10:19,440 --> 01:10:22,520
until the third party ATM company figured out

926
01:10:22,520 --> 01:10:24,060
that we were a marijuana business.

927
01:10:24,600 --> 01:10:28,300
And then their bank said they couldn't offer ATMs to us anymore.

928
01:10:29,080 --> 01:10:31,040
And I tell this story because I think

929
01:10:31,040 --> 01:10:33,640
but it's indicative of many of the solutions

930
01:10:34,320 --> 01:10:36,760
that marijuana businesses come up with.

931
01:10:37,200 --> 01:10:39,340
They work for a short amount of time

932
01:10:39,340 --> 01:10:41,960
until everyone figures out what's going on,

933
01:10:41,960 --> 01:10:44,560
and then when somebody actually says down and thinks about it,

934
01:10:44,760 --> 01:10:47,700
they realize that it poses a lot of legal risk,

935
01:10:47,880 --> 01:10:49,700
and so it worked for a little while,

936
01:10:49,700 --> 01:10:53,380
but maybe it's not a long-term solution to the problem.

937
01:10:54,120 --> 01:10:56,800
The other thing I found is I visited marijuana shops

938
01:10:56,800 --> 01:11:00,380
in Colorado, less than a number of them do have bank

939
01:11:00,380 --> 01:11:05,660
accounts, almost all of them with Wells Fargo. I didn't take pictures of them to protect

940
01:11:05,660 --> 01:11:15,160
the bank accounts of those marijuana businesses, which I thought was interesting, especially

941
01:11:15,620 --> 01:11:23,000
because if you ask banks why they don't serve a marijuana industry, they say things like

942
01:11:23,000 --> 01:11:28,820
the spokesperson of Wells Fargo says. We buy by all federal laws and the distribution

943
01:11:28,820 --> 01:11:33,880
in sale of marijuana is illegal, so we don't think the sale of medical or recreational

944
01:11:33,880 --> 01:11:39,340
marijuana, in spite of the fact that when you go to businesses, many of them have those

945
01:11:39,340 --> 01:11:40,060
bank accounts.

946
01:11:41,000 --> 01:11:47,040
So, that's obviously what I'm here to talk about today is why marijuana businesses don't

947
01:11:47,040 --> 01:11:52,820
get bank accounts, and I think that the easiest thing to point to is a thing that Wells Fargo

948
01:11:52,820 --> 01:11:59,700
points too. That's the federal criminal laws governing marijuana. And we'll talk about

949
01:11:59,700 --> 01:12:05,340
those in just a minute. But at the outset, it's useful to note the banking structure in

950
01:12:05,340 --> 01:12:10,980
the United States. So we have what is called a dual banking system. Banks or credit unions

951
01:12:10,980 --> 01:12:16,500
can be chartered by national regulators, or they can be chartered by state regulators. And

952
01:12:16,500 --> 01:12:21,320
if they were just sort of two separate systems, we could just go to our state regulator and

953
01:12:21,320 --> 01:12:26,040
And she could tell us, you know, totally cool, go ahead and do it, and then your life

954
01:12:26,040 --> 01:12:27,180
would be terrific.

955
01:12:27,580 --> 01:12:31,960
But as we know, that's not exactly how it works here.

956
01:12:33,660 --> 01:12:39,540
In part because of the Constitution's supremacy clause, but also in part because of the main

957
01:12:39,540 --> 01:12:43,960
banking services that the federal government actually provides.

958
01:12:44,560 --> 01:12:51,440
So, let's start with the federal criminal law, the federal controlled substances acts,

959
01:12:51,800 --> 01:12:56,780
prohibit manufacturing, distribution, or dispensing marijuana.

960
01:12:57,520 --> 01:13:02,840
So if you do that, you are violating federal law, even if you're in a state that says

961
01:13:02,840 --> 01:13:08,200
it's okay, federal law, and from a bank's perspective, it doesn't just end there.

962
01:13:08,380 --> 01:13:11,700
I mean, they might be able to tell themselves, well, I'm not manufacturing, distributing

963
01:13:11,700 --> 01:13:19,480
or dispensing, but federal law also prohibits aiding and abetting the manufacturer distribution

964
01:13:19,480 --> 01:13:20,200
or dispensing.

965
01:13:20,440 --> 01:13:23,400
And guess what that means, financing these businesses.

966
01:13:24,120 --> 01:13:30,640
It also prohibits conspiracy to distribute manufacturer or dispense.

967
01:13:31,040 --> 01:13:37,040
So if you go into your bank and they help you plot out how you might expand your business

968
01:13:37,040 --> 01:13:45,300
that's conspiracy. And accessories after the fact are criminal. So if a bank helps you

969
01:13:45,300 --> 01:13:53,660
take your money that you got from your marijuana business, technically that's your an accessory

970
01:13:53,660 --> 01:14:01,340
after the fact. Now, it being a criminal violation is completely separate question from whether

971
01:14:01,340 --> 01:14:08,640
or not you'd ever actually be prosecuted for it, but to be clear, federal law goes far

972
01:14:08,640 --> 01:14:16,840
enough that if someone wanted to, could prosecute banks or bank employees for dealing with

973
01:14:16,840 --> 01:14:18,700
marijuana or cannabis businesses.

974
01:14:20,120 --> 01:14:23,540
And that's just the controlled substances that itself.

975
01:14:24,680 --> 01:14:28,360
On top of that, we have a variety of anti-mondering laws.

976
01:14:28,360 --> 01:14:33,340
laws. There are lots of different money laundering laws, but in general, what they do is they

977
01:14:33,340 --> 01:14:41,140
make it a crime to either get money from an illegal enterprise or send money to an

978
01:14:41,140 --> 01:14:50,380
illegal enterprise. So if you have a drug selling business and you take that money and use it

979
01:14:50,380 --> 01:14:54,300
for something else, that's money laundering. If you have money that's coming from a clean

980
01:14:54,300 --> 01:14:59,980
source in music, for example, to fund terrorism. That's also money-long, right? So...

981
01:15:01,810 --> 01:15:31,670
It was hard for the federal government to enforce money laundering laws until they figured out that they could make banks enforce these laws for them. And so they came up with this law, the Bank Secrecy Act, and they said, look, banks, you need to know your customers well enough in order to prevent money laundering. So you need to know where the source of the money coming in is coming from and what your customers are doing.

982
01:15:31,670 --> 01:15:38,990
with it. So they have to verify the identity of people in businesses. And in theory, they

983
01:15:38,990 --> 01:15:46,130
should know if any of their businesses are selling marijuana. And if they don't do sufficient

984
01:15:46,130 --> 01:15:50,950
due diligence to know this, they could run a foul of these money laundering laws. What

985
01:15:50,950 --> 01:15:57,810
happens if you commit the offense of money laundering? Well, there are criminal and civil penalties

986
01:15:57,810 --> 01:16:00,030
used for that, that are substantially for banks.

987
01:16:01,170 --> 01:16:03,610
So that's on the criminal law side.

988
01:16:04,890 --> 01:16:07,990
But even beyond that, so sometimes I hear people say, well,

989
01:16:08,110 --> 01:16:10,590
if we just change the control substance

990
01:16:10,590 --> 01:16:13,490
is that this would solve all of our problems.

991
01:16:14,770 --> 01:16:15,330
Maybe.

992
01:16:15,950 --> 01:16:18,550
But to the turns out, you have lots and lots of problems.

993
01:16:21,470 --> 01:16:26,090
So even for state chartered banks or state chartered credit

994
01:16:26,090 --> 01:16:27,790
unions, the federal government

995
01:16:27,790 --> 01:16:37,690
even outside of criminal law and even setting aside the Constitution's supremacy clause has a lot of control over what state banks do.

996
01:16:37,950 --> 01:16:47,190
And one of the primary ways that they get control over state banks and credit unions is by providing federal deposit or share insurance.

997
01:16:47,910 --> 01:16:55,630
So the federal government says if you take your money and you put it in FDIC or NCUA insured institution

998
01:16:55,630 --> 01:17:05,530
And that institution goes out of business at least $250,000 in your heart or in money will just be given back to you by the federal government.

999
01:17:05,710 --> 01:17:09,790
And this is supposedly what makes us all happy to go put our money in banks.

1000
01:17:10,230 --> 01:17:13,750
It was a measure adopted after the Great Depression.

1001
01:17:14,690 --> 01:17:20,010
And this works great, but as you might expect with the federal government being the insurer,

1002
01:17:20,010 --> 01:17:26,050
they want to make sure that the insurance they're providing is a good risk, so they want

1003
01:17:26,050 --> 01:17:31,930
to make sure that all these banks that have federal depositors share insurance are safe

1004
01:17:31,930 --> 01:17:32,530
and sound.

1005
01:17:32,770 --> 01:17:37,790
And this gives them lots of authority to tell banks or credit unions what they can do.

1006
01:17:38,330 --> 01:17:44,590
And so they have a plethora of laws and regulations about this, but what I want to touch on today,

1007
01:17:44,590 --> 01:17:49,870
because I think it's particularly important for the cannabis industry, is the FDIC has

1008
01:17:49,870 --> 01:17:54,770
becoming increasingly alarmed by what they call reputational risk.

1009
01:17:55,750 --> 01:18:01,950
The idea is basically that if the bank does something that hurts its public perception,

1010
01:18:02,710 --> 01:18:07,050
that it might cause a run on the bank and this would be costly to deposit insurance fund.

1011
01:18:07,610 --> 01:18:14,080
And under this umbrella of reputational risk, the tell banks time and time again that you

1012
01:18:14,080 --> 01:18:19,460
to be aware of the risk associated with third-party payment processes.

1013
01:18:20,640 --> 01:18:26,080
So what they want is they want banks to assure themselves that if they're dealing with

1014
01:18:26,080 --> 01:18:33,900
an ATM company or a gift card company or someone else like PayPal that provides third-party

1015
01:18:33,900 --> 01:18:39,880
payment processing, that those third-party payment processors are complying with all the

1016
01:18:39,880 --> 01:18:44,740
same laws that the bank would have to, that this third-party payment processing isn't just

1017
01:18:44,740 --> 01:18:47,760
a way to get around anti-money laundering laws.

1018
01:18:48,460 --> 01:18:52,960
And so that's one of the things that makes me skeptical that some of these payment systems

1019
01:18:52,960 --> 01:18:58,840
that we're seeing emerging are long-term solutions for cannabis businesses.

1020
01:18:59,600 --> 01:19:05,420
I think that it's right to think that some of them will succeed for a short amount of time

1021
01:19:05,420 --> 01:19:08,160
until they become successful,

1022
01:19:08,720 --> 01:19:10,880
but then once they become successful,

1023
01:19:12,180 --> 01:19:19,600
regulators are on to them and that's potentially a problem.

1024
01:19:21,940 --> 01:19:24,280
And that's just, so that's just deposit insurance.

1025
01:19:24,500 --> 01:19:26,660
I guess I should mention that for credit unions

1026
01:19:27,240 --> 01:19:30,920
in nine states, California being one of them,

1027
01:19:31,280 --> 01:19:34,080
they don't technically need federal insurance.

1028
01:19:34,080 --> 01:19:39,100
You can get private share insurance that provides a similar amount of coverage.

1029
01:19:39,740 --> 01:19:49,580
In the United States, there's only one company who provides this ASI, ASI says we know about

1030
01:19:49,580 --> 01:19:57,420
money laundering, and we're not providing deposit insurance to banks that want it so that

1031
01:19:57,420 --> 01:19:59,400
they can serve the marijuana industry.

1032
01:20:00,400 --> 01:20:06,240
There's some developers out in Colorado that are hoping to start a credit union, and they

1033
01:20:06,240 --> 01:20:11,340
have begged and pleaded with ASI for private share insurance and ASI laughs at them.

1034
01:20:12,020 --> 01:20:18,760
So to the extent we were hoping that might be a loophole in some states at least right

1035
01:20:18,760 --> 01:20:18,980
now.

1036
01:20:19,100 --> 01:20:24,760
It isn't now put some other share insurance company or some foreign insurance company provide

1037
01:20:24,760 --> 01:20:32,900
share insurance, share in theory. I don't know if any to give you their cards so that you

1038
01:20:32,900 --> 01:20:39,720
can call them. So that's a possibility. Aside from the FDIC, we also have the Federal

1039
01:20:39,720 --> 01:20:45,680
Reserve. And one of the things that the Federal Reserve does is that it provides many of the

1040
01:20:45,680 --> 01:20:54,400
payment systems that we're all familiar with. So if you send an ACH, that happens on the

1041
01:20:54,400 --> 01:20:57,240
federal reserves, ACH systems.

1042
01:20:57,460 --> 01:21:00,580
They have to grant financial institutions access

1043
01:21:00,580 --> 01:21:03,740
to be able to process these electronic payments.

1044
01:21:04,360 --> 01:21:07,120
It's the same thing for large wire transfers.

1045
01:21:07,960 --> 01:21:12,160
If you don't have access to send ACH payments

1046
01:21:12,160 --> 01:21:14,920
as a practical matter, you're not going

1047
01:21:14,920 --> 01:21:16,140
to be a bank for very long.

1048
01:21:16,260 --> 01:21:17,920
That's one of the things you must have,

1049
01:21:19,080 --> 01:21:21,160
not because the law says you must have it,

1050
01:21:21,160 --> 01:21:23,800
but because you want to process transactions.

1051
01:21:25,160 --> 01:21:29,720
And so historically, access to the payment system

1052
01:21:29,720 --> 01:21:30,800
was just sort of given.

1053
01:21:31,500 --> 01:21:36,680
They figured that the FDIC and the financial regulator,

1054
01:21:36,860 --> 01:21:41,860
whether it was the state or the OCC and the other federal

1055
01:21:41,860 --> 01:21:43,780
regulator, whoever was chartering it,

1056
01:21:43,840 --> 01:21:46,020
would do all the due diligence to make sure

1057
01:21:46,320 --> 01:21:48,880
that there was no trouble with the payment processing.

1058
01:21:48,880 --> 01:21:52,640
But that's not how it has to work.

1059
01:21:53,120 --> 01:21:54,680
It's their payment system.

1060
01:21:55,140 --> 01:21:56,980
They can take their ball and go home.

1061
01:21:58,260 --> 01:22:03,600
So that's another potential problem for banks that,

1062
01:22:03,920 --> 01:22:09,120
even if you fix the control substances act,

1063
01:22:09,460 --> 01:22:13,340
if you can't convince the Federal Reserve that this isn't that risky,

1064
01:22:14,080 --> 01:22:17,940
we might wind up in a situation where banks are still having trouble.

1065
01:22:18,580 --> 01:22:24,800
processing payments simply because their regulators think that it's risky, and so I think

1066
01:22:24,800 --> 01:22:30,240
it's a two-pronged problem. One, you've got the law itself and two, you've got the risk

1067
01:22:30,240 --> 01:22:34,620
that you have to acknowledge comes with the industry and you've got to get to a point

1068
01:22:34,620 --> 01:22:39,680
where you can convince the regulators that the risk is not that large, because your risk

1069
01:22:39,680 --> 01:22:45,920
looks very much like the risk of someone that's selling alcohol or something else that some

1070
01:22:45,920 --> 01:22:47,020
people don't like, right?

1071
01:22:49,340 --> 01:22:56,420
So we mentioned earlier I think another thing that we want to be aware of

1072
01:22:56,420 --> 01:23:01,780
is that just because it's illegal doesn't necessarily mean that it will ever be enforced.

1073
01:23:03,020 --> 01:23:08,840
So this is where the Department of Justice guidance first the coal memorandum from 1990

1074
01:23:08,840 --> 01:23:17,360
from 2013 and then just a supplemental memo a few years later said look we

1075
01:23:17,360 --> 01:23:22,320
the Department of Justice understand we can't enforce all the marijuana laws

1076
01:23:22,320 --> 01:23:25,960
we've been relying on states to do that and we're gonna let you know what our

1077
01:23:25,960 --> 01:23:31,220
priorities are seems like a good idea right because then if you're not in

1078
01:23:31,220 --> 01:23:37,860
their priority it gives you some amount of assurance that you'll be okay so they

1079
01:23:37,860 --> 01:23:47,900
If they come up with nine enforcement priorities, many of them you've probably heard of, one is that they want to prevent the distribution to minors or in areas near schools.

1080
01:23:48,340 --> 01:23:54,800
They want to prevent marijuana receipts from going to criminal enterprises, cartels, gangs, things like that.

1081
01:23:55,220 --> 01:24:02,260
They want to prevent the diversion of marijuana from states where it's legal, like in Colorado, to other states where it's not like Wyoming.

1082
01:24:02,260 --> 01:24:08,120
They want to prevent the sale of marijuana as state dispensaries from expanding out into

1083
01:24:08,120 --> 01:24:10,380
the trafficking of other illegal drugs.

1084
01:24:11,340 --> 01:24:16,380
And here might be where one of your concerns about having armed guards in here, the spensaries

1085
01:24:16,380 --> 01:24:17,260
comes from.

1086
01:24:17,560 --> 01:24:21,880
We want to prevent violence and firearms in the distribution of marijuana.

1087
01:24:23,040 --> 01:24:31,180
And so some folks think that means that even state legal dispensaries should be not excessively

1088
01:24:31,180 --> 01:24:37,260
liberal and their use of firearms, preventing drug driving, preventing the growing or use

1089
01:24:37,260 --> 01:24:44,300
of marijuana on public lands. So this leaves, as you might imagine, lots of room for

1090
01:24:44,860 --> 01:24:50,440
state legal businesses assuming the Department of Justice follows these guidelines.

1091
01:24:52,140 --> 01:25:01,180
A few years or so later they follow up with this because banks and marijuana businesses

1092
01:25:01,180 --> 01:25:03,340
are complaining this said nothing about banking.

1093
01:25:04,160 --> 01:25:12,000
So we get some supplemental guidance and it says if you provide banking services to marijuana

1094
01:25:12,000 --> 01:25:21,540
want to really edit businesses, then prosecution might not be appropriate, but if you come in

1095
01:25:21,980 --> 01:25:26,000
a file of those priorities, that's a problem.

1096
01:25:26,720 --> 01:25:32,060
And also banks don't think that you can just bury your head and sand here and rely on

1097
01:25:32,060 --> 01:25:34,960
your customers to do the right thing.

