President’s Column

Serving Our Customers, Protecting Our Banks Ingrained in every Arkansas banker is the desire to help a new business grow, prosper and enhance our communities. Not always will the answer for new funds be “yes;” sometimes it is a very correct “not yet,” and occasionally it is a sound “no.” Surely we are always ready to provide our services and funding to new business opportunities in our communities; especially when this developing business is projected to create more new jobs than the manufacturing sector of our national economy. But what if this new business is cultivating or dispensing marijuana? Most banks are sitting on the sidelines, weighing the reputational, legal, and regulatory risks before deciding on a business plan. Arkansas is one of 29 states that have made medical marijuana legal under a regulated program. Eight other states have expanded their program to include recreational use and/or edible products. Cannabis is legal in each of these states, but remains a class I drug prohibited by federal laws. And recently U.S. Attorney General Sessions has reiterated his strong feelings that it should not be a legal drug. So, what should our banks be aware of as we face new businesses that are legal under our state’s laws, and illegal under our federal laws? What should we know about our existing customers who will provide a product or service to a marijuana business? What do we need to do when we have a longtime customer who has had a transaction with a marijuana business? What do we have to report, which SAR do we file, what do we have to investigate, where do we go for answers? These are all parts of the maze that is created by this new, but growing industry. Not banking this new industry also poses reputational risk. Under our state’s laws these are legal businesses that deserve the same banking services as other businesses. These are cash intensive businesses that must pay the vendors, landlords, suppliers and employees with cash. There will undoubtedly be people willing to risk their safety, and the safety of anyone else in the area, to attempt to attain possession of these large cash pools. Our communities look to us to provide a safe consumer cash experience, something that may now be threatened. It is not a problem we can solve. Federal legislation is urgently needed to make banking state-legal marijuana businesses less problematic and challenging.

PRESIDENT & CEO BILL HOLMES

BILL HOLMES PRESIDENT/CEO 501.978.3602 | bill.holmes@arkbankers.org ABA STAFF

CARLA BRINKLEY VP/CONTROLLER 501.978.3608 | carla.brinkley@arkbankers.org

AVA F. ROBERTS VP/DIRECTOR OF GOVERNMENT RELATIONS 501.978.3606 | ava.roberts@arkbankers.org

JESSICA SAHENE MARKETING COORDINATOR 501.978.3609 | jessica.sahene@arkbankers.org

BARRY JACKSON SVP/COO 501.978.3613 | barry.jackson@arkbankers.org

KAMI T. COLEMAN VP/PROFESSIONAL DEVELOPMENT 501.978.3614 | kami.coleman@arkbankers.org

TRACI LOGSDON DIRECTOR OF COMMUNICATIONS 501.978.3603 | traci.logsdon@arkbankers.org

BRENDA SCARBROUGH ADMINISTRATIVE ASSISTANT 501.978.3607 | brenda.scarbrough@arkbankers.org

What we do know from other states is that if a bank is going to take on a facet of this business, they must have strong compliance and BSA officers, and require boards that are informed and active. They will need processes and procedures in place, and a strong audit standard for their marijuana business customers. Most of all, they will need to be transparent and open with their regulators. The banks will need a well-designed plan, blessed by the regulators, to be able to handle these new businesses that will require much greater due diligence than any of our other customers. Looking at this business in its infancy, looking at the potential growth and fee income, looking at the state-legal, federallyillegal status explains why so many are on the sidelines watching. This opportunity isn’t right for everyone. For those that make a commitment and follow the plan, maybe it is okay. On October 24 in Little Rock at the Marriott, we will have a two-hour panel discussion with bankers, business people, and regulators on the good, the bad and the ugly of marijuana business. Come join us for that lunch meeting, hear their stories, get some questions answered and gain a better understanding of the issues related with medical marijuana. Our panelists include subject matter experts from Colorado and California. You or one of your senior level executives should be there to hear how marijuana and the banking industry intersects. It is a $6 billion business and going to grow bigger.

CONFIRMED MARIJUANA BANKING PANELISTS

John W. Vardaman, III Executive Vice President & General Counsel, Hypur Founded in 2014, Hypur is a team of bank compliance and software entrepreneurs who have successfully helped financial institutions automate their compliance with marijuana banking regulatory requirements by implementing an integrated point-of-sale system. As Hypur’s General Counsel, John advises on strategy to ensure that Hypur’s offerings are in alignment with legal and regulatory requirements. Kelly Goode Senior Examiner, Kansas City Federal Reserve Bank The Denver Branch of the Kansas City Federal Reserve has supervised banks on the subject of marijuana banking since the controlled substance’s legalization in Colorado in the early 2000s. Kelly is a senior examiner in the Denver branch of the Kansas City Federal Reserve Bank, where she has worked for 10 years. Mary Robin Casteel Directory, Arkansas Alcoholic Beverage Control Division ABC regulates the manufacture and sale of alcoholic beverages and medical marijuana dispensaries and cultivation facilities in Arkansas. Mary Robin has served the ABC since 2013, and was named the agency’s director in June.

DAVE DICKSON | CHAIRMAN Union Bank & Trust Co., Monticello SEAN WILLIAMS | PAST CHAIRMAN First National Bank of Wynne, Wynne CATHY OWEN | CHAIRMAN-ELECT Eagle Bank, Little Rock BILL HOLMES | PRESIDENT/CEO Arkansas Bankers Association, Little Rock ABA EXECUTIVE COMMITTEE

ROB ROBINSON IV | VICE CHAIRMAN Simmons Bank, El Dorado

JOHNNY ADAMS | GROUP 2 First Security Bank, Conway PHIL BALDWIN | GROUP 2 Citizens Bank, Batesville JEFF BRECKLEIN | GROUP 1 Integrity First Bank, Jonesboro JIM CARGILL | GROUP 2 Arvest Bank, Little Rock GENE CRAWFORD | GROUP 5 Citizens Bank, Batesville DAVID DOWD | GROUP 1 Cross County Bank, Wynne TROY DUKE | GROUP 5 Gateway Bank, Rison NATHAN GAIRHAN | GROUP 3 United Bank, Springdale DON GIBSON | GROUP 3 Legacy National Bank, Springdale CHRIS GOSNELL | GROUP 4 Farmers Bank & Trust Co., Magnolia ABA BOARD OF DIRECTORS

TOM GRUMBLES | GROUP 2 First Service Bank, Greenbrier SCOTT HANCOCK | GROUP 3 Centennial Bank, Fayetteville DARWIN HENDRIX | GROUP 4 Bank of Delight, Delight DAVID JESSUP | GROUP 5 DeWitt Bank & Trust, DeWitt WILSON MOORE | GROUP 2 Bank of America, Little Rock

JERRY MORGAN | GROUP 1 Focus Bank, Jonesboro LORI ROSS | GROUP 4 Citizens Bank, Arkadelphia JASON TENNANT | GROUP 3 Cornerstone Bank, Eureka Springs LYNN WRIGHT | GROUP 2 Regions Bank, Little Rock