Southwest Capital Bank wants to ensure transparency throughout its cannabis portfolio after facing federal scrutiny related to the industry.
To do so, the bank will work with Sacramento, California-based tech company NatureTrak, which offers a compliance and risk management platform for banks working within the cannabis industry.
Southwest Capital sees the legalization of recreational cannabis use by adults in New Mexico, and the start of recreational sales by April of next year, as an opportunity to grow its business. However, navigating government oversight will be a chief priority as the industry brings "significant risk," according to a statement from Southwest President Lonnie Talbert.
In addition to NatureTrak, Southwest has also enlisted a company called Higher-Risk Deposit Compliance Solutions (HDCS) for training and advice on best practices, according to a news release. HDCS offers a compliance program, customer screening and monitoring and reporting for financial transactions — which is crucial for staying in line with the federal government.
While the distribution and sale of cannabis remains illegal at the federal level, the U.S. government has laid out expectations for financial institutions seeking to provide services to services to the industry. In 2014, it required that such institutions file a Suspicious Activity Report for activity involving a cannabis-related business.
In New Mexico, adult-use legalization has been signed into law but over-the-counter sales haven't begun. Recreational cannabis sales are to start no later than April 1, 2022. But local financial institutions have already started to build their cannabis businesses.
Southwest Capital opened its first medical cannabis bank account opened in October 2014, and the sector already accounts for a "significant part of what we're doing," Talbert told Business First in July.
Years later, the bank was hit with two consent orders from the Federal Deposit Insurance Corporation and the New Mexico Regulation and Licensing Department's Financial Institutions Division, although just one was related to cannabis, Talbert said.
At least one other financial institution in New Mexico is also reportedly targeting cannabis. U.S. Eagle Federal Credit Union launched a banking program for the sector in 2019, per the Albuquerque Journal.