1098
01:25:34,960 --> 01:25:38,100
If you're willfully blind, that's the problem, too,

1099
01:25:38,340 --> 01:25:45,420
and you're in our range of target criminals.

1100
01:25:47,360 --> 01:25:49,900
So all this is great, but that's just the Department

1101
01:25:49,900 --> 01:25:50,440
of Justice.

1102
01:25:50,760 --> 01:25:53,300
Banks still have all these regulators out there.

1103
01:25:54,380 --> 01:25:58,820
And banks probably weren't that concerned about being hauled

1104
01:25:58,820 --> 01:26:04,820
off to jail in handcuffs, because at least for large bankers,

1105
01:26:04,820 --> 01:26:06,520
That almost never happens to them.

1106
01:26:09,200 --> 01:26:13,340
So, they probably weren't that worried about the Department of Justice to begin with.

1107
01:26:13,400 --> 01:26:18,980
Maybe they were worried about some large fines for money laundering, but, you know, especially

1108
01:26:18,980 --> 01:26:19,700
big bankers.

1109
01:26:19,780 --> 01:26:26,600
They weren't that concerned about going to jail, but they were concerned about fines, but

1110
01:26:26,600 --> 01:26:27,880
they had these other regulators.

1111
01:26:27,980 --> 01:26:29,100
They don't want to be shut down.

1112
01:26:29,260 --> 01:26:30,100
They want to make money.

1113
01:26:30,100 --> 01:26:32,340
I mean, that's what they're there for.

1114
01:26:33,520 --> 01:26:34,720
It's a great thing.

1115
01:26:35,000 --> 01:26:35,560
American Dream.

1116
01:26:36,980 --> 01:26:40,120
So, they weren't worried about what about Finson

1117
01:26:40,120 --> 01:26:42,040
and what about the other regulators.

1118
01:26:42,660 --> 01:26:48,300
And Finson said, well, we think that there's a way to comply

1119
01:26:48,300 --> 01:26:49,840
with the money laundering laws.

1120
01:26:50,460 --> 01:26:55,380
And the way for you to comply with this is by preparing a variety

1121
01:26:55,380 --> 01:26:57,160
of time-intensive reports.

1122
01:26:58,100 --> 01:26:59,600
They didn't say it exactly like that,

1123
01:26:59,600 --> 01:27:00,400
but they should have.

1124
01:27:02,080 --> 01:27:04,520
So they said, look, we got all these new reports.

1125
01:27:04,520 --> 01:27:07,200
You know how you're supposed to file a suspicious activity

1126
01:27:07,200 --> 01:27:07,760
reports.

1127
01:27:08,240 --> 01:27:10,960
Well, we have got a whole new bunch of them

1128
01:27:10,960 --> 01:27:12,620
for your marijuana businesses.

1129
01:27:13,400 --> 01:27:17,060
First of all, you should file a marijuana limited

1130
01:27:17,060 --> 01:27:21,700
suspicious activity report if you've got a business

1131
01:27:21,700 --> 01:27:24,680
and you think it complies with all the federal priorities.

1132
01:27:24,880 --> 01:27:27,060
But you've got to tell us a lot of information about it.

1133
01:27:27,080 --> 01:27:28,640
You've got to tell us how much money

1134
01:27:28,640 --> 01:27:32,040
they have and when it's coming in and where they're getting it from and who's running

1135
01:27:32,040 --> 01:27:38,480
this business and you've got to do that at least every 90 days but probably more often.

1136
01:27:39,420 --> 01:27:44,720
So that's a lot of work for businesses that are ostensibly applying with state law.

1137
01:27:45,240 --> 01:27:50,460
But then they said, well there's more of that too because what if you have a business that

1138
01:27:50,460 --> 01:27:56,640
was supposedly complying with state law but you're concerned that maybe some of their customers

1139
01:27:56,640 --> 01:27:58,800
or actually taking marijuana across state lines,

1140
01:27:59,000 --> 01:28:01,560
well then you get a file of marijuana priority.

1141
01:28:02,240 --> 01:28:04,900
So, without tipping off the business mind you,

1142
01:28:05,300 --> 01:28:07,420
and tell us why you think they're violating the law,

1143
01:28:07,560 --> 01:28:12,100
because you know, you're an arm of the federal government's

1144
01:28:12,100 --> 01:28:14,480
enforcement mechanism for money laundering.

1145
01:28:15,020 --> 01:28:18,840
And if you decide to terminate a business as a customer

1146
01:28:18,840 --> 01:28:20,580
because you're worried that they're not complying

1147
01:28:20,580 --> 01:28:24,180
with the law, then you need to file a marijuana termination.

1148
01:28:26,900 --> 01:28:29,840
and if you're getting cash,

1149
01:28:32,430 --> 01:28:36,790
we need you to report that, too. The amount of cash every

1150
01:28:36,790 --> 01:28:44,370
time it comes in, where it came from, who brought it in, where they got it from, probably

1151
01:28:44,370 --> 01:28:45,350
where they got it from.

1152
01:28:48,910 --> 01:28:51,150
And this is not that easy. It's hard.

1153
01:28:53,420 --> 01:28:54,600
And it requires collecting

1154
01:28:54,600 --> 01:29:00,340
lots of information. And so now, even if a bank could do it and do it right and be convinced

1155
01:29:00,340 --> 01:29:06,940
that they weren't making any mistakes is very costly for them and remember they want to make money

1156
01:29:07,720 --> 01:29:15,740
and so they want to pass the cost along to the marijuana industry if they can, assuming I think

1157
01:29:15,740 --> 01:29:16,620
that they can do it right.

1158
01:29:21,500 --> 01:29:23,760
And here's the other thing about the Finson guidance.

1159
01:29:25,860 --> 01:29:26,800
The Finson guidance

1160
01:29:26,800 --> 01:29:37,860
says that if you don't implicate any of these eight priorities, then prosecution may not be appropriate.

1161
01:29:38,480 --> 01:29:44,500
Not is not appropriate. We won't prosecute you. It may not be appropriate.

1162
01:29:47,180 --> 01:29:48,700
I mean, what do they

1163
01:29:48,700 --> 01:29:50,000
think? Bankers can't read.

1164
01:29:52,280 --> 01:29:53,000
So

1165
01:29:55,110 --> 01:29:59,890
the guidance isn't particularly robust. It uses the word may, which

1166
01:30:00,000 --> 01:30:28,860
It doesn't give anyone a lot of assurances, and it sets a very high bar for compliance, especially at the retail level. Think about how a bank is supposed to know that a retail operation is selling to a customer who is for sure not going to turn around and give that marijuana to a minor or someone who's going to take it across state lines, or someone who's not carrying a weapon on them when they buy it. I mean, how do you know that as a bank?

1167
01:30:28,860 --> 01:30:38,820
how do you know that as a dispensary even so how do you come if this really is

1168
01:30:38,820 --> 01:30:45,060
the bar that you have to know these things it's very hard now it might be that

1169
01:30:45,060 --> 01:30:50,440
this is what they say the bar is but their bar is actually somewhere else it's

1170
01:30:50,440 --> 01:30:54,800
happens in banking they say one thing but then they really enforce some lower

1171
01:30:54,800 --> 01:31:00,620
level of compliance. But again, how do you know that? This is risky, particularly for banks

1172
01:31:00,620 --> 01:31:07,560
that already are making money and doing very well. Thank you. And cannabis industry is growing.

1173
01:31:07,860 --> 01:31:14,790
There's a lot of money there, but I mean, if you want, if you're a bank and you already have a good

1174
01:31:14,790 --> 01:31:18,990
amount of business, what makes you want to take this risk?

1175
01:31:21,090 --> 01:31:23,150
So, but fits in super proud of themselves.

1176
01:31:23,150 --> 01:31:28,190
their director says we've solved the marijuana banking problem super

1177
01:31:28,190 --> 01:31:33,590
proud of themselves and they say we know it's working because we get these

1178
01:31:33,590 --> 01:31:37,870
SARS and so we know that people are banking the marijuana industry and we say

1179
01:31:37,870 --> 01:31:43,290
oh really how many SARS have you got and they say we've got SARS from 320

1180
01:31:43,810 --> 01:31:49,090
financial institutions or that's banks and credit unions they also got a few

1181
01:31:49,090 --> 01:31:55,050
SARS from some securities firms, some money services businesses, that's like Western Union,

1182
01:31:56,330 --> 01:31:57,770
a few from casinos.

1183
01:31:59,410 --> 01:32:05,090
Okay, so 320 banks out of 13,000-ish.

1184
01:32:05,310 --> 01:32:07,570
They don't tell you what kind of SARS those are.

1185
01:32:07,710 --> 01:32:09,910
So some of those are marijuana termination SARS.

1186
01:32:10,150 --> 01:32:16,650
Some of those are from financial institutions that figured out they were banking a marijuana business and cut them off.

1187
01:32:16,650 --> 01:32:24,390
Some of them, there's marijuana priority SARS, so they figured out that the business was doing something wrong and they turned them in.

1188
01:32:25,370 --> 01:32:34,210
So it's not clear at all that those 320 financial institutions are ones that are voluntarily banking the marijuana industry.

1189
01:32:35,610 --> 01:32:41,250
Anyway, so if Fincent tells you the problem is solved, they're wrong.

1190
01:32:44,590 --> 01:32:49,150
And another limitation, of course, with the Department of Justice and Fins and Guidance

1191
01:32:49,150 --> 01:32:56,390
is that it's just guidance and that it can change with whoever might be enforcing the

1192
01:32:56,390 --> 01:32:58,370
mechanism at a particular point in time.

1193
01:32:58,850 --> 01:33:04,390
And so it might be that the Trump administration does not see marijuana exactly the same as

1194
01:33:04,390 --> 01:33:06,410
the Obama administration did.

1195
01:33:07,030 --> 01:33:12,510
In terms, President Trump has said that he thinks it's a state-by-state issue.

1196
01:33:12,510 --> 01:33:16,270
Of course, he can change his mind on that at any time if he would like to.

1197
01:33:18,110 --> 01:33:23,250
Jeff Sessions, I get to hear a lot about what Jeff Sessions thinks living in Alabama.

1198
01:33:24,630 --> 01:33:28,490
I remember well when he said that good people don't smoke marijuana.

1199
01:33:29,290 --> 01:33:30,710
He had my mom agree on this point.

1200
01:33:35,910 --> 01:33:39,670
But he's just barely going through the confirmation hearings.

1201
01:33:39,670 --> 01:33:42,270
It's hard to know exactly what he thinks.

1202
01:33:42,610 --> 01:33:49,230
He recognizes that the federal government probably doesn't have the resources for full enforcement of federal marijuana law.

1203
01:33:49,410 --> 01:33:57,730
But at the same time, he's very hesitant to say that there are federal laws out there he's not going to enforce that are not a priority for him.

1204
01:33:57,730 --> 01:34:07,570
So we're at this state where it's clearly illegal, federal regulators have substantial

1205
01:34:07,570 --> 01:34:13,610
authority to regulate banks with respect to risk, and that includes a risk posed by marijuana

1206
01:34:15,190 --> 01:34:20,950
industry directly as well as by third-party payment processors or vendors or that sort of thing.

1207
01:34:20,950 --> 01:34:27,770
And then we have a situation where even the enforcement mechanism that we have working

1208
01:34:27,770 --> 01:34:31,390
now isn't necessarily guaranteed to continue.

1209
01:34:32,550 --> 01:34:37,550
Might be also interesting to think for just a minute about some of the things that have

1210
01:34:37,550 --> 01:34:38,930
been tried elsewhere.

1211
01:34:39,670 --> 01:34:44,030
So Colorado decided that what they would do is that they would have a separate charter

1212
01:34:44,030 --> 01:34:47,310
for what they called cannabis credit co-ops.

1213
01:34:47,310 --> 01:34:52,210
They were going to be financial institution like things that were chartered by the state

1214
01:34:52,210 --> 01:34:54,010
of Colorado.

1215
01:34:54,010 --> 01:35:01,070
They were going to be owned cooperatively by members of the cannabis industry, sort of

1216
01:35:01,070 --> 01:35:05,010
like a credit union, but they said, well, one way we're going to keep the federal government

1217
01:35:05,010 --> 01:35:09,130
out of our businesses, we're not going to have them be federally insured.

1218
01:35:09,710 --> 01:35:15,130
And so that way, at least we don't have the problem with the FDIC or the NC way looking

1219
01:35:15,130 --> 01:35:19,330
over our shoulders simply because they're providing share insurance and we don't have to

1220
01:35:19,330 --> 01:35:24,270
go out and find private share insurance either because they're just not going to be insured

1221
01:35:24,270 --> 01:35:29,410
and this is just what the industry is going to have to live with because they're different

1222
01:35:29,410 --> 01:35:30,550
from everyone else.

1223
01:35:30,990 --> 01:35:38,290
And it seemed like a good idea at the time it was passed but when they were writing the bill

1224
01:35:38,290 --> 01:35:45,170
Well, they came up with a few things that were designed, I think, to make the state not

1225
01:35:45,170 --> 01:35:45,810
be a target.

1226
01:35:46,110 --> 01:35:52,650
So they said that these co-ops had to get access to the Federal Reserve system, which meant

1227
01:35:52,650 --> 01:35:59,300
that you had to convince the Federal Government that this wasn't money laundering, but it

1228
01:35:59,300 --> 01:36:00,320
is money laundering.

1229
01:36:01,820 --> 01:36:03,020
So that's a problem.

1230
01:36:03,540 --> 01:36:06,480
And they also said that you had to comply with all federal law.

1231
01:36:06,480 --> 01:36:14,440
And so, again, lawyers in Colorado can read, and people who might want to start cannabis

1232
01:36:14,440 --> 01:36:21,860
credit co-ops can read, and they looked at this, and they said, well, I can't do that.

1233
01:36:22,600 --> 01:36:23,860
I guess the whole point.

1234
01:36:24,800 --> 01:36:34,680
And so there are no applications for cannabis credit co-ops in Colorado, because on its face,

1235
01:36:34,680 --> 01:36:38,340
If you couldn't do that, that was the whole point of having something different.

1236
01:36:43,560 --> 01:36:50,060
So a group of people who were originally considering a cannabis credit co-op and pushing for

1237
01:36:50,060 --> 01:36:56,100
that legislation decided that actually the better way to go about entering the marijuana

1238
01:36:56,780 --> 01:37:00,760
banking business was to just get a Colorado credit union.

1239
01:37:01,580 --> 01:37:06,600
So the folks that were trying to start fourth-coronored credit union, they applied to the state

1240
01:37:06,600 --> 01:37:12,700
Colorado. Colorado gave them a charter and said, sure, we're happy to let you be a credit union

1241
01:37:12,700 --> 01:37:19,740
in Colorado. But Jeff, so, you know, you know, you need some insurance, but we're going to provisionally

1242
01:37:19,740 --> 01:37:26,220
give you a charter. And, you know, we don't require it, but we think you're probably going to want

1243
01:37:26,220 --> 01:37:34,340
a Federal Reserve Master account, too. So, you know, go ahead, find with us, let us know how it goes.

1244
01:37:35,640 --> 01:37:37,040
It didn't go so well.

1245
01:37:38,900 --> 01:37:44,020
So they applied for a master account Federal Reserve said, I don't know if you're aware

1246
01:37:44,020 --> 01:37:52,680
of this, but it's money laundering, and the NCUA said, no, you're going to bank marijuana

1247
01:37:52,680 --> 01:37:55,820
businesses, no, no.

1248
01:37:57,640 --> 01:38:03,800
And so then they said, well, now that we've been denied, we should ask the court to do

1249
01:38:03,800 --> 01:38:15,260
something about this and as it turns out judges can read and so they looked at the applications

1250
01:38:15,260 --> 01:38:24,240
and said well we don't see a judicial mechanism for forcing federal regulators to engage in

1251
01:38:24,240 --> 01:38:28,820
activity that might be viewed as money wandering under federal law that seems to us like not

1252
01:38:28,820 --> 01:38:34,680
something a court can do. Would your mileage vary if you found a different

1253
01:38:34,680 --> 01:38:39,740
court? I mean we all sort of know that the night circuit is a little different

1254
01:38:39,740 --> 01:38:43,880
than the 10th circuit where Colorado is. I

1255
01:38:45,960 --> 01:38:47,780
don't think so. I don't think even the

1256
01:38:47,780 --> 01:38:53,620
night circuit would go that far but that's just my prognostication so someone's

1257
01:38:53,620 --> 01:38:57,680
perfectly happy to try to run that down in California and see if you get a

1258
01:38:57,680 --> 01:39:01,480
different answer. I think the chances aren't that high.

1259
01:39:04,080 --> 01:39:07,700
So here's what I think. I think

1260
01:39:07,700 --> 01:39:14,720
that the path to marijuana banking is that Congress has to take action to legalize marijuana

1261
01:39:16,660 --> 01:39:24,780
or clearly prevent the punishment of banks that serve the industry. And I think it has

1262
01:39:24,780 --> 01:39:26,520
to happen at the level of Congress.

1263
01:39:26,740 --> 01:39:32,340
I don't think, given the existing state of law, that courts can do it, and I don't think

1264
01:39:32,340 --> 01:39:36,940
that there's anything that can be done on the state level to do it, and I don't think

1265
01:39:36,940 --> 01:39:43,520
that there's anything that can be done administratively to give, even at the federal level, to give

1266
01:39:43,520 --> 01:39:46,900
banks the level of comfort that is useful to them.

1267
01:39:46,900 --> 01:40:12,320
So I should probably mention one thing that's been sort of tried, attached to an appropriations bill was a writer that said that federal resources could not be used in certain states to prosecute people who were complying with who were otherwise complying with state marijuana laws.

1268
01:40:13,200 --> 01:40:20,760
And then what happened is the Department of Justice found medical marijuana users in the

1269
01:40:20,760 --> 01:40:25,900
Ninth Circuit who were complying with state law and prosecuted them criminally anyway.

1270
01:40:26,560 --> 01:40:31,040
The case went up to the Ninth Circuit and the Ninth Circuit said, yes, in fact this

1271
01:40:31,040 --> 01:40:37,360
writer prevents the prosecution of someone who's complying with state law.

