Earlier this week Alterna Savings made an announcement that they’re supportive of offering banking services to licensed cannabis-related businesses. In 2014 the Ontario government introduced new regulations to license producers of medicinal marijuana, so they can provide products to many critically ill Canadians in need. However legally licensed cannabis-related businesses have been turned away by financial institutions refusing to offer them basic banking services. On BNN the CEO of Alterna Savings, Robert Paterson, talked about the credit union’s reasoning to provide banking to these businesses and their rigorous risk management process. Here are the main points you need to know about their decision. You can check out the full BNN interview here. ?
Making the decision
On the BNN interview Paterson talks about how Alterna carefully assessed the situation after they were approached by a client who was turned away by another financial institution.
“We were approached a year ago by one of the newly licensed businesses that were turned away by the big banks and we took a hard look to open up the dialogue. When we looked at the downstream, it’s there to help critically ill Canadians going through diseases.”
Before working with their first client, the credit union went through the long task of fully understanding Health Canada’s licensing process, which includes the RCMP checks that businesses go through. They then did onsite inspections and set their own risk management process to monitor and measure the client’s business. Now after serving that first client, Alterna Savings provides banking services to half-a-dozen licensed cannabis related business of the 35 in the country.
Alterna’s risk management process
Like any new business financial institutions take on, risk must be assessed. For licensed cannabis-related business Alterna has a special risk management process in place. Paterson explained this rigorous process to BNN.
“Again the businesses we are dealing with are licensed by Health Canada and that in itself is a rigorous process that the RCMP is involved in. We then do our own process post-licensing. We do on-site inspections to take a look at how they are producing and the security of their facilities. We check the principles of the business, how they are raising their money and monitor it as it comes into their accounts. We do a detailed assessment of their business plan to understand how their cash flow is going. We put a rigorous three party monitoring process including branch managers, risk management and compliance teams monitoring it.”