1272
01:40:37,360 --> 01:40:42,820
And so some people were very excited about this case, US versus Macintosh, and said,

1273
01:40:43,020 --> 01:40:48,580
this is the opening we've wanted, you know, all we need is this appropriations writer.

1274
01:40:50,510 --> 01:40:56,960
Why it doesn't work this way for banks, I think, is that you've got to understand what

1275
01:40:56,960 --> 01:40:59,360
banks were concerned about from the beginning.

1276
01:40:59,360 --> 01:41:10,120
And part of it was perhaps the criminal law, but part of it is this safety and sound

1277
01:41:10,120 --> 01:41:12,480
is regulation from their regulators.

1278
01:41:13,140 --> 01:41:19,080
And I don't think that an appropriations rider keeps your federal regulators from setting

1279
01:41:19,080 --> 01:41:25,860
your compliance burden so high that you can't comply with it or prevents them from taking

1280
01:41:25,860 --> 01:41:30,440
your deposit insurance if they think that you're too risky and so I just don't think

1281
01:41:30,440 --> 01:41:37,220
that that goes quite far enough which brings me to my second point is that even if you

1282
01:41:38,300 --> 01:41:45,360
legalize or say that states get to decide the question of criminal law, you still need

1283
01:41:45,360 --> 01:41:52,680
a mechanism to make it clear that there are going to be reasonable due diligence requirements

1284
01:41:52,680 --> 01:41:56,420
for banks if they serve the industry.

1285
01:41:57,060 --> 01:42:03,700
So even if the federal government said tomorrow states you decide it could be that the Federal

1286
01:42:03,700 --> 01:42:12,320
Reserve and the FDIC still say you've got to make sure that no one leaving a marijuana

1287
01:42:12,320 --> 01:42:18,560
dispensary is taking that marijuana across state lines or giving it to a minor.

1288
01:42:18,560 --> 01:42:25,180
And if they do that, it doesn't matter how legal it is, banks won't be able to comply

1289
01:42:25,180 --> 01:42:29,280
with it, and they'll be worried about it, and we'll want to avoid the industry.

1290
01:42:29,860 --> 01:42:36,220
So part of the solution has to be getting clear to diligence requirements.

1291
01:42:38,500 --> 01:42:43,900
I think that someone else at some point was going to talk to you about Operation Chip Point,

1292
01:42:43,900 --> 01:42:52,320
which is a federal program that was trying to stem the flow of other illegal activity

1293
01:42:52,320 --> 01:42:56,140
by cracking down on banks that did business with that sort of thing.

1294
01:42:56,260 --> 01:43:01,840
But that's an operation choke point is an example, I think, of a situation where you have

1295
01:43:03,000 --> 01:43:09,740
activity that is ostensibly legal, but you see the great power of federal banking regulators

1296
01:43:09,740 --> 01:43:14,300
to make banks curtail that type of activity in the same sort of think it

1297
01:43:14,300 --> 01:43:19,240
happened here even if the Control Substances Act was changed or marijuana was

1298
01:43:19,240 --> 01:43:27,420
rescheduled. And that's basically what I see is the path. I suppose someone who

1299
01:43:27,420 --> 01:43:31,080
lives in the South should never offer this as a solution but since it's in

1300
01:43:31,800 --> 01:43:36,180
California and other people have already floated this, I suppose another option is

1301
01:43:36,180 --> 01:43:37,640
for you all just to secede.

1302
01:43:45,500 --> 01:43:47,160
Um, Professor, can I ask a question?

1303
01:43:47,400 --> 01:43:47,800
Yes, please.

1304
01:43:47,980 --> 01:43:54,940
So, one and two, the relationship, is that, are you stating that as an end or a, or relationship?

1305
01:43:55,360 --> 01:43:56,440
I think you need both.

1306
01:43:56,760 --> 01:44:02,040
So, I think you, you need a change to federal law that makes it clear that banks aren't going

1307
01:44:02,040 --> 01:44:09,500
be punished under criminal law, and then I think you need reassurances or limitations

1308
01:44:09,500 --> 01:44:18,060
on the risk regulating authority, federal regulators, so that the due diligence requirements

1309
01:44:18,060 --> 01:44:19,060
are not set too high.

1310
01:44:19,180 --> 01:44:22,680
I think you have to have both otherwise as a practical matter you're not going to wind

1311
01:44:22,680 --> 01:44:24,780
up with, with cannabis banking.

1312
01:44:25,320 --> 01:44:31,120
And then you've spoken to pieces of it, but I just want to raise it because there's a discussion

1313
01:44:31,120 --> 01:44:38,960
amongst some that advocate for a state bank claiming or stating that it would not have

1314
01:44:38,960 --> 01:44:46,020
be subject to all the rules and regulations and laws subject to national and state banks.

1315
01:44:46,420 --> 01:44:51,220
So can you can you think of any application where they're not subject to the same rules or

1316
01:44:51,220 --> 01:44:53,060
they're immune from some of those provisions?

1317
01:44:53,060 --> 01:44:59,970
Well, it depends on what you want your state bank to do.

1318
01:45:00,000 --> 01:45:14,700
To do, right? Do you want your state bank to have access to a payment processing system provided by the Federal Reserve? If you do, you have to play by their rules. There's no getting around that.

1319
01:45:17,160 --> 01:45:29,980
If you have a state bank that processes marijuana payments using its own system, you have to be aware that that state bank is still violating federal law.

1320
01:45:29,980 --> 01:45:33,340
You still have the control services act.

1321
01:45:33,500 --> 01:45:42,900
You still have the anti-money laundering laws, and it might be that that's fine because

1322
01:45:42,900 --> 01:45:45,020
no one will ever prosecute you for it.

1323
01:45:45,860 --> 01:45:50,580
That's, I think, the view of most state taxing authorities.

1324
01:45:51,060 --> 01:45:58,800
They all know that they're getting money that is from an illegal source under federal law.

1325
01:45:59,340 --> 01:46:05,580
But state taxing authorities have just decided that, well, okay, let the Department of Justice

1326
01:46:05,580 --> 01:46:11,020
come in and arrest us all and let's see how that goes, you know, they think as a political

1327
01:46:11,020 --> 01:46:12,940
calculation that that's not going to happen.

1328
01:46:13,780 --> 01:46:23,340
And so you think the same thing would be true with respect to a state-owned financial institution.

1329
01:46:24,720 --> 01:46:28,640
But where I really see the trouble coming is that when that state financial institution

1330
01:46:28,640 --> 01:46:31,620
and wants to deal with a financial institution

1331
01:46:31,620 --> 01:46:33,740
that's not a state financial institution.

1332
01:46:34,280 --> 01:46:36,900
And everyone knows that that state financial institution

1333
01:46:36,900 --> 01:46:38,920
was created for basically one reason

1334
01:46:38,920 --> 01:46:41,320
and that was marijuana payments.

1335
01:46:42,080 --> 01:46:45,200
Does the federal government have the power to make it

1336
01:46:45,200 --> 01:46:47,240
so that no bank can actually do business

1337
01:46:47,240 --> 01:46:49,440
with your state bank?

1338
01:46:49,820 --> 01:46:50,540
Yeah, absolutely.

1339
01:46:52,130 --> 01:46:53,100
Would they do that?

1340
01:46:55,740 --> 01:46:56,600
I'm a law professor.

1341
01:46:57,140 --> 01:46:59,160
Get the political science folks in here.

1342
01:46:59,160 --> 01:47:05,180
and ask them. I mean, I don't know. I think that's a harder calculation. I think it's a harder

1343
01:47:05,180 --> 01:47:13,280
calculation, the more states you get that we lie, some form of marijuana, but I don't know.

1344
01:47:13,540 --> 01:47:16,240
That's a risk you'd have to decide if you were willing to take.

1345
01:47:19,290 --> 01:47:20,750
So I agree with everything.

1346
01:47:21,030 --> 01:47:25,010
After two years of talking about all these experts, I came to the same conclusion you did.

1347
01:47:25,010 --> 01:47:30,890
But the State Board of Equalization has been collecting taxes, co-mingled funds for

1348
01:47:30,890 --> 01:47:31,890
the last 20 years.

1349
01:47:32,230 --> 01:47:33,190
And you're not in jail?

1350
01:47:33,350 --> 01:47:33,930
We're not in jail.

1351
01:47:34,690 --> 01:47:41,610
And so my first proposition was, why can't we do more at the State Board of Equalization?

1352
01:47:42,090 --> 01:47:46,570
Franchise Tax Board collects taxes, EDD collects taxes.

1353
01:47:46,790 --> 01:47:49,510
I mean, we are all collecting taxes at the state level, right?

1354
01:47:49,510 --> 01:47:56,930
So, you know, I think all states, actually, as we're going around talking different states,

1355
01:47:57,010 --> 01:47:57,850
they're all doing the same thing.

1356
01:47:58,030 --> 01:48:03,410
Every state agency is collecting money that is co-mingled and putting it into whatever

1357
01:48:03,410 --> 01:48:04,510
their bank is.

1358
01:48:05,430 --> 01:48:08,310
If some of those stylists do go to the Fed, right?

1359
01:48:08,830 --> 01:48:08,910
Yeah.

1360
01:48:09,150 --> 01:48:09,370
Right.

1361
01:48:09,630 --> 01:48:15,470
And you've heard me say, I'm like California, we're like the biggest money laundering in the country,

1362
01:48:15,570 --> 01:48:16,150
probably, right?

1363
01:48:16,970 --> 01:48:23,470
So, you know, if we're doing it and everybody's state is going to do, you know, 23 states

1364
01:48:23,470 --> 01:48:27,390
now have passed some sort of law and everybody wants to collect taxes, everybody is going

1365
01:48:27,390 --> 01:48:30,650
to be doing it at the state level.

1366
01:48:32,570 --> 01:48:38,430
Well, my parents taught me that everyone's doing it, excuse, doesn't always work.

1367
01:48:39,910 --> 01:48:42,650
And that's really the trouble here, right?

1368
01:48:42,650 --> 01:48:49,230
The trouble here is that you don't know at what point you're going to provoke the federal

1369
01:48:49,230 --> 01:48:49,670
government.

1370
01:48:49,850 --> 01:48:51,510
It's just hard to know that in advance.

1371
01:48:52,270 --> 01:48:56,870
So it could be that you'd be, you could get away with doing more.

1372
01:48:58,510 --> 01:49:02,530
That could very well be the case, but that's just it.

1373
01:49:02,670 --> 01:49:10,050
You're getting away with doing more and so when you cross the line, I can't tell you where

1374
01:49:10,050 --> 01:49:15,550
that enforcement line is. In fact, as a lawyer, I'm supposed to tell you it's illegal.

1375
01:49:19,090 --> 01:49:22,930
That's the pesky trouble with lawyers. They put these ethical rules in and we're supposed

1376
01:49:22,930 --> 01:49:26,970
to tell you when you're doing stuff that's illegal and so that's what they do and it makes

1377
01:49:26,970 --> 01:49:35,990
us unhelpful. But that's the trouble. You don't know where, could you do more? Maybe, but

1378
01:49:35,990 --> 01:49:39,130
you don't know where the line is. Where's the line where you would provoke the federal

1379
01:49:39,130 --> 01:49:41,150
government into taking action against you.

1380
01:49:49,770 --> 01:49:51,630
I'm with the credit unions and one of our

1381
01:49:52,350 --> 01:49:57,690
concerns and not only the CSA and other stuff is the RICO Act. I was wondering if you

1382
01:49:57,690 --> 01:50:01,450
would talk a little bit about that because if we fix the deposit problem we still have

1383
01:50:01,450 --> 01:50:06,170
the lending problem and we can't just have a lot of deposits and cash come into our institutions

1384
01:50:06,170 --> 01:50:10,550
without also lending that out. So I was wondering if you could maybe talk a little bit about

1385
01:50:10,550 --> 01:50:10,850
that.

1386
01:50:12,270 --> 01:50:23,450
So, Rico is designed to prevent criminal enterprises, the question is about how the

1387
01:50:23,450 --> 01:50:33,210
Rico statues, racketeering and corrupt enterprises would prevent credit unions or other financial

1388
01:50:33,210 --> 01:50:38,230
institutions from lending, even if you solve a deposit problem, let's see you get it so

1389
01:50:38,230 --> 01:50:45,450
that credit unions can accept money coming in, what happens when you lend it out.

1390
01:50:47,690 --> 01:50:50,890
And there are all sorts of problems when you lend it out.

1391
01:50:52,090 --> 01:51:00,880
One thing that might happen is that you'd be subject to criminal forfeiture law.

1392
01:51:01,140 --> 01:51:07,120
The business itself is subject to criminal forfeiture laws, and so it could be that when

1393
01:51:07,120 --> 01:51:14,020
your collateral is seized and the cannabis business doesn't pay you back. You have no real

1394
01:51:14,020 --> 01:51:23,420
recourse for that. Another problem even beyond the recose statutes is just with basic contract

1395
01:51:23,420 --> 01:51:32,080
law. At common law, contracts are that are made for an illegal purpose or not enforceable.

1396
01:51:32,080 --> 01:51:42,440
And so you go to a court to try to enforce the lending contract you've made with the borrower.

1397
01:51:43,060 --> 01:51:53,400
Now, you say, well, but I go to a Colorado state court to enforce my Colorado or go to a California court to enforce my California contract.

1398
01:51:53,920 --> 01:51:58,100
And they would be sympathetic because we legalize marijuana here.

1399
01:51:59,620 --> 01:52:05,860
What happens if you've got to find answer across the board or what happens if you just

1400
01:52:05,860 --> 01:52:12,620
got that one judge, you think the electorate got it wrong, so yeah, you've got problems

1401
01:52:12,620 --> 01:52:14,080
on the lending side too.

1402
01:52:15,240 --> 01:52:21,680
Now to be clear, the problems on the lending side go away if you can get both of these things

1403
01:52:21,680 --> 01:52:22,300
to happen.

1404
01:52:22,860 --> 01:52:28,360
If you don't have a recode problem, if it's no longer illegal, illegal, or if you can't

1405
01:52:28,360 --> 01:52:34,080
punish the industry for banks that serve the industry, same with your due diligence

1406
01:52:34,080 --> 01:52:34,760
requirements.

1407
01:52:34,980 --> 01:52:35,920
They go way down too.

1408
01:52:36,380 --> 01:52:43,280
So, if you use this way to solve your deposits coming in, I think you also solve almost all

1409
01:52:43,280 --> 01:52:50,320
of your back end problems on lending too, but yeah, lending is hard and financing is hard.

1410
01:52:50,320 --> 01:52:55,380
For those who are interested in the forfeiture issue that Professor Hill raised, that's going

1411
01:52:55,380 --> 01:53:00,020
to be part of the discussion in the next working group meeting.

1412
01:53:01,700 --> 01:53:04,440
Thank you.

1413
01:53:05,000 --> 01:53:10,020
Professor, can you talk a little bit about the process of clarifying the due diligence

1414
01:53:10,020 --> 01:53:15,640
requirements that be through rewriting the regulations themselves or through some clarification

1415
01:53:15,640 --> 01:53:18,740
vacation process then by a regulatory agency?

1416
01:53:18,940 --> 01:53:21,660
How might that come about?

1417
01:53:23,770 --> 01:53:28,130
So, I think one thing is that you could just do it

1418
01:53:28,130 --> 01:53:30,810
with congressional action, all right?

1419
01:53:31,310 --> 01:53:37,810
It, you could spell out a safe harbor in a federal statute

1420
01:53:37,810 --> 01:53:43,750
that said if you've done these five things,

1421
01:53:43,750 --> 01:53:50,410
we're going to presume that that's the gold standard and if it turns out that some marijuana

1422
01:53:50,410 --> 01:53:54,090
escapes across state law and the bank's not responsible.

1423
01:53:54,310 --> 01:54:00,090
So you could use congressional action if you've done these things, you fall within a safe

1424
01:54:00,090 --> 01:54:00,490
harbor.

1425
01:54:01,950 --> 01:54:05,090
You could do the same thing with regulation.

1426
01:54:05,630 --> 01:54:13,190
The trouble with regulation, administrative rules, is that you have to convince the

1427
01:54:13,190 --> 01:54:20,350
regulator, but they want the rules. And so federal regulators could create a safe harbor

1428
01:54:20,350 --> 01:54:26,050
that says we don't push for anything beyond this. This is what we think the gold standard

1429
01:54:26,050 --> 01:54:35,550
is. But if regulators don't want to do it, that's a problem. And also, if they don't do

1430
01:54:35,550 --> 01:54:39,750
it through rules themselves, if they do it through guidance, you have the trouble that

1431
01:54:39,750 --> 01:54:46,010
it's very easy for administrations or even different administrators within an administration

1432
01:54:46,010 --> 01:54:51,810
to change their mind or to not follow the guidance because I think that this one particular

1433
01:54:51,810 --> 01:54:58,390
case is different. So I think from a bank's perspective, you probably prefer congressional

1434
01:54:58,390 --> 01:55:03,930
action, but if you couldn't get congressional action here, an administrative rule would give

1435
01:55:03,930 --> 01:55:09,050
you substantial comfort. If you can't get an administrative rule, might you be happy

1436
01:55:09,050 --> 01:55:16,730
enough with very clear guidance, maybe it's possible that on the second prong here, very

1437
01:55:16,730 --> 01:55:23,950
clear administrative guidance would give banks enough security that they'd be willing

1438
01:55:23,950 --> 01:55:29,750
to take the plunge, but I think that bank's preference would be in that order, congressional

1439
01:55:29,750 --> 01:55:36,350
action, administrative rule, it's hard to change, and then very clear guidance.

1440
01:55:39,450 --> 01:55:42,310
That's basically being, I was going to be my question, so I won't make you go through

1441
01:55:42,310 --> 01:55:48,090
that whole answer again. But great presentation, by the way, I think we were trying to articulate

1442
01:55:48,090 --> 01:55:52,570
some of these same points in our last December 19th meeting and you showed us that we didn't

1443
01:55:52,570 --> 01:55:58,370
do as well a job doing that. So thank you for your time here. And also, I don't know if

1444
01:55:58,370 --> 01:56:01,470
you're going to be here for this afternoon for the second or third panel, the C panel, but

1445
01:56:01,470 --> 01:56:05,770
on the POS issue, I had the same question that was going to be my question for this afternoon

1446
01:56:05,770 --> 01:56:08,070
was how do you clear that?

1447
01:56:08,230 --> 01:56:10,130
How are you bypassing the voter reserve process?

1448
01:56:11,350 --> 01:56:13,870
So I'm going to still say that until the seat panel.

1449
01:56:15,050 --> 01:56:17,230
And the other thing, I kind of was thinking about when

1450
01:56:17,230 --> 01:56:18,630
I kind of take all this into consideration

1451
01:56:18,630 --> 01:56:20,130
and kind of think about, now what can we do?

1452
01:56:20,630 --> 01:56:22,750
It always seems to me, it goes back to the federal side

1453
01:56:22,750 --> 01:56:23,790
of things, back to Congress.

1454
01:56:24,010 --> 01:56:25,830
And if there's some way, it doesn't have

1455
01:56:25,830 --> 01:56:27,430
to be overly complicated to figure out

1456
01:56:27,430 --> 01:56:29,450
is there's just some way to have a safe passage type

1457
01:56:29,450 --> 01:56:31,890
legislation that just kind of gives you a pass?

1458
01:56:32,230 --> 01:56:34,150
And I know that because then what happens from theirs

1459
01:56:34,150 --> 01:56:38,230
and the regulators take that and they actually write the rules as they interpret the legislation

1460
01:56:38,230 --> 01:56:39,250
as they see it.

1461
01:56:39,990 --> 01:56:43,130
But so you've already done a good job on going through all that, so I'll leave it there.

1462
01:56:48,490 --> 01:56:52,510
Thank you very much for your presentation and your articles, really very informative.

1463
01:56:53,210 --> 01:56:58,170
On the question of back to the public bank question for a second, and on the question about

1464
01:56:58,170 --> 01:57:04,510
whether the federal government could prosecute the state for running a public bank, and this

1465
01:57:04,510 --> 01:57:07,450
is a little bit more of a constitutional law question, so I don't mean to put you on this

1466
01:57:07,450 --> 01:57:08,050
lot about it.

1467
01:57:08,050 --> 01:57:12,050
But what about the argument under sovereign immunity

1468
01:57:12,050 --> 01:57:15,030
article 10 of the Constitution that says powers that are not

1469
01:57:15,610 --> 01:57:17,670
specifically given to the federal government

1470
01:57:17,670 --> 01:57:18,790
or reserved to the states?

1471
01:57:19,970 --> 01:57:22,170
What do you think about that kind of an argument

1472
01:57:22,170 --> 01:57:23,530
with regard to the public bank?

1473
01:57:25,620 --> 01:57:29,120
So first of all, I do my best to avoid all constitutional

1474
01:57:29,120 --> 01:57:30,500
law questions.

1475
01:57:31,440 --> 01:57:34,060
I said it might not be fair, so I apologize for that.

1476
01:57:34,060 --> 01:57:47,230
So the trouble is still, I think, that

1477
01:57:49,630 --> 01:57:55,750
it's clear that the federal government has authority

1478
01:57:56,100 --> 01:58:04,510
to promulgate at least some rules with respect to criminal law, and I think it's also reasonably

1479
01:58:04,510 --> 01:58:13,130
clear that those laws are fair game for states. If a state beside it just wanted to run a cocaine

1480
01:58:14,150 --> 01:58:21,250
producing outfit, if that was your rate and make money, I think that no one would have trouble

1481
01:58:21,250 --> 01:58:28,730
on a constitutional law level when the federal government shut them down. The trouble with constitutional

1482
01:58:28,730 --> 01:58:34,410
law as I see it, which is why I don't do constitutional laws that it's not actually law.

1483
01:58:35,930 --> 01:58:43,510
We have a constitution that is written down that nine, or I guess now eight, justices

1484
01:58:43,510 --> 01:58:49,390
on the Supreme Court get to say what that means, and we don't really have any idea for

1485
01:58:49,390 --> 01:58:55,610
sure how it comes out because the framers never thought about what's going to happen when

1486
01:58:55,610 --> 01:58:59,390
in California as marijuana that they want

1487
01:58:59,390 --> 01:59:02,110
to be able to be sold and it's illegal under federal law.

1488
01:59:03,570 --> 01:59:08,090
So I think that there's some reason to argue

1489
01:59:08,090 --> 01:59:10,170
that if they did prosecute the state,

1490
01:59:12,170 --> 01:59:13,830
the federal government would have authorities

1491
01:59:13,830 --> 01:59:15,830
to do that, would the Supreme Court

1492
01:59:15,830 --> 01:59:18,770
who would have to ultimately decide that,

1493
01:59:18,930 --> 01:59:20,950
would the Supreme Court decide that?

1494
01:59:22,470 --> 01:59:25,330
I don't know, probably depends on when it comes up

1495
01:59:25,330 --> 01:59:33,290
who's on the court. I mean, this is why most professors love con law because they just say whatever they think and they can't be wrong.

1496
01:59:38,360 --> 01:59:44,560
Okay, very good. Thank you very much. We will call up. Thank you very kindly for your comments.

1497
01:59:54,560 --> 01:59:59,860
And now we turn to our last panel today, which is made up of people who can speak of the progress being made in getting banking.

1498
02:00:00,000 --> 02:00:13,140
Good morning, services to cannabis businesses in other states. We have with us today Rick Garza, director of the Washington State Liquor and Cannabis Board. Coral Parker, deputy treasurer for the state of Oregon, and Kenneth Burr, co-founder and CEO of PayQuick.

1499
02:00:34,550 --> 02:00:49,810
And we will begin with Rick Garza. Rick, welcome. Good morning. I guess I should turn that on. Good morning. Good to be with you today. I see some familiar faces that have come to visit us in Washington the last couple of years.

1500
02:00:50,770 --> 02:00:56,690
I have to shorten my presentation I was told so I'm going to really try to go this through this very quickly.

1501
02:00:57,670 --> 02:01:06,530
I guess I'd begin with this is very risky business and I'm going to share the experience in Washington with respect to banking.

1502
02:01:07,250 --> 02:01:15,910
One thing I start with is Oregon, Washington, Alaska and Colorado have very different systems that were put in place,

1503
02:01:15,910 --> 02:01:21,430
either by referendum or initiative or in the case of Colorado through a constitutional amendment.

1504
02:01:22,010 --> 02:01:26,450
So our systems are very different, but I think some of the things that we're doing in Washington,

1505
02:01:26,990 --> 02:01:32,350
the success that we've had in getting regional credit union and state charter banks is what I want

1506
02:01:32,350 --> 02:01:40,710
to share with you today. So let's begin with our system. So interesting that Alison Hokem who

1507
02:01:40,710 --> 02:01:49,810
So the author of the initiative in Washington wrote the initiative to replicate our alcohol beverage law coming out of prohibition in 1934.

1508
02:01:50,650 --> 02:02:02,270
So let me hear how that, what I just said, because there was an old Tide House law from 1934 that said a manufactured distributor of alcohol can have no interest in a retailer.

1509
02:02:02,830 --> 02:02:08,650
This initiative does not allow for vertical integration as you see in many, not all of the other states.

1510
02:02:08,650 --> 02:02:15,790
If I'm a manufacturer, distributor of cannabis, I can't have financial interest, director, indirect, in a retailer.

1511
02:02:16,230 --> 02:02:22,890
That's exactly what the old Tite House law was for alcohol in Washington here even in California.

1512
02:02:23,590 --> 02:02:27,730
And so I begin by saying we created a three tier regular system for marijuana,

1513
02:02:28,450 --> 02:02:33,470
producer, processor, retailer licenses, enforcement to carry out those rules,

1514
02:02:33,910 --> 02:02:37,650
and then collection and distribution of taxes and fees.

1515
02:02:38,170 --> 02:02:41,670
You've seen this and you've heard it talked about today, the cold memorandum.

1516
02:02:41,930 --> 02:02:44,710
It really is the basis by which we created our regulations.

1517
02:02:45,210 --> 02:02:47,310
There's three areas, one, and you've heard it.

1518
02:02:47,350 --> 02:02:48,270
I'll do it very quickly.

1519
02:02:48,810 --> 02:02:56,550
Diversion, how you're going to convince us that you're not going to divert product out of the state or invert illegal product into the legal system in Washington.

1520
02:02:57,450 --> 02:02:59,790
Secondly, how you're going to keep it out of the hands of kids.

1521
02:03:00,270 --> 02:03:04,730
I have to be 21 like alcohol to possess or consume marijuana.

1522
02:03:04,730 --> 02:03:07,570
I want to, what did you do in your state to address that issue?

1523
02:03:08,210 --> 02:03:11,330
Number three, how are you going to keep it out of the hands of cartels, criminals?

1524
02:03:11,790 --> 02:03:13,190
We've talked a little bit about that.

1525
02:03:13,650 --> 02:03:14,990
I'll share how we've done that.

1526
02:03:16,730 --> 02:03:18,910
So first, the licensing requirements.

1527
02:03:19,190 --> 02:03:23,550
These were the licensing requirements for alcohol after prohibition in 1934.

1528
02:03:23,990 --> 02:03:32,730
We don't do fingerprints anymore for alcohol licenses, but we do a criminal history investigation of the applicant.

1529
02:03:32,730 --> 02:03:42,390
There are spouses, it includes a fingerprint, both with the Washington State Patrol in Washington and then through the FBI we do a criminal history of the nation.

1530
02:03:42,690 --> 02:03:48,470
You have to attest when you apply with the liquor and cannabis board for all arrests and all convictions.

1531
02:03:48,930 --> 02:03:58,110
There's a point system that we have just like we have for alcohol, but that's really unique to anything else that we do in Washington.

1532
02:03:58,110 --> 02:04:01,050
and we also do a financial background investigation,

1533
02:04:01,050 --> 02:04:02,690
whether it's you get the source of funds

1534
02:04:02,690 --> 02:04:05,570
to acquire the business, it's probably very similar

1535
02:04:05,570 --> 02:04:07,210
what you have for alcohol in this state.

1536
02:04:07,310 --> 02:04:09,410
We have it for alcohol in our state.

1537
02:04:09,810 --> 02:04:11,870
It goes even further if I'm a financier

1538
02:04:11,870 --> 02:04:13,630
and investigator or investor.

1539
02:04:13,890 --> 02:04:15,690
I have to go through a criminal background check

1540
02:04:15,690 --> 02:04:17,950
and a financial background check.

1541
02:04:18,370 --> 02:04:20,610
And then there's a six month residency requirement

1542
02:04:21,390 --> 02:04:23,330
Colorado I think at two years.

1543
02:04:24,070 --> 02:04:26,510
And then there's a buffer zone for a thousand feet

1544
02:04:26,510 --> 02:04:31,370
where these licenses, a producer process or a real tailor, can not be located.

1545
02:04:31,590 --> 02:04:34,930
It's 1,000 feet from where children are typically located, schools,

1546
02:04:35,190 --> 02:04:39,770
childhood centers, transit centers, game archive libraries, playgrounds, and public parks.

1547
02:04:40,290 --> 02:04:44,950
And then with respect to the version issue, a pretty robust and

1548
02:04:44,950 --> 02:04:52,390
comprehensive seed to sell system that we have like Colorado and like many of the states that have legalized.

1549
02:04:53,590 --> 02:05:00,370
Just very quickly, the number of licenses in Washington about 1273 total licenses produced

1550
02:05:00,370 --> 02:05:07,690
a processor, almost 500 licenses, retail licenses statewide, I'll just take you back when the

1551
02:05:07,690 --> 02:05:11,510
fiscal impact statement was done the initiative four years ago, do you know how many they

1552
02:05:11,510 --> 02:05:16,070
estimated we would have with respect to growers and processors 100 each?

1553
02:05:16,070 --> 02:05:21,930
They assume there would be 2,000 people that applied over 7,000 applied to get into the

1554
02:05:21,930 --> 02:05:22,270
business.

1555
02:05:22,610 --> 02:05:28,070
And so we won't have time to talk about that, but some other day, I'm thinking of a

1556
02:05:28,070 --> 02:05:32,230
lawyer right now, the need that you'll have to regulate, I can't even imagine California

1557
02:05:32,230 --> 02:05:36,110
Washington, it's typical enough with a number of licensees that we have.

1558
02:05:38,760 --> 02:05:41,300
There's so much information that's been asked over the years.

1559
02:05:41,560 --> 02:05:45,640
We actually have a dashboard at our website where you can go and look at where all the

1560
02:05:45,640 --> 02:05:51,120
retail locations, all the producer processor locations are, and as you can see it's pretty

1561
02:05:51,120 --> 02:05:52,780
spread out around the state.

1562
02:05:54,400 --> 02:05:59,400
We have enforcement trends that we look at as an agency, the growth of the industry,

1563
02:06:00,900 --> 02:06:06,800
marijuana complaints, like the alcohol industry, the industry likes to call us up and let

1564
02:06:06,800 --> 02:06:09,260
us know what the competitor is doing or not doing.

1565
02:06:09,260 --> 02:06:12,400
And then you see the top three marijuana violations.

1566
02:06:12,920 --> 02:06:16,660
Failure utilize or maintain the traceability system,

1567
02:06:16,940 --> 02:06:18,080
seller service to minor.

1568
02:06:18,460 --> 02:06:21,520
We do compliance checks for our retailers,

1569
02:06:21,520 --> 02:06:25,140
just like we do for alcohol three or four a year

1570
02:06:25,140 --> 02:06:26,100
for each of them.

1571
02:06:26,680 --> 02:06:28,680
Pretty aggressive, even more aggressive than we have

1572
02:06:28,680 --> 02:06:29,420
for alcohol.

1573
02:06:29,740 --> 02:06:33,040
You can see the compliance rate adiped in May of 2016,

1574
02:06:33,200 --> 02:06:35,880
but typically right now our compliance rate

1575
02:06:35,880 --> 02:06:39,280
you'd compliance rate for marijuana is about 93%.

1576
02:06:41,220 --> 02:06:45,320
And then our sales activity, you can see 260 million

1577
02:06:45,320 --> 02:06:49,520
first fiscal year 2015, almost $1 billion last year.

1578
02:06:49,980 --> 02:06:51,580
Here we're only a little over halfway.

1579
02:06:52,080 --> 02:06:56,280
We assume we'll have sales of about $1.5, $1.6 billion.

1580
02:06:57,000 --> 02:07:00,280
For the current fiscal year, we're averaging 4.3 million

1581
02:07:00,280 --> 02:07:01,120
in daily sales.

1582
02:07:01,520 --> 02:07:05,360
You can see the excise taxes that are being collected below that.

1583
02:07:05,360 --> 02:07:11,040
Again, take a look at what the initial forecast was for projections, for excise taxes that would be collected.

1584
02:07:11,680 --> 02:07:13,760
We've doubled in almost triple those.

1585
02:07:14,980 --> 02:07:20,200
The original fiscal estimate of how much money would be collected was somewhere between,

1586
02:07:20,480 --> 02:07:24,740
and literally it said this, between zero and $2 billion over five years.

1587
02:07:24,820 --> 02:07:29,240
Because nobody knew how much business it would come in the first two years.

1588
02:07:29,240 --> 02:07:35,180
If you look at the first five years, it looks like it will be somewhere around $1.2, $1.3

1589
02:07:35,180 --> 02:07:37,960
billion in excise taxes that are collected.

1590
02:07:39,680 --> 02:07:42,420
So doing business with the marijuana industry.

1591
02:07:42,740 --> 02:07:46,040
I gave you a couple of documents and I wanted you to see those.

1592
02:07:46,260 --> 02:07:54,660
The first one was something that came out after the Finsam guidance was provided in February

1593
02:07:54,660 --> 02:07:55,780
of 2014.

1594
02:07:55,780 --> 02:08:08,520
And it was really the first memorandum that we sent to financial institutions in our state sharing with them the kind of information that we have available at the liquor and cannabis board for those banks.

1595
02:08:08,760 --> 02:08:12,760
I also provided you a copy of a release of personal records.

1596
02:08:13,000 --> 02:08:19,780
So typically in our state what happens is the applicant goes or the licensee goes to the bank.

1597
02:08:19,780 --> 02:08:25,620
The bank then has them sign a waiver from the board that allows us to basically hand over the licensing file.

1598
02:08:25,940 --> 02:08:33,940
So all the work that we did with respect to their criminal history, all the work that we did with respect to their financing is handed over to the bank.

1599
02:08:34,240 --> 02:08:39,380
And another thing that happens is typically they'll ask through public records to get any information

1600
02:08:39,380 --> 02:08:46,160
into their monthly or quarterly of any activity, any enforcement violations that have been issued against the

1601
02:08:46,160 --> 02:08:50,440
licensee, in some instances of these loss those accounts because of that.

1602
02:08:50,780 --> 02:08:55,840
But what we were trying to do is create a transparent system between the board.

1603
02:08:56,000 --> 02:09:00,000
A lot of this information is provided on our website and our banks.

1604
02:09:00,420 --> 02:09:06,160
You can go into our website on a monthly basis and our banks and credit unions do this.

1605
02:09:06,420 --> 02:09:09,840
You can see what the sales are of that particular account.

1606
02:09:10,260 --> 02:09:13,420
And then they can balance that against the activity at the bank.

1607
02:09:13,420 --> 02:09:20,020
And so, again, this is an opportunity to try to create transparency, so that we're working pretty closely with the banks.

1608
02:09:21,600 --> 02:09:27,840
I don't know how you're going to adhere to the coal memorandum of fact people are allowed to transact with cash.

1609
02:09:28,380 --> 02:09:34,300
So, I mean, I felt like it was a little bit depressing to hear what Julie had to say, but it's true.

1610
02:09:34,720 --> 02:09:40,400
But I have to tell you, I think the strategy we took was you're going to have to be proactive.

1611
02:09:40,400 --> 02:10:07,580
I mean, the coal memorandum, I don't think, I don't think you can wait for the government, the federal government to move, I don't think it's going to, I think you have to be proactive in the state as we have to do everything you possibly can to allow for the businesses to use, whether it's state-charted banks or credit your local, and for most of the state, it's regional credit unions who have stepped forward.

1612
02:10:07,580 --> 02:10:12,340
And that continues to increase every three or four months,

1613
02:10:12,600 --> 02:10:17,340
another credit union or say charter bank moves forward.

1614
02:10:17,480 --> 02:10:21,640
But you just have to be proactive in doing everything that you can.

1615
02:10:21,980 --> 02:10:24,540
And I don't think we can really deal with the issues.

1616
02:10:25,180 --> 02:10:26,280
But you have guidance.

1617
02:10:26,460 --> 02:10:27,500
You have the call memorandum.

1618
02:10:27,540 --> 02:10:29,960
You have the Finson guidance that you were given.

1619
02:10:30,160 --> 02:10:31,300
And it's really true.

1620
02:10:31,400 --> 02:10:32,580
It's not the force of law.

1621
02:10:33,040 --> 02:10:33,940
It's not even a rule.

1622
02:10:34,220 --> 02:10:35,680
It's just simply a memorandum.

1623
02:10:35,680 --> 02:10:46,200
But it gives us enough guidance, and I think we've had success in Washington because we work with the Department of Financial Institutions because I'm sure you have here in California.

1624
02:10:46,520 --> 02:10:57,040
We've been active with our conventional delegation to get them to pressure the federal government to give guidance in the first hand, which they did took a little bit of time, but they did.

1625
02:10:57,580 --> 02:11:05,200
So I guess my recommendation to you all would be do everything you can in trying to be transparent.

1626
02:11:05,200 --> 02:11:11,280
And I think we're successful because of the scrutiny that we go through with our licensees in order to hold a license.

1627
02:11:11,860 --> 02:11:16,740
And in some of the states where they've had problems, it's because they're not scrutinizing that license.

1628
02:11:16,880 --> 02:11:22,280
They're not doing enough due diligence to make sure that you go through a criminal background check and

1629
02:11:22,280 --> 02:11:27,860
a financial investigation so that you know where the money is flowing and where it came from for the business.

1630
02:11:28,020 --> 02:11:33,440
So I know I may have gone a little bit over the biggest issue that we have that you can see on the slide is

1631
02:11:33,440 --> 02:11:41,320
The biggest concern is the excise taxes collected at a retail level in Washington is 37%.

1632
02:11:41,700 --> 02:11:44,700
That's a lot of cash that was coming to the liquor and cannabis board.

1633
02:11:45,360 --> 02:11:52,440
And so by being able to get these credit unions and state charter banks to provide that banking service and financial services,

1634
02:11:52,900 --> 02:11:58,920
we were concerned because people were literally coming to our office to pay their excise taxes as you heard with cash.

1635
02:11:58,920 --> 02:12:05,120
We were able to move that to about 90% of it now was coming in a form other than cash.

1636
02:12:05,500 --> 02:12:07,680
And for that, for that, it was really important.

1637
02:12:08,000 --> 02:12:13,940
We had employees, we had a window, we had a lot of people paying early on in cash, and

1638
02:12:13,940 --> 02:12:14,680
that was problematic.

1639
02:12:15,040 --> 02:12:19,000
So with that, I'll hand it over to the next presenter.

1640
02:12:19,500 --> 02:12:19,800
Thank you.

1641
02:12:27,660 --> 02:12:28,320
Is this on?

1642
02:12:28,780 --> 02:12:28,980
All right.

1643
02:12:29,580 --> 02:12:33,080
So hi, I'm Kora Parker, I'm the director of finance with the Oregon State Treasury.

1644
02:12:33,080 --> 02:12:39,540
And my relationship to the industry, as you might imagine, is very similar to the gentleman

1645
02:12:39,540 --> 02:12:42,840
who is here from the LA City Office of Finance.

1646
02:12:43,300 --> 02:12:50,760
Primarily, I work with financial institutions and state agencies, Department of Revenue

1647
02:12:50,760 --> 02:12:54,880
and others to bank the funds that we're collecting from the industry.

1648
02:12:55,480 --> 02:13:00,020
And while I know that's not the focus of today's conversation, I do just want to say that I

1649
02:13:00,020 --> 02:13:01,440
I think it's important for you all to make sure

1650
02:13:01,440 --> 02:13:03,440
that you're running those efforts concurrently.

1651
02:13:03,620 --> 02:13:04,700
I know the state treasurer's office

1652
02:13:04,700 --> 02:13:07,880
is working with their vendor partners as well

1653
02:13:08,600 --> 02:13:11,740
to make sure that all the doors and options

1654
02:13:11,740 --> 02:13:14,660
are open with regard to those opportunities.

1655
02:13:15,420 --> 02:13:19,020
I will tell you though, we have had some of the same issues

1656
02:13:19,020 --> 02:13:21,260
that the industry has had with regard

1657
02:13:21,260 --> 02:13:22,740
to banking those taxes.

1658
02:13:24,100 --> 02:13:26,140
And primarily right now,

1659
02:13:26,440 --> 02:13:29,360
we are still in a place very different from Washington.

1660
02:13:29,360 --> 02:13:33,560
and we are still in a place where from the retail sales tax collection perspective,

1661
02:13:34,060 --> 02:13:42,680
every one in the state has to come to Salem and pay in either cash or check to a central location.

1662
02:13:43,140 --> 02:13:48,980
We then deposit those funds by cash vaults.

1663
02:13:49,180 --> 02:13:54,860
So an armored car is coming to that physical location and taking those funds to our location in Portland.

1664
02:13:55,540 --> 02:14:00,860
That creates all of the same security and other issues that you heard some of the industry

1665
02:14:00,860 --> 02:14:03,000
I've just talked to you about early this morning.

1666
02:14:05,080 --> 02:14:10,220
Right now because the industry is largely unbanked, there's a, you know, there's, that sort

1667
02:14:10,220 --> 02:14:16,120
of meshes well, maybe not the single location piece of it, but it meshes well with their inability

1668
02:14:16,120 --> 02:14:18,360
to pay us by electronic means anyway.

1669
02:14:19,140 --> 02:14:23,720
But at some point the industry is going to find a solution and so you as a state need to make

1670
02:14:23,720 --> 02:14:29,400
sure that you are ready on the state side when the industry does find a solution.

1671
02:14:29,700 --> 02:14:37,100
So I just, I offer that because I know at the national banking level there are a variety

1672
02:14:37,100 --> 02:14:43,260
of opinions from, you know, the major banks with regard to their willingness to bank these

1673
02:14:43,260 --> 02:14:52,260
response, and the nuances that they apply to those get really, really tight.

1674
02:14:53,300 --> 02:14:58,040
And I just, it's something that you are going to need to work with from your perspective.

1675
02:14:58,040 --> 02:14:59,980
with regards to baking the industry.

1676
02:15:00,000 --> 02:15:29,980
You know, you've heard a lot of things today. You know, we, we were not nearly as coordinated as you are or as Washington was as we started in Oregon. Initially, there were a number of tech startup firms and others who were coming and visiting us, and I think the challenge that they had, and, you know, you can probably speak to this, there was no single place to come and have that conversation. No single place at the state level, either from a, from a banking regulatory

1677
02:15:29,980 --> 02:15:35,280
regulatory or licensing regulatory perspective, but I also think no single place from an industry

1678
02:15:35,280 --> 02:15:40,400
perspective with regard to the coalitions, that you know, a number of different cannabis-related

1679
02:15:40,400 --> 02:15:44,660
coalitions, but they weren't necessarily working together to have those conversations.

1680
02:15:44,940 --> 02:15:49,660
And so I think it made it very difficult for those who might have a solution even if it

1681
02:15:49,660 --> 02:15:53,160
is a short-term solution, very difficult for them to have an entry.

1682
02:15:53,280 --> 02:15:58,220
They're sort of, where do we start, how do we, how do we, you know, enter into that conversation.

1683
02:15:58,220 --> 02:16:02,220
So I applaud you for the work that you're doing here because I think that will make some

1684
02:16:02,220 --> 02:16:05,420
of that conversation easier for you.

1685
02:16:06,520 --> 02:16:11,540
We had attempts by a couple of different state chartered banks to really take on this business

1686
02:16:11,540 --> 02:16:16,940
and say, you know, we'll raise our hands, we'll be the ones who will tackle these issues.

1687
02:16:17,260 --> 02:16:22,960
They experienced the very issues that Professor talked to you about some of the others today.

1688
02:16:22,960 --> 02:16:27,940
when they got through really the regulatory constructs

1689
02:16:27,940 --> 02:16:29,620
that they had to set up to be able to do that,

1690
02:16:29,620 --> 02:16:31,380
it just was too costly.

1691
02:16:31,640 --> 02:16:34,820
There just was no way for them to really do that

1692
02:16:34,820 --> 02:16:37,760
in a manner that allowed them to continue to make money,

1693
02:16:37,940 --> 02:16:38,840
which is their goal.

1694
02:16:40,440 --> 02:16:44,140
We have experienced with a number of calls

1695
02:16:44,140 --> 02:16:47,360
to create a state bank, Oregon happens

1696
02:16:47,360 --> 02:16:50,300
to have a constitutional prohibition on such a thing.

1697
02:16:50,300 --> 02:16:58,860
So unless there were an initiative or a legislator somehow sought to it to make a change there,

1698
02:16:59,560 --> 02:17:02,900
we don't have the ability to do that. But as the professor mentioned,

1699
02:17:03,180 --> 02:17:07,720
I think even if we were to move to that level, we would still that just hit all of those same

1700
02:17:07,720 --> 02:17:14,880
regulatory and legal constructs and issues that the financial institutions are today as well.

1701
02:17:15,960 --> 02:17:19,520
One of the things that Mr. Garza talked about was really the regulatory construct.

1702
02:17:19,520 --> 02:17:27,300
And I think what Washington did that we are just beginning to do is provide access to the licensing and

1703
02:17:27,300 --> 02:17:34,300
fraction and compliance information to all of the financial institutions in a way that was simple and

1704
02:17:34,300 --> 02:17:42,240
easy and clear. So that while they may not be able to go that next step and determine that they haven't

1705
02:17:42,240 --> 02:17:49,680
and provided access to minors, three layers down the transaction, they were able to very

1706
02:17:49,680 --> 02:17:54,000
clearly get to that level that the state was able to certify to.

1707
02:17:54,300 --> 02:17:59,420
And I think that is what has made it a much simpler process within the state.

1708
02:17:59,640 --> 02:18:04,240
We're going to starting to do that, but it is much more of an ad hoc process.

1709
02:18:04,960 --> 02:18:10,580
Our licensing board is really starting to follow in more of an ad hoc and one-off way

1710
02:18:11,520 --> 02:18:23,560
access and relationship with individual financial institutions but have nowhere near the sort of depth and breadth of information available on websites and in other just very clear and distinct ways.

1711
02:18:24,800 --> 02:18:36,260
So I applaud again Washington for the efforts they've done there and we are several of us in the state who are trying to get those who have authority for those efforts to really follow that model.

1712
02:18:38,300 --> 02:18:45,320
Beyond that, I will say, even with that sort of dire description of what's been happening

1713
02:18:45,320 --> 02:18:53,860
in Oregon, we find that there still are about 50% cash to check ratio coming in for retail

1714
02:18:53,860 --> 02:19:02,240
sales tax payments, and that's maintained about that same level for the entire first year

1715
02:19:02,240 --> 02:19:03,220
that we've been online.

1716
02:19:03,880 --> 02:19:08,740
Now, the 50% that are baked, we have seen churn,

1717
02:19:09,000 --> 02:19:12,660
we have seen, they started here, now they're here,

1718
02:19:13,100 --> 02:19:14,860
a couple of months later, there's somewhere else,

1719
02:19:15,280 --> 02:19:17,740
but there still seems to be this sort of maintenance

1720
02:19:17,740 --> 02:19:20,660
of about 50% of those payments coming in

1721
02:19:21,500 --> 02:19:23,700
are baked in some manner.

1722
02:19:24,880 --> 02:19:28,280
That officially, we have one bank and two credit unions

1723
02:19:28,280 --> 02:19:30,660
who are officially taking money.

1724
02:19:31,660 --> 02:19:38,300
They are not the only ones that those transactions are coming in from, however.

1725
02:19:38,900 --> 02:19:46,740
So we believe there's just more of a quiet, don't ask, don't tell long-term relationships.

1726
02:19:47,220 --> 02:19:52,280
You know, used to be Mike's bike shop, now it's Mike's pot shop, but I know Mike.

1727
02:19:52,900 --> 02:19:57,680
And I'm willing to bank Mike because he's been my long-term customer.

1728
02:19:57,680 --> 02:20:00,860
And I think we have a lot of that going on in Oregon right now.

1729
02:20:01,980 --> 02:20:11,720
I don't know how sustainable that is as the conversation continues just from a more global scale.

1730
02:20:12,100 --> 02:20:25,420
So, you know, in general, I think we have come to this end conclusion in Oregon that changes need to occur at the federal level, both on the criminal side and on the regulatory side.

1731
02:20:25,420 --> 02:20:29,700
and that beyond that, there is no good solid clear answer.

1732
02:20:30,500 --> 02:20:33,460
But you can take efforts similar to what Washington has done

1733
02:20:33,460 --> 02:20:34,780
on a regulatory scheme.

1734
02:20:35,460 --> 02:20:39,700
I think there are some technology solutions

1735
02:20:40,320 --> 02:20:42,600
that could be good answers.

1736
02:20:42,980 --> 02:20:45,500
Again, I think, that's it.

1737
02:20:46,300 --> 02:20:51,420
I think as the professor mentions that there's

1738
02:20:51,420 --> 02:21:10,780
questions by those of us who are considering, partnering and those relationships, really how long-term and sustainable they are, but they may be long-term enough that they get you through the level of conversation that, frankly, you're going to be able to bring you there at the federal level.

1739
02:21:10,780 --> 02:21:19,380
So, you know, I appreciate the opportunity to speak with you, and I hope that we can partner with you as you take the conversation further

1740
02:21:20,600 --> 02:21:25,440
because we just look forward to you helping solve some of the challenges that we're all experiencing.

1741
02:21:27,200 --> 02:21:30,860
So, I'm sorry, Jennifer. I understand this because you have to leave pretty soon.

1742
02:21:31,200 --> 02:21:39,520
Thank you very much, everybody. I really want to applaud Washington and what they've done.

1743
02:21:39,520 --> 02:21:46,420
And there's a reason that we started our business in Washington and that's because of a number

1744
02:21:46,420 --> 02:21:49,840
of factors that I'll go through in a minute, but let me explain for a second what pay-quick

1745
02:21:49,840 --> 02:21:50,600
is and what we did.

1746
02:21:51,160 --> 02:21:52,120
We're a compliance company.

1747
02:21:52,480 --> 02:21:57,700
First and foremost, we are a compliance company that has a very sophisticated e-wallet that

1748
02:21:57,700 --> 02:22:03,560
allows for electronic payment along the entire supply chain, both from producer processors

1749
02:22:03,560 --> 02:22:07,800
to retailers and then from consumers to retailers as well.

1750
02:22:07,800 --> 02:22:11,400
So a consumer can pay a retailer, and a retailer can pay a producer processor.

1751
02:22:11,580 --> 02:22:14,200
And the way we do that and the way is through compliance.

1752
02:22:14,800 --> 02:22:17,640
We have a full BSA AML compliance program.

1753
02:22:18,240 --> 02:22:24,020
One thing that helps us incredibly is that we can fill in a form and send it to the

1754
02:22:24,020 --> 02:22:28,200
liquor and cannabis ward in Washington and get the marijuana businesses license application.

1755
02:22:28,700 --> 02:22:34,240
So we can do our own, know your customer due diligence before we onboard a marijuana business.

1756
02:22:34,460 --> 02:22:36,680
That's critical, absolutely critical.

1757
02:22:37,800 --> 02:22:43,240
We go out to our businesses four times a year and we do an onsite compliance assessment

1758
02:22:43,240 --> 02:22:44,920
and we're looking basically for two things.

1759
02:22:45,180 --> 02:22:48,960
We're making sure the business is complying with state law and we're making sure that

1760
02:22:48,960 --> 02:22:52,440
they're not implicating any of the eight enforcement priorities in the coal memo.

1761
02:22:53,060 --> 02:22:59,340
We file the marijuana-limited SARS, marijuana-priority SARS, and necessary marijuana termination

1762
02:22:59,340 --> 02:23:00,320
SARS ourselves.

1763
02:23:00,580 --> 02:23:05,180
We're a federally registered money service business and a state licensed money transmitter.

1764
02:23:05,180 --> 02:23:12,240
We share all of our due diligence information with our partner banks who bank us so they

1765
02:23:12,240 --> 02:23:16,840
have an added level of know your customer due diligence through our platform.

1766
02:23:17,400 --> 02:23:21,820
And the other thing that really makes it work in Washington is their seed-to-sale traceability system.

1767
02:23:21,960 --> 02:23:26,440
And what we've done is we've reverse engineered the seed-to-sale traceability system

1768
02:23:26,440 --> 02:23:32,460
and we trace the money from sale all the way back to the seed using that barcode system.

1769
02:23:32,460 --> 02:23:38,760
And when you do that, you can ensure that no money from illegal marijuana sales is getting

1770
02:23:38,760 --> 02:23:39,720
into the banking system.

1771
02:23:39,780 --> 02:23:43,520
And that's really, I think, one of the things that banks are most scared about and what

1772
02:23:43,520 --> 02:23:48,840
needs to be solved is they need to be assured that no money from illegal sales is getting into

1773
02:23:48,840 --> 02:23:49,200
their bank.

1774
02:23:49,740 --> 02:23:54,400
And that's what we do by reverse engineering the seed to sale system and tracing every dollar

1775
02:23:54,400 --> 02:23:55,720
from sale back to seed.

1776
02:23:56,740 --> 02:23:58,940
There are two main components of our business.

1777
02:23:58,940 --> 02:24:03,160
We have a business-to-business component, serving businesses, and we have a consumer component.

1778
02:24:03,760 --> 02:24:06,980
On the business-to-business component, we've in doubt the paypal for pot.

1779
02:24:07,820 --> 02:24:14,040
And the way that works like on paypal, if you buy something on eBay, the buyer logs into their paypal account

1780
02:24:14,040 --> 02:24:15,840
and sends the money to the seller.

1781
02:24:16,560 --> 02:24:18,760
With payquick, it works the exact same way.

1782
02:24:19,100 --> 02:24:23,840
The marijuana retail store, when they receive the marijuana, they log into their payquick account

1783
02:24:23,840 --> 02:24:27,380
and they send the money electronically within payquick to the grower.

1784
02:24:27,380 --> 02:24:33,520
So that delivery person is not driving back with 5, 10, 15, $25,000 in cash in their car.

1785
02:24:33,980 --> 02:24:35,420
That's one of the B2B components.

1786
02:24:35,980 --> 02:24:40,500
The next B2B component is cash management, given armor car service that comes and picks

1787
02:24:40,500 --> 02:24:43,740
up the cash from the producer processors and from the retailers.

1788
02:24:43,740 --> 02:24:45,360
It's taken to a counting room.

1789
02:24:45,860 --> 02:24:47,460
From the counting room, it's verified.

1790
02:24:47,980 --> 02:24:50,320
It's deposited into the Federal Reserve Bank.

1791
02:24:50,920 --> 02:24:55,640
It's credit to our bank account at our partner bank and then our software credits the money

1792
02:24:55,640 --> 02:24:58,420
need to each marijuana businesses pay quick account.

1793
02:24:59,940 --> 02:25:03,700
So if that's the way the process works, so it's picked up in cash,

1794
02:25:04,800 --> 02:25:09,260
counted, deposited into the Fed, from the Fed it goes to our bank who banks us,

1795
02:25:09,720 --> 02:25:13,660
and then our software platform allocates it to the individual marijuana business.

1796
02:25:15,220 --> 02:25:20,600
The next component of our B2B platform is a bill pay service.

1797
02:25:21,120 --> 02:25:24,480
So in Washington, a marijuana business can log into their pay quick account.

1798
02:25:24,480 --> 02:25:39,620
They enter a creditor, their creditor's information, their insurance company, their gas company, their landlord, whatever it happens to be and we cut physical check and mail that check to that business so that they can still don't have to pay their landlord in cash.

1799
02:25:39,980 --> 02:25:46,040
We provide with through a third party payroll services so they can use the funds in their pay quick account to pay payroll.

1800
02:25:47,280 --> 02:25:53,280
And we also have a lot of ancillary businesses that have signed up for paid with accounts.

1801
02:25:53,580 --> 02:25:57,720
So these are lawyers, accountants, insurance companies who, as we heard before, getting

1802
02:25:57,720 --> 02:25:58,400
paid in cash.

1803
02:25:58,880 --> 02:26:00,860
They can also have a paid with account.

1804
02:26:01,440 --> 02:26:04,620
And so they can be paid electronically through our platform.

1805
02:26:05,500 --> 02:26:09,300
That's the nuts and bolts of our B2B platform.

1806
02:26:09,300 --> 02:26:16,640
We also have a consumer-based platform which is a physical pay-quick card and a consumer

1807
02:26:16,640 --> 02:26:19,200
signs up for a pay-quick account.

1808
02:26:19,540 --> 02:26:21,420
They receive a pay-quick card.

1809
02:26:21,480 --> 02:26:26,440
They can also download a smartphone app and what they do is they link their pay-quick account

1810
02:26:26,440 --> 02:26:32,100
to their bank account and they send via ACH transfer funds from their bank account to their

1811
02:26:32,100 --> 02:26:32,820
pay-quick account.

1812
02:26:32,980 --> 02:26:37,940
When they walk into the retail marijuana store, they just show their pay-quick card or their

1813
02:26:37,940 --> 02:26:42,260
smartphone app to make the purchase, and it further reduces the amount of cash at the

1814
02:26:42,260 --> 02:26:47,380
retail level. It works really much like a Starbucks card if you guys have Starbucks cards.

1815
02:26:48,300 --> 02:26:54,420
So that's our platform, you know, from a 40,000 foot kind of view. Mainly, I reiterate, we

1816
02:26:54,420 --> 02:27:00,140
are a compliance company with any wallet because that's what makes it work. Now, I think

1817
02:27:00,140 --> 02:27:05,180
everyone here, we all have the same goal. And that is to get banks willing to bank this industry.

1818
02:27:05,180 --> 02:27:09,940
In Washington, as you saw, you had three banks and three credit unions basically right now doing it.

1819
02:27:10,400 --> 02:27:12,760
In California, we need a lot more than that.

1820
02:27:13,020 --> 02:27:15,680
You need a lot more than that given the size of this state.

1821
02:27:16,500 --> 02:27:19,420
So I view it kind of as a jigsaw puzzle.

1822
02:27:19,800 --> 02:27:22,400
And we've got to put all the pieces of that puzzle together.

1823
02:27:22,560 --> 02:27:26,000
And Washington, in fact, has put those pieces together.

1824
02:27:26,100 --> 02:27:30,940
And let me go through what we see in Washington, and I think what will really, really help here.

1825
02:27:30,940 --> 02:27:35,820
and that is one, a robust seed-to-sale traceability system that barcodes everything.

1826
02:27:37,500 --> 02:27:43,860
It's mandated that all marijuana and marijuana-infused products in Washington are pre-weight and pre-packaged,

1827
02:27:44,220 --> 02:27:48,760
so it's not a jar where they're taking, you know, flour out of a jar, weighing it on a scale and selling it.

1828
02:27:49,000 --> 02:27:53,820
It's all pre-packaged and that package has the barcode on it that goes all the way back to the

1829
02:27:53,820 --> 02:27:59,840
seed. That's done brilliantly in Washington and it's incredibly important to make sure that no

1830
02:27:59,840 --> 02:28:02,700
of black market money gets into the system.

1831
02:28:03,240 --> 02:28:09,420
The other thing that Washington did is that they did not allow the existing medical marijuana

1832
02:28:09,420 --> 02:28:15,060
stores to just start selling retail marijuana on a date certain, which is what Colorado

1833
02:28:15,060 --> 02:28:19,380
did that said July 1, 2014, anyone over 21 could come in and buy it.

1834
02:28:19,880 --> 02:28:20,880
That was a huge problem.

1835
02:28:21,080 --> 02:28:24,720
I think for banks willing to get involved, Washington didn't do it that way.

1836
02:28:25,160 --> 02:28:27,660
They required that the growers start their grow.

1837
02:28:28,060 --> 02:28:29,000
They tagged their plants.

1838
02:28:29,000 --> 02:28:33,220
They harvest them, they ship them, they barcode them, they send them to the dispensaries,

1839
02:28:33,420 --> 02:28:34,880
and now you could have a retail sale.

1840
02:28:35,380 --> 02:28:38,840
At the beginning, of course, there were supply and demand issues, you know, when there

1841
02:28:38,840 --> 02:28:41,440
was a little bit of friction there, because you had a limited supply.

1842
02:28:41,880 --> 02:28:45,660
But now that you've been through several growing cycles, it's all smoothed out.

1843
02:28:46,260 --> 02:28:53,040
But they never allowed medical marijuana stores to just start selling retail on a date certain.

1844
02:28:53,140 --> 02:28:54,980
Now, we think that was incredibly important.

1845
02:28:56,280 --> 02:29:00,540
The other two things that they've done, as Rick mentioned, is they've established a very

1846
02:29:00,540 --> 02:29:05,760
good framework for the transfer of licensee, marijuana licensee information to financial

1847
02:29:05,760 --> 02:29:08,000
institutions and institutions like ours.

1848
02:29:08,320 --> 02:29:12,920
So we can get both their licensee data, all their background tracks, ownership information

1849
02:29:12,920 --> 02:29:18,780
to do our own know-you customer good diligence, and they also make freely available the sales

1850
02:29:18,780 --> 02:29:21,220
records, the sales information on their website.

1851
02:29:21,220 --> 02:29:26,520
So, we have over 200 clients in Washington and every month we go and we check their sales

1852
02:29:26,520 --> 02:29:29,900
data, we check their deposits, we see how much business they're doing, and we match

1853
02:29:29,900 --> 02:29:32,580
it all up to make sure that they're all in line.

1854
02:29:33,120 --> 02:29:37,660
And if they're depositing, believe more, than their sales, we find out why.

1855
02:29:37,940 --> 02:29:42,600
If they're depositing less than their sales, we find out why because we want to know where

1856
02:29:42,600 --> 02:29:43,600
that money is going.

1857
02:29:44,940 --> 02:29:50,320
They also, in Oregon, there's legislation that protects financial institutions from criminal

1858
02:29:50,320 --> 02:29:53,980
liability for serving the marijuana industry, and you're right, I think we're all right.

1859
02:29:54,280 --> 02:29:57,060
We're not going to see much from the federal government for quite a while.

1860
02:29:57,260 --> 02:29:57,800
We're just not.

1861
02:29:58,160 --> 02:29:59,780
So it's incumbent upon us.

1862
02:30:00,000 --> 02:30:29,980
In California, to get those regulations in place and protect financial institutions who are dealing with this business and establishing due diligence and compliance thresholds for financial institutions and companies like ours pay quick, money transmitters that we need to comply with in order to serve this industry. And I'm the setting of a safe harbor that if you do this, you're okay with the state. And my final point, and this is something that Washington has done among licensees

1863
02:30:29,980 --> 02:30:31,680
and I think it should be extended further.

1864
02:30:32,100 --> 02:30:35,120
Washington does not allow licensees

1865
02:30:35,120 --> 02:30:38,040
to pay each other using cryptocurrency like Bitcoin.

1866
02:30:38,740 --> 02:30:41,320
And we then think that that is incredibly important,

1867
02:30:41,700 --> 02:30:43,900
given the nascent nature of this industry,

1868
02:30:44,360 --> 02:30:46,980
that we keep cryptocurrency like Bitcoin

1869
02:30:46,980 --> 02:30:48,520
out of the marijuana transaction

1870
02:30:48,520 --> 02:30:50,020
through the entire supply chain.

1871
02:30:51,680 --> 02:30:54,100
And I think when you do all of those things,

1872
02:30:54,340 --> 02:30:57,080
you put all the pieces of the jigsaw puzzle together,

1873
02:30:57,580 --> 02:30:59,240
and you will encourage and entice banks

1874
02:31:02,820 --> 02:31:07,000
I think the only thing I'd add is that that was a decision made by the Department of Financial

1875
02:31:07,000 --> 02:31:09,840
Institutions, not the liquor and cannabis for it.

1876
02:31:12,730 --> 02:31:13,210
I

1877
02:31:15,960 --> 02:31:22,720
just had a couple of questions and one was Mr. Garzo, I was looking at your compliance

1878
02:31:22,720 --> 02:31:27,580
rates and somewhere in March of 16 you had a 10% drop off.

1879
02:31:28,160 --> 02:31:30,460
Why would you have a sort of rationale for that?

1880
02:31:31,080 --> 02:31:34,840
Yeah, I think part of it was that it wasn't the same number.

1881
02:31:35,160 --> 02:31:38,020
It was a smaller number and it had eight heads.

1882
02:31:38,840 --> 02:31:42,460
And so, remember initially, if you know anything about compliance,

1883
02:31:42,680 --> 02:31:45,740
especially over on the alcohol, the more compliance you do,

1884
02:31:45,860 --> 02:31:47,100
the more compliance you're going to get.

1885
02:31:47,500 --> 02:31:49,160
Often times when our compliance tips,

1886
02:31:49,540 --> 02:31:53,740
is because we're not doing enough of them statewide or in a region.

1887
02:31:54,120 --> 02:31:55,720
And I think that's what happened in that case.

1888
02:31:56,180 --> 02:31:59,020
But I can tell you, it's pretty static after that.

1889
02:31:59,020 --> 02:32:05,300
We're trying to make three or four visits a year to each of them and and if you do get stung and we

1890
02:32:05,300 --> 02:32:10,020
You're part of that 10% we're back in there are three three months later doing another

1891
02:32:10,020 --> 02:32:15,260
But it's just one of the tools that we use that I think gives

1892
02:32:16,820 --> 02:32:23,240
Assurance to the banks and those that want to provide financial services that we're watching very carefully the industry

1893
02:32:23,240 --> 02:32:28,880
We do it when we license them in the very beginning and then we're there all the time the security

1894
02:32:29,020 --> 02:32:36,080
the cameras surveillance, I mean I heard someone talk about security and no guns, it's the guns that

1895
02:32:36,080 --> 02:32:42,820
you should not the security, you can have security inside those buildings as we do with our license

1896
02:32:42,820 --> 02:32:47,300
premises, but I think it's just from the very beginning whether it's a seem to sell program,

1897
02:32:47,780 --> 02:32:55,040
or a 21st apply for a license to the enforcement that occurs continually, we have 140 enforcement

1898
02:32:55,040 --> 02:32:59,360
officers in our state, we do alcohol and cannabis together.

1899
02:32:59,880 --> 02:33:01,980
We thought that was probably the best way to do it.

1900
02:33:02,200 --> 02:33:05,500
From a retail point of view, our retail outlets are where our bars and

1901
02:33:06,040 --> 02:33:07,440
lounges are in our restaurants.

1902
02:33:07,720 --> 02:33:11,840
And so we've taken an approach, at least with respect to retail, if a separate

1903
02:33:11,840 --> 02:33:17,660
unit for producers and processors for marijuana, because it's very different than a

1904
02:33:17,660 --> 02:33:18,660
winery or a brewery.

1905
02:33:18,980 --> 02:33:23,260
But the vast majority of our enforcement officers do compliance with for

1906
02:33:23,260 --> 02:33:27,740
alcohol and cannabis in our state, and that has a lot to do to think about how much

1907
02:33:27,740 --> 02:33:32,380
resources are being given to the regulatory agency to do that type of enforcement.

1908
02:33:32,880 --> 02:33:37,140
In your state, I see there's seven or eight different agencies that have responsibilities

1909
02:33:37,140 --> 02:33:42,080
and Washington is probably easier for us because we're the primary agency, and then we have

1910
02:33:42,080 --> 02:33:47,900
an interagency group of 10 other agencies that we work with in addition to the Department

1911
02:33:47,900 --> 02:33:52,620
of financial institutions, but I think we've had some success.

1912
02:33:52,980 --> 02:33:57,520
And let me say I should say some success because there's still a lot of cash moving for

1913
02:33:57,520 --> 02:34:00,300
a producer to a processor and processor to retail.

1914
02:34:00,540 --> 02:34:06,580
It's the retailers that in our state that are having success with respect to banking and

1915
02:34:06,580 --> 02:34:10,140
with the credit unions, but we still have a long ways to go to.

1916
02:34:10,600 --> 02:34:13,600
The national banks do not want to touch this industry right now.

1917
02:34:13,600 --> 02:34:18,100
And so we target our efforts toward state credit unions, state charter banks.

1918
02:34:18,680 --> 02:34:22,380
I'm glad that you brought that up and my other question I had to do, strengthen this park.

1919
02:34:22,460 --> 02:34:27,980
You mentioned that this industry is an unbanked, the reality at least what we heard earlier today

1920
02:34:27,980 --> 02:34:33,040
from the city of LA is that only 20% is coming in a cash receipt.

1921
02:34:33,300 --> 02:34:35,680
You experienced something different in Oregon?

1922
02:34:36,680 --> 02:34:38,140
No, I mean, I think we have.

1923
02:34:38,460 --> 02:34:40,920
As I said, we're about at 50, 50 actually.

1924
02:34:40,920 --> 02:34:44,500
So we are still getting on our scale.

1925
02:34:44,500 --> 02:34:45,320
That's a lot different.

1926
02:34:45,480 --> 02:34:49,460
Yes, but I think the important piece there is that that 50%.

1927
02:34:50,260 --> 02:34:55,260
We're seeing them cycle to bank to bank, but at some point,

1928
02:34:55,680 --> 02:34:59,960
they're going to run out if they've got resolved the issue

1929
02:34:59,960 --> 02:35:01,160
on a broader scale.

1930
02:35:01,420 --> 02:35:02,960
They're going to run out of banks to jump to.

1931
02:35:03,600 --> 02:35:08,340
So yes, I think there is in Oregon, again,

1932
02:35:08,340 --> 02:35:11,920
And we have three who are willingly accepting funds

1933
02:35:13,180 --> 02:35:15,900
and represent probably about that same 20%

1934
02:35:15,900 --> 02:35:17,540
level, really, between the three of them.

1935
02:35:17,720 --> 02:35:18,920
Maybe so we slightly more.

1936
02:35:19,540 --> 02:35:20,960
I think the others, there are some

1937
02:35:20,960 --> 02:35:23,100
that, again, those long-term relationships,

1938
02:35:23,860 --> 02:35:26,060
I know my regardless of whether you've

1939
02:35:26,060 --> 02:35:27,900
got a bike shop or a parking shop now.

1940
02:35:28,400 --> 02:35:30,240
But I think there's a lot that do is they

1941
02:35:30,240 --> 02:35:32,080
don't know what they're baking.

1942
02:35:32,360 --> 02:35:35,740
And they are, they are firing their customers

1943
02:35:35,740 --> 02:35:37,300
when they find out who they are.

1944
02:35:37,300 --> 02:35:44,340
So, I think that number of pharmacists in ability perspective, at least in war, is a little

1945
02:35:45,240 --> 02:35:48,880
misrepresentative of building the true nature of life.

1946
02:35:57,040 --> 02:36:02,300
Real quick, Mr. Garza, you know, you alluded to this scope challenge that we're facing here

1947
02:36:02,300 --> 02:36:03,660
given the number of businesses.

1948
02:36:04,660 --> 02:36:08,960
One of the big concerns when we put these rags together was dealing with audits and the

1949
02:36:08,960 --> 02:36:10,120
efficiency of audits.

1950
02:36:10,520 --> 02:36:14,760
And I'm just curious, everything I'm hearing today is that the more transparency and the

1951
02:36:14,760 --> 02:36:18,800
more daylight there is, the more comfortable this is going to be, can you have any insight

1952
02:36:18,800 --> 02:36:24,800
about how to improve the efficiency of audits, flagging suspicious activity? Is there anything

1953
02:36:24,800 --> 02:36:28,860
we can draw from you guys specifically to get that information efficiently?

1954
02:36:29,420 --> 02:36:34,560
Well, with respect to the traceability system, we have a marijuana examiner's unit of eight

1955
02:36:34,560 --> 02:36:38,980
people who literally are looking at that system every day and there's red flags that come

1956
02:36:38,980 --> 02:36:43,860
up, I don't know if that's what you're talking about, but that's, it's all about staffing,

1957
02:36:43,860 --> 02:36:47,740
So we have a large licensing staff, a larger enforcement staff,

1958
02:36:48,200 --> 02:36:51,520
and the MG examiners, or MJ examiners, and

1959
02:36:51,520 --> 02:36:55,820
auditors that go out to audit the businesses just like we do breweries, distilleries,

1960
02:36:56,520 --> 02:36:57,900
and wineries.

1961
02:36:58,280 --> 02:37:03,820
So the fact that the systems were created very similar with respect to cannabis and

1962
02:37:03,820 --> 02:37:09,220
alcohol, those places where you have regulators that have alcohol experience that they've given it to,

1963
02:37:09,220 --> 02:37:15,240
They just gave it to them, I think, in Maine from where it started through the initiative process.

1964
02:37:15,580 --> 02:37:32,060
It makes it easier for us, because we understand that if you build a system's like alcohol, I know there's a lot of people in the cannabis industry that don't like that, but the reality is there's a lot of symmetry there and it makes a lot of sense we know how to regulate both drugs.

1965
02:37:32,060 --> 02:37:32,160
Thanks.

1966
02:37:35,160 --> 02:37:36,180
Thank you very much.

1967
02:37:36,400 --> 02:37:36,720
Thank you.

1968
02:37:36,860 --> 02:37:37,100
Thank you.

1969
02:37:44,660 --> 02:37:46,300
We are now going to turn to public comment.

1970
02:37:46,620 --> 02:37:49,160
But I want to do a couple of things.

1971
02:37:49,260 --> 02:37:54,160
First, I want to thank these SCAG staff and their kindness and generosity for allowing us

1972
02:37:54,160 --> 02:37:55,060
to hold this meeting here.

1973
02:37:55,240 --> 02:37:56,520
So thank you to SCAG.

1974
02:37:57,020 --> 02:37:59,380
And then I, yes, please recognize them.

1975
02:37:59,600 --> 02:38:00,700
I want

1976
02:38:05,530 --> 02:38:07,990
to recognize our former Lieutenant Governor, who's the Monday.

1977
02:38:08,230 --> 02:38:09,490
Thank you for joining us today.

1978
02:38:13,950 --> 02:38:16,090
Let me repeat the instructions I gave earlier.

1979
02:38:16,350 --> 02:38:20,090
If you wish to make a comment, we ask that you fill out a request to make a public comment.

1980
02:38:20,090 --> 02:38:23,290
which can be found with one of my staff members.

1981
02:38:23,550 --> 02:38:25,630
Please be sure to include your name and organization.

1982
02:38:26,250 --> 02:38:27,870
As the information will aid our working group

1983
02:38:27,870 --> 02:38:29,690
as we revisit those comments.

1984
02:38:30,570 --> 02:38:33,830
To keep us on schedule, I ask you to keep your comments

1985
02:38:33,830 --> 02:38:36,650
to two minutes. We'll be watching the clock.

1986
02:38:37,150 --> 02:38:40,090
Please do not take it as a review or a reproach of the chair.

1987
02:38:40,290 --> 02:38:42,110
If I ask you to stop at the two-minute mark,

1988
02:38:42,650 --> 02:38:45,110
we want to make sure that we create enough opportunity

1989
02:38:45,110 --> 02:38:47,270
for as many people as speak as possible.

1990
02:38:47,270 --> 02:38:51,910
And then let's begin with the public comments.

1991
02:38:52,210 --> 02:38:55,710
So I will call as I stated earlier, three individuals at a time.

1992
02:38:55,910 --> 02:38:58,250
So the first three are Adriana Sanchez,

1993
02:38:58,770 --> 02:39:00,950
Haam Fleming, Lisa Sunberg,

1994
02:39:01,970 --> 02:39:04,810
the B-Followed by Larry Lippman, Ken Hammock,

1995
02:39:05,590 --> 02:39:06,490
and Sherry Franklin.

1996
02:39:06,930 --> 02:39:13,170
So Adriana, Haam, Alisa, please proceed to the podium.

1997
02:39:13,170 --> 02:39:18,080
So please introduce yourself for the record please.

1998
02:39:25,280 --> 02:39:28,620
Adriana, Tom, and Lisa.

1999
02:39:29,820 --> 02:39:31,300
Hello, I'm Adriana Sanchez.

2000
02:39:31,300 --> 02:39:33,400
I represent a company called the E-Canopy.

2001
02:39:36,100 --> 02:39:39,660
We actually have a lot of a service

2002
02:39:40,940 --> 02:39:42,940
that can solve a lot of your problems.

2003
02:39:43,280 --> 02:39:47,640
We work with 10 of the top tier one banking institutions

2004
02:39:47,640 --> 02:39:54,200
And we offer banking for the cannabis industry, also merchant services, payroll services,

2005
02:39:54,960 --> 02:39:57,920
employee benefits, and tax services as well.

2006
02:39:58,600 --> 02:40:03,680
We do something similar to Quick Pay, excuse me.

2007
02:40:04,600 --> 02:40:11,200
We send the armored cars to pick up the cash and deposit it directly into their banks.

2008
02:40:11,200 --> 02:40:17,820
So we do open up FDIC bank or insured banks bank accounts for these businesses.

2009
02:40:18,840 --> 02:40:25,480
They work just like a regular business account and we're able to help them and not have

2010
02:40:25,480 --> 02:40:27,320
their business account shut down.

2011
02:40:28,160 --> 02:40:31,920
So I just wanted to give you that information because we are nationwide.

2012
02:40:32,980 --> 02:40:38,160
We do, we're operational in all the legal states as well as with CBD oils.

2013
02:40:41,120 --> 02:40:41,260
Okay.

2014
02:40:41,540 --> 02:40:41,780
Thank you.

2015
02:40:41,780 --> 02:40:42,420
If you

2016
02:40:48,150 --> 02:40:50,890
guys could, when I call your name up, you could buy it up, please.

2017
02:40:51,290 --> 02:40:52,090
Tom, follow by Lisa.

2018
02:40:55,030 --> 02:41:00,070
I'm Tom Fleming, I actually, I don't know if I can keep this to two minutes, but I'm

2019
02:41:00,070 --> 02:41:00,930
going to hold you to it.

2020
02:41:01,630 --> 02:41:03,230
Okay, maybe we have to start.

2021
02:41:03,930 --> 02:41:08,550
I'm actually here at the invitation of this group because I work with a working group on

2022
02:41:08,550 --> 02:41:09,110
the East Coast.

2023
02:41:09,350 --> 02:41:10,710
It's trying to do exactly the same thing.

2024
02:41:10,870 --> 02:41:15,050
It's put together white paper on it and I see a lot of many meetings.

2025
02:41:15,050 --> 02:41:27,650
but my resume is that I was a banker for 22 years, and then for 24 years I was with the US government and only did bank secrecy act and anti-money laundering initiatives and compliance issues.

2026
02:41:28,750 --> 02:41:41,090
I, the last seven years of my career, I was the director of compliance for Fenson, and listening to the comments here is exactly what I heard two years ago when I got into this,

2027
02:41:41,090 --> 02:41:45,590
going to marijuana conferences and listening to people talk.

2028
02:41:46,350 --> 02:41:49,410
And there is still a huge amount of misunderstanding

2029
02:41:49,910 --> 02:41:53,690
and misinterpretation and misinformation

2030
02:41:53,690 --> 02:41:56,670
with regard to banking this industry.

2031
02:41:57,230 --> 02:42:00,790
Number one, the two industries do not understand one another

2032
02:42:00,790 --> 02:42:05,310
and have heard lots of presentations

2033
02:42:05,310 --> 02:42:08,570
at particularly the cannabis industry conferences

2034
02:42:08,570 --> 02:42:11,070
is at which I have addressed seven of them

2035
02:42:11,430 --> 02:42:12,450
with keynote speeches.

2036
02:42:13,530 --> 02:42:15,710
And I've heard the same things here today

2037
02:42:16,190 --> 02:42:19,090
where people are trying to interpret

2038
02:42:19,970 --> 02:42:22,630
the coal memos and the fins and guidelines

2039
02:42:23,230 --> 02:42:25,350
and talking about the inadequacies,

2040
02:42:25,590 --> 02:42:28,270
poking fun at them, and talking about

2041
02:42:29,790 --> 02:42:33,230
the problems are created by the banking industry.

2042
02:42:33,910 --> 02:42:36,590
And I'm sorry, all of this is just not true.

2043
02:42:36,590 --> 02:42:41,070
So I take a totally different approach than most of the people have been talking here and

2044
02:42:41,070 --> 02:42:42,230
at these other conferences.

2045
02:42:42,990 --> 02:42:47,830
The reality of the situation is that marijuana is a scheduled one drug.

2046
02:42:48,330 --> 02:42:49,810
It is a legal period.

2047
02:42:50,290 --> 02:42:51,410
That's what we're dealing with.

2048
02:42:52,270 --> 02:42:58,870
Now there are parts of the type of government that have made exceptions to this simply because

2049
02:42:58,870 --> 02:43:03,510
they're trying to address issues that on a larger scale can't be addressed.

2050
02:43:03,510 --> 02:43:09,590
And that is the accumulation of cash in this cash-intensive industry, the fact that crime

2051
02:43:09,590 --> 02:43:14,410
around this is rising and the fact that law enforcement needs the appropriate information

2052
02:43:14,410 --> 02:43:20,270
to do their job on the illegal operations as opposed to those that are legitimately recognized.

2053
02:43:21,170 --> 02:43:26,550
My take on the coal memos together, the two collectively, which were very similar but had some

2054
02:43:26,550 --> 02:43:33,390
differences in them, is basically those memos were issued to the prosecutors and they didn't

2055
02:43:33,390 --> 02:43:39,010
have to be made public, but DOJ made them public because they wanted the public and state

2056
02:43:39,010 --> 02:43:45,450
governments to know they were taking a stance on marijuana. And that is, that is, that

2057
02:43:45,450 --> 02:43:50,450
they're going to rely on the states to take care of enforcement and regulation of their

2058
02:43:50,450 --> 02:43:57,690
state laws, and all of those kinds of responsibilities will make banks feel better about banking that

2059
02:43:57,690 --> 02:44:05,830
unity. But when presentations are done or the attitude toward the Fins and Guides and

2060
02:44:05,830 --> 02:44:11,530
the Colmemos is negative, this is exactly what what falseters the fears that the banks

2061
02:44:11,530 --> 02:44:17,230
have and they walk away from the industry. The answer to all of this is educating both industries

2062
02:44:17,230 --> 02:44:23,390
to understand one another and to work together because with that cooperation, banks cannot comply

2063
02:44:23,390 --> 02:44:27,470
with their requirements and the industry doesn't understand what those requirements are.

2064
02:44:28,670 --> 02:44:33,650
I know I'm over my limit but I could go on from mom time. I'm sure you could see if you want

2065
02:44:33,650 --> 02:44:39,190
to submit a written submission you would greatly appreciate it and we'll have you added to that.

2066
02:44:39,810 --> 02:44:40,010
Okay.

2067
02:44:50,160 --> 02:44:55,560
Hi, I'm Lisa Sunberg. I am a member of the Trinidad Rancheria in Northern California and

2068
02:44:55,560 --> 02:44:58,080
in Humboldt County, where one is seven drives in that area.

2069
02:44:59,040 --> 02:44:59,840
And I'm an advocate.

2070
02:45:00,000 --> 02:45:05,900
For legalizing cannabis in my community, as well as I'm involved in economic development

2071
02:45:05,900 --> 02:45:12,580
and ending country across the country. And we've seen a lot of this. I was actively involved.

2072
02:45:12,740 --> 02:45:19,140
I was VP for ending gaming of a financial company that helped put a whole financial

2073
02:45:19,140 --> 02:45:24,700
infrastructure inside the gaming industry for our, you know, for our piece of it, which we

2074
02:45:24,700 --> 02:45:28,780
became the largest gaming industry in the country.

2075
02:45:30,140 --> 02:45:33,440
And as I came home, I started to look at what was going on

2076
02:45:33,440 --> 02:45:34,580
in the cannabis industry.

2077
02:45:35,180 --> 02:45:36,520
I mean, this is my backyard.

2078
02:45:37,120 --> 02:45:38,120
Humboldt's my backyard.

2079
02:45:38,620 --> 02:45:41,280
And I want my tribe to participate in this industry.

2080
02:45:42,820 --> 02:45:45,620
But so we have to look at things like how are we

2081
02:45:45,620 --> 02:45:47,280
going to leverage our sovereignty?

2082
02:45:47,500 --> 02:45:51,020
Just as the well as we ask the same questions of what's

2083
02:45:51,020 --> 02:45:53,300
going to happen to us whenever we get to the Supreme Court,

2084
02:45:53,420 --> 02:45:54,300
just like you guys do.

2085
02:45:54,300 --> 02:45:59,720
in your situations. We've had to deal with financial situations and accountability and regulatory

2086
02:45:59,720 --> 02:46:05,920
processes, not only in ending gaming but also pay-day lending and online gaming. So those

2087
02:46:05,920 --> 02:46:10,240
kind of things all come together as well, but what I do encourage you, you know, with

2088
02:46:10,240 --> 02:46:16,140
any brand new piece of the industry, whenever you're on the innovation side, you step out

2089
02:46:16,140 --> 02:46:20,060
with the first tribes in California that stepped out, you heard some of them got shut down

2090
02:46:20,060 --> 02:46:23,880
and closed down and things like that. And you're going to see, you know, when you run out

2091
02:46:23,880 --> 02:46:27,300
the field, you're going to see who's going to throw arrows at you, right? Who's going

2092
02:46:27,300 --> 02:46:32,760
to be shooting at you and where they're coming from? So, and I'm I like to play in the

2093
02:46:32,760 --> 02:46:38,240
innovation side. You know, I like to go out there and see and figure out how we can build

2094
02:46:38,240 --> 02:46:43,120
regulation. And in California, I have I have studied tribes that started going around trying

2095
02:46:43,120 --> 02:46:48,340
to find out what tribes have actually been able to create cornerstones. And it's been done

2096
02:46:48,340 --> 02:46:55,160
in California and it's transparent models. And so I highly encourage you guys to look

2097
02:46:55,160 --> 02:47:01,340
at the fact that this timeline is coming but we need to create safety for people to

2098
02:47:01,340 --> 02:47:06,480
put their money in. You know, Yuri goes high crime rate and things like that. I worry

2099
02:47:06,480 --> 02:47:11,300
about that with my own people. And so I just encourage you to get behind those companies.

2100
02:47:11,540 --> 02:47:18,020
I'm working right now with Expo. You know, you won't know until you test to tell the

2101
02:47:18,020 --> 02:47:18,940
Robert meets the road.

2102
02:47:19,380 --> 02:47:21,700
Who's really going to be able to pan out in this industry?

2103
02:47:21,960 --> 02:47:23,600
So anyway, thank you for your time.

2104
02:47:23,860 --> 02:47:24,280
Thank you, Lisa.

2105
02:47:24,660 --> 02:47:28,840
So we're going to have Larry, 10, and Sherry.

2106
02:47:38,060 --> 02:47:39,100
My name is Larry.

2107
02:47:39,280 --> 02:47:42,020
I live in on the CEO of Alliance Financial Network.

2108
02:47:42,360 --> 02:47:48,400
And many of you I've been speaking to via email over the last

2109
02:47:48,960 --> 02:47:51,620
month or two, and several of you I've spoken to.

2110
02:47:52,920 --> 02:47:58,840
Next door at the Sheraton after this meeting at 230, gentlemen in the back, Mr.

2111
02:47:58,980 --> 02:48:01,280
Schafer has allowed us to hand these out to people who are leaving.

2112
02:48:02,260 --> 02:48:08,860
We're going to have a 230 and 330 meeting to explain our solution in complete detail.

2113
02:48:09,840 --> 02:48:14,120
I'm a subject matter expert in FinTech, which is financial technology.

2114
02:48:14,980 --> 02:48:18,180
We operate in bank choked industries.

2115
02:48:18,260 --> 02:48:19,820
You heard a little bit about that today.

2116
02:48:19,820 --> 02:48:26,240
federal firearms, payday lending, other industries that the government has made

2117
02:48:26,240 --> 02:48:33,860
very difficult. We spent about three years on each piece that Todd Bowie was

2118
02:48:33,860 --> 02:48:38,640
speaking about earlier, and I forgot your name, but this gentleman all of his

2119
02:48:38,640 --> 02:48:44,660
problems and concerns. Financial institutions must file red flags, ours

2120
02:48:44,660 --> 02:48:50,100
reports for inconsistent financial reporting in relation to the business.

2121
02:48:50,540 --> 02:48:52,080
It's in the Finson guidelines.

2122
02:48:53,020 --> 02:49:05,380
We are a Finson MSB, or regulated by five agencies, one of them being the IRS, and I would urge

2123
02:49:05,380 --> 02:49:16,980
you to make sure that your seed sale is an end-to-end and it's coordinated with this subject

2124
02:49:16,980 --> 02:49:17,480
matter.

2125
02:49:18,020 --> 02:49:19,700
I work in seven states.

2126
02:49:19,800 --> 02:49:24,840
I just came back from Canada yesterday and I'm working in the Caribbean, which is having

2127
02:49:24,840 --> 02:49:28,940
the same issues for BSA and anti-money laundering.

2128
02:49:28,940 --> 02:49:40,300
So, two days ago, we had a new attorney general approved, yesterday Colorado shut down bank,

2129
02:49:40,300 --> 02:49:44,760
shut down 36 bank accounts and a payroll account.

2130
02:49:45,080 --> 02:49:49,900
The reason for the lot of lying on the KYC, those were all squeezed out.

2131
02:49:51,680 --> 02:49:57,380
We've opened now pre-registration in the Bay Area, Humboldt County and today we're going

2132
02:49:57,380 --> 02:49:57,980
to open LA.

2133
02:49:57,980 --> 02:50:01,800
So, I'm being waived, but I would urge you, if you're interested,

2134
02:50:02,000 --> 02:50:06,260
come by the El Capitan Room in the Sheraton, 230 or 330.

2135
02:50:06,860 --> 02:50:10,660
We are expecting a lot of people, and we'd love to meet everybody.

2136
02:50:11,100 --> 02:50:11,960
Talk about our program.

2137
02:50:12,300 --> 02:50:12,660
Thank you, Larry.

2138
02:50:12,860 --> 02:50:13,000
Kent?

2139
02:50:18,300 --> 02:50:19,300
I'll keep it short.

2140
02:50:19,740 --> 02:50:20,880
Kent and the Cumble County.

2141
02:50:22,320 --> 02:50:24,760
Thank you for addressing these issues to me.

2142
02:50:24,880 --> 02:50:26,140
They're pure safety issues.

2143
02:50:27,220 --> 02:50:32,320
But now to talk about the money side, I know banking and regulatory regimes

2144
02:50:32,320 --> 02:50:36,480
or trying to be formed appropriately, track and trace programs, et cetera.

2145
02:50:37,440 --> 02:50:40,260
But I also ask us to look at the bigger picture too.

2146
02:50:41,340 --> 02:50:43,620
The seed to sale, we talk about a lot.

2147
02:50:44,280 --> 02:50:48,260
If you did a diagram of seed to sale, those are all people.

2148
02:50:48,960 --> 02:50:50,800
They start with the seed and it's planted.

2149
02:50:51,420 --> 02:50:54,920
The farmer is going to get that crop to market.

2150
02:50:55,440 --> 02:50:58,160
There's going to be a distributor. There's going to be lab testing.

2151
02:50:58,660 --> 02:51:00,360
All the appropriate things that need to happen.

2152
02:51:00,360 --> 02:51:03,140
And then it's going to get sold to a patient or a customer.

2153
02:51:04,180 --> 02:51:05,000
Is that happens?

2154
02:51:05,880 --> 02:51:11,320
I asked that we look at all of different compliance costs,

2155
02:51:12,260 --> 02:51:16,100
fee schedules that are applied, taxations, tariffs,

2156
02:51:17,140 --> 02:51:20,280
et cetera, excite taxes all the way down through the whole thing

2157
02:51:20,280 --> 02:51:24,240
because it's great to see the gentleman from Washington

2158
02:51:24,240 --> 02:51:26,840
putting up the numbers at 0 to 2 billion.

2159
02:51:26,840 --> 02:51:30,320
and I think was the estimates of how much excise tax revenue

2160
02:51:30,320 --> 02:51:30,880
that might get.

2161
02:51:31,740 --> 02:51:33,600
I don't know what it would be for California,

2162
02:51:34,180 --> 02:51:35,400
but it's going to be big.

2163
02:51:36,720 --> 02:51:40,360
And this is an industry, as you know, from Humboldt County.

2164
02:51:40,960 --> 02:51:42,200
We are recognizing it now.

2165
02:51:42,480 --> 02:51:43,640
We've passed our land use ordinance.

2166
02:51:44,420 --> 02:51:47,920
And I just say, just keep in mind those cumulative costs

2167
02:51:48,500 --> 02:51:51,740
to all the people involved, because we want the small farmers

2168
02:51:51,740 --> 02:51:52,580
that survive this.

2169
02:51:52,960 --> 02:51:54,300
And that's really one of our priorities.

2170
02:51:54,720 --> 02:51:55,380
Thank you very much.

2171
02:51:55,380 --> 02:51:55,900
Thank you.

2172
02:51:56,040 --> 02:51:56,040
Good

2173
02:52:00,460 --> 02:52:01,760
afternoon.

2174
02:52:02,000 --> 02:52:04,500
And thank you for this very informative hearing today.

2175
02:52:04,920 --> 02:52:07,200
My name is Sheree Franklin with Urban Design Center.

2176
02:52:07,380 --> 02:52:14,100
We're working to create an incubator facility in Los Angeles, focused on the cannabis industry,

2177
02:52:14,640 --> 02:52:20,080
the cannabis of Los Angeles incubator, and then also to create a credit union, if possible,

2178
02:52:20,540 --> 02:52:22,840
the People's Credit Union of California.

2179
02:52:23,340 --> 02:52:28,580
Our main focus is to make sure that there's equitable distribution of opportunities for

2180
02:52:28,580 --> 02:52:30,180
are enterprises in South Los Angeles.

2181
02:52:30,780 --> 02:52:33,260
We want to make sure that they have access to information

2182
02:52:33,800 --> 02:52:36,560
to form these entities, but more importantly,

2183
02:52:36,660 --> 02:52:38,420
as we talked about today, banking.

2184
02:52:38,740 --> 02:52:40,460
As you know, there's already a dearth of banking

2185
02:52:41,000 --> 02:52:42,660
enterprises within South Los Angeles

2186
02:52:42,660 --> 02:52:43,960
and other urban communities.

2187
02:52:44,640 --> 02:52:46,140
So as you think about this,

2188
02:52:46,280 --> 02:52:49,440
we want to make sure that they are located in areas

2189
02:52:49,440 --> 02:52:52,980
where these enterprises within South Los Angeles

2190
02:52:52,980 --> 02:52:54,160
will have access to them.

2191
02:52:54,700 --> 02:52:57,600
And the other thing is to look at something similar to,

2192
02:52:57,600 --> 02:53:03,020
But we have with CRA with the banking industry now, making sure that there's a reinvestment

2193
02:53:03,020 --> 02:53:07,820
in communities that have been impacted by the cannabis industry and also to make sure

2194
02:53:07,820 --> 02:53:14,940
that there's opportunities to train mentor and provide resources for entrepreneurs who are

2195
02:53:14,940 --> 02:53:23,160
developing and who are not part of the int 135 that are currently allowed to operate in Los

2196
02:53:23,160 --> 02:53:28,860
If you look at a map, South Los Angeles is not part of the business right now, we need

2197
02:53:28,860 --> 02:53:29,540
to change that.

2198
02:53:29,960 --> 02:53:30,360
Thank you.

2199
02:53:30,640 --> 02:53:30,920
Thank you.

2200
02:53:36,300 --> 02:53:40,060
We are Lisa Selin, Kathleen Van Oston, and Ali Bakery.

2201
02:53:43,940 --> 02:53:50,260
Hi, I'm Lisa Selin, I'm General Counsel to the UCBA Trade Association and I want to thank

2202
02:53:50,260 --> 02:53:55,340
all of you for everything you're trying to do to make this industry as legitimate as

2203
02:53:55,340 --> 02:53:55,960
it can be.

2204
02:53:55,960 --> 02:53:57,540
I'll keep it very short.

2205
02:53:58,420 --> 02:54:02,480
First of all, I just want to clarify, most of the banking is not transparent banking.

2206
02:54:02,740 --> 02:54:08,360
So if people are paying their taxes with bank accounts as stated earlier, they're not

2207
02:54:08,360 --> 02:54:11,200
associated usually with the actual entity.

2208
02:54:11,440 --> 02:54:18,100
It's a management company and that in itself is really not a suitable alternative and finding

2209
02:54:18,100 --> 02:54:20,680
real banking solutions is what we're all looking for.

2210
02:54:20,680 --> 02:54:25,540
Just one other thing with regard to the new administration.

2211
02:54:26,460 --> 02:54:33,100
This week, Dean Aurora Barker of California, our 48th US Congressman, introduced the Respect

2212
02:54:33,100 --> 02:54:36,380
State Marijuana Laws Act of 2017.

2213
02:54:37,680 --> 02:54:42,180
It might fall to deaf ears, we don't know that, everyone has in the past.

2214
02:54:42,820 --> 02:54:49,380
But with California having 53 congressmen and over half the states having marijuana laws,

2215
02:54:49,380 --> 02:54:55,560
I think we need to start looking as states to how we can influence Congress to fix this

2216
02:54:55,560 --> 02:54:55,980
problem.

2217
02:54:56,280 --> 02:55:00,740
And I don't know what California is doing at the federal level, but I think we all need

2218
02:55:00,740 --> 02:55:01,760
to as industry.

2219
02:55:02,460 --> 02:55:08,200
Contact our congressman, talk to our fellow states that have marijuana laws and see it as a

2220
02:55:08,200 --> 02:55:15,020
unit with 60% of the general population in favor of marijuana legalization, how we can create

2221
02:55:15,020 --> 02:55:21,120
a movement to get this forward even in a hostile environment in the federal government right now.

2222
02:55:21,380 --> 02:55:23,400
Thanks again. I appreciate it. Thank you, Kathleen.

2223
02:55:32,860 --> 02:55:34,820
Good afternoon, Kathleen Ben Austin,

2224
02:55:35,100 --> 02:55:44,580
representing Caliva, which is based in San Jose. It's a vertically integrated entity. They do cultivation

2225
02:55:44,580 --> 02:55:51,980
and have a dispensary. So that encouraged slightly discouraged and encouraged by the comments

2226
02:55:51,980 --> 02:55:54,620
that were made earlier today by your presenters.

2227
02:55:54,620 --> 02:55:57,980
I'm particularly encouraged by Mr. Garza's comments

2228
02:55:57,980 --> 02:55:59,920
and the progress that they've made in Washington,

2229
02:56:00,660 --> 02:56:04,260
there's, I think, a good deal to look at

2230
02:56:04,260 --> 02:56:05,220
with what they're doing.

2231
02:56:06,660 --> 02:56:10,060
It's critical for Caliva and others in the business

2232
02:56:10,060 --> 02:56:14,400
in the industry that we can have the relationships

2233
02:56:14,400 --> 02:56:17,040
with our banks and credit unions that are above board

2234
02:56:17,040 --> 02:56:19,720
and fully transparent, we're eager to do that.

2235
02:56:20,900 --> 02:56:27,720
There's a strong desire to, in fact, Kaliva has always said, you know, we're ready to

2236
02:56:27,720 --> 02:56:28,860
be a good partner.

2237
02:56:33,550 --> 02:56:42,070
But with the banking and credit unions, what we don't want to see is have our honesty

2238
02:56:42,070 --> 02:56:47,350
and integrity used somehow against us in the future.

2239
02:56:47,350 --> 02:56:56,470
and that's a concern. One that is certainly surmountable but we definitely are encouraged by the

2240
02:56:56,470 --> 02:57:03,290
comments that were made earlier and you know we're very eager to get there. So just encourage

2241
02:57:03,290 --> 02:57:09,190
the working group here to continue your due diligence and hopefully we can come up with a solution.

2242
02:57:09,510 --> 02:57:10,690
Thank you. Thank you.

2243
02:57:14,940 --> 02:57:20,080
Hi my name is Ali. I am the CEO of Event High. We are a software company.

2244
02:57:20,080 --> 02:57:22,020
We don't touch the plant at all.

2245
02:57:22,740 --> 02:57:25,880
And we're having issues with banking, especially with

2246
02:57:26,600 --> 02:57:30,700
gameways, no companies will work with us from PayPal

2247
02:57:30,700 --> 02:57:34,900
to any gameways that's available out there because

2248
02:57:34,900 --> 02:57:38,060
of Visa, MasterCard, Merry Express,

2249
02:57:38,340 --> 02:57:42,180
are basically the back end of some of these software

2250
02:57:42,900 --> 02:57:46,640
that's available for software companies like us.

2251
02:57:46,780 --> 02:57:47,820
We don't touch the flower.

2252
02:57:47,820 --> 02:57:49,460
or even our clients don't just have power.

2253
02:57:50,660 --> 02:57:52,240
But fortunately, we can't get a bank account.

2254
02:57:52,440 --> 02:57:55,020
We can't do a single transactional line.

2255
02:57:55,720 --> 02:57:58,020
And if we want to kind of follow

2256
02:57:58,020 --> 02:58:00,560
along with these guidelines and try

2257
02:58:00,560 --> 02:58:04,460
to establish a bank account with our bank,

2258
02:58:05,780 --> 02:58:08,440
we are a software that takes transactions

2259
02:58:08,440 --> 02:58:09,140
to different states.

2260
02:58:09,580 --> 02:58:12,680
So we kind of break some laws three-fifths in it.

2261
02:58:13,200 --> 02:58:15,500
So we really want you guys also to notice

2262
02:58:15,500 --> 02:58:21,940
that it's not just a flower, the cash issue. It's also gateway issue, credit card issues.

2263
02:58:22,920 --> 02:58:27,560
There's a lot of tech companies that are coming into the space and a lot of services we offer

2264
02:58:27,560 --> 02:58:33,140
through credit cards, through transactions online. And even if we don't touch the plant,

2265
02:58:34,080 --> 02:58:38,280
it's going to be a huge issue for you just getting a big account as a software company.

2266
02:58:38,280 --> 02:58:41,660
So, thank you very much.

2267
02:58:41,860 --> 02:58:42,040
Excellent.

2268
02:58:42,520 --> 02:58:42,780
Do

2269
02:58:46,530 --> 02:58:50,170
you want to make any public comment, make sure to submit your request that we have

2270
02:58:50,170 --> 02:58:53,210
Aaron, Justice, and Peter Holtzworth next.

2271
02:58:59,400 --> 02:58:59,580
Hi.

2272
02:58:59,640 --> 02:59:00,140
Good afternoon.

2273
02:59:00,540 --> 02:59:01,700
My name is Aaron Justice.

2274
02:59:01,960 --> 02:59:05,440
I'm the president of Buds and Roses, a property dispensary here in LA.

2275
02:59:06,100 --> 02:59:09,420
I'm also a board member of the National Cannabis Industry Association.

2276
02:59:10,400 --> 02:59:14,000
First I want to thank you for forming this committee and working hard on this issue.

2277
02:59:14,980 --> 02:59:22,000
and I'd really like to know how we at NCIA can help you help us. I'm sure my

2278
02:59:22,000 --> 02:59:25,200
fellow board member, Kershita, here has mentioned it, but I just wanted to

2279
02:59:25,200 --> 02:59:30,420
reiterate the point. This issue can only truly be solved at the federal level. At

2280
02:59:30,420 --> 02:59:34,240
NCIA we have political support and federal lobbyists on both sides of the

2281
02:59:34,240 --> 02:59:39,740
aisle in Washington, DC. I'd like to make that connection with this group and with

2282
02:59:39,740 --> 02:59:45,320
any of the lobbyists that represent California. This issue must be part of the California Federal

2283
02:59:45,320 --> 02:59:52,280
Policy Agenda. We need that state muscle, especially from California, to be applied in the Federal

2284
02:59:52,280 --> 02:59:58,520
Banking Conversation. Federal legislation for cannabis banking reform will be coming back this year,

2285
03:00:00,000 --> 03:00:28,520
All the support we can get. We know we have bipartisan support for this reform, and we need your help to push this legislation over the edge and get it passed. State officials of Colorado, including Governor Hickelimper, have been very helpful in D.C., and later this year I would like to say the same about the state of California. So I'll stick around to make connections with any of you, and I look forward to working together here in California, and most importantly, at the federal level. Thank you. Thank you.

2286
03:00:38,370 --> 03:00:42,390
First off, I would like to thank each one of you for the opportunity to speak to you today.

2287
03:00:43,030 --> 03:00:45,250
My name is Peter Holesworth with the Cannabis Lab.

2288
03:00:45,810 --> 03:00:50,630
I'm the former CIO of BioTrack THC, which built the state's systems for Washington and

2289
03:00:50,630 --> 03:00:52,870
several other states that are operating successfully now.

2290
03:00:54,170 --> 03:00:59,350
No longer with the company, I would just say that for the federal government to move forward

2291
03:00:59,350 --> 03:01:05,510
and have security, a seed-disabled system, which encompasses complete transparency ensures

2292
03:01:05,510 --> 03:01:12,130
to close-loop system with no money laundering or illegal or illicit inventory or exiting or entering

2293
03:01:12,130 --> 03:01:17,170
the system is critical to the future of this industry. And I would just encourage everybody here

2294
03:01:17,170 --> 03:01:22,210
in the decision-making process to take your time to value each one of those options on a statewide

2295
03:01:22,210 --> 03:01:29,310
or municipal level prudently and understand its importance towards the successful making of this

2296
03:01:29,310 --> 03:01:30,990
history. Thank you very much.

2297
03:01:38,470 --> 03:01:44,250
Other public comments? Do any numbers of the committee want

2298
03:01:44,250 --> 03:01:46,010
to make any concluding comments?

2299
03:01:49,180 --> 03:01:53,200
I just want to encourage all of us to stay involved

2300
03:01:53,200 --> 03:01:58,560
as I said at the outset. Our next meeting will take place March 27th. We're looking

2301
03:01:58,560 --> 03:02:06,280
at somewhere in the Bay Area. I am going back to Washington, D.C. this evening of we have

2302
03:02:06,280 --> 03:02:09,540
a scheduled meeting with the White House set with the National Association of State

2303
03:02:09,540 --> 03:02:13,200
Treasures, and this will be one of the issues that I will bring to the White House as

2304
03:02:13,200 --> 03:02:18,940
an engine for hopefully some type of action back in Washington, D.C. Thank you all for

2305
03:02:18,940 --> 03:02:19,500
I'm going to practice here.

2306
03:02:35,520 --> 03:02:36,520
This is my favorite.

2307
03:02:37,720 --> 03:02:38,140
For a bank?

2308
03:02:38,860 --> 03:02:39,000
Yeah.

2309
03:02:39,260 --> 03:02:40,700
I'll be about that.

2310
03:02:42,920 --> 03:02:43,460
Yeah.

2311
03:02:43,620 --> 03:02:44,360
Thanks for having me.

2312
03:02:44,480 --> 03:02:44,640
Yeah.

2313
03:02:47,540 --> 03:02:48,080
Yeah.

2314
03:02:52,340 --> 03:02:52,880
Yeah.

2315
03:02:53,780 --> 03:02:54,200
Yeah.

2316
03:02:54,420 --> 03:02:54,580
Yeah.

2317
03:02:54,580 --> 03:02:54,680
Yeah.

2318
03:02:55,340 --> 03:02:55,700
Yeah.

2319
03:02:56,740 --> 03:02:57,100
Yeah.

2320
03:02:58,540 --> 03:02:58,960
Yeah.

2321
03:02:58,960 --> 03:03:00,180
Thank you very much.