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uh good afternoon or good morning everybody depending on where you're call viewing from um my name is scott maskel i'm here with my partner katrina skinner as we continue on in our look at issues involving cannabis and the financial industry and financial institutions kind of continuing on from our theme that we had last time i think about two weeks ago about how important automation is to the financial industries that are looking to get involved in this industry i mean the cannabis industry we're really happy that we have as our guest today steve kemmerling who is the ceo and founder and owner of crb monitor which is involved with empowering financial institutions and capital providers to understand identify and manage cannabis related rights and opportunities through its database of crbs or cannabis related businesses which will use that abbreviation benefit and their beneficial owners steve founded the crb monitor in 2014 and he has been a thought leader subject matter expert in data hound focused on addressing significant challenges around cannabis and banking he created and continues to refine many of the terms text taxonomy and frameworks relied upon by financial institutions and regulars as they seek to understand the cannabis industry and formulate relevant and effective policies procedures and standards so steve our data hound thank you so much for joining um just to let folks know we're gonna kind of dive in in a second um we'll try to get to questions at the end um this is a micro webinar so 15 to 20 minutes and then if we can get to questions we will if not please email them to us and we'll make sure that you get a reply um whether it's to myself katrina or steve so let let me just sort of jump in steve and you know ask you what is crb monitor um how and why did you start it i guess in 2014 and and just kind of what what's it who utilizes it and i guess it's like three or four questions so but i guess i've been doing the elevator pitch for a while now but uh so i can answer it but thanks for having me uh scott and katrina um so historically i was not dissimilar i think from you scott i was historically uh in corporate investment banking specifically mergers and acquisitions uh throughout the majority of my career i also spent a hot minute in institutional commercial real estate um sales so basically back in 2013 2014 i personally was looking for a centralized source of information on um i'm going to use the word marijuana related businesses back then cannabis related businesses what have you um and they're really there there wasn't and still isn't other than crb monitor i think a uh what i would call a sector specific corporate intelligence database which is basically a fancy way of saying the database of all the cannabis related businesses um there are various business intelligence data vendors which gets to the minutia of you know price per unit or consumer behavior but really as an investment banker i was a heavy user of a bank specific database where all it was was bank information assets locations i basically wanted to build the same thing and have built the same thing for cannabis companies so it's a pretty broad use case was if i was an m a immersion acquisitions investment banker and i want to go do 30 000 m a roll ups you need a database to do that um but at the time and still to this day one of the biggest pain points for the industry and making it as well is this intersection of banking um i'm going to use that word to mean depository institutions so credit unions banks etc the intersection of banking and the marijuana industry right so back when i was starting the company fincen had had come out with their bsa guidance on marijuana banking in february 2014 and among other things that said use publicly available information to understand the nature of the business i would interpret that to mean medical versus recreational cultivation versus dispensary understand who owns and manages these businesses etc etc so that was kind of the the primary use case i've been focused on so we aggregate identify and aggregate information on currently about forty thousand um direct or what i call tier one and at this point i'm gonna use the word marijuana related businesses we haven't yet delved into hemp but we will so with tier one you mean plant touching right plant touching direct and this is you know so that's part of the challenges industry is what do you mean um so in 2016 i wrote a white paper that i think is fairly widely used and referenced knowingly or not where i defined it's year one tier two and tier three marijuana related business which was a bit more of a detailed version of direct versus indirect that fincen loosely refers to um and i felt well positioned to write that because i literally you know we're creating a database we we have to draw a line of what businesses are we including what are we not including how do you identify them how do you categorize them so that was so so these are very high level answers and i will get more detail but i know so so what i'm curious about is and and i know that your database has applications both for the fi side or the financial institution side but also um because as you imagine i do come from a banking corporate m a world but also on the uh corporate sort of capital provider side right it's kind of curious um if you want to talk a little bit about how different those two entities those two needs are and maybe even how similar they are in the long run yeah great point so so so when i started it it really was from i'm going to use the word investment banking meaning mna capital raising etc but what i found in 2014 was arguably i was too the database was too early from that use case because most institutional investors private equity funds and this is still true today the vast majority of them still don't touch cannabis but obviously that's changed quite a bit you know on a relative basis but still as a out of the entire industry the financial services industry most banks most institutional investors still don't touch the space so that kind of left me you know that was the original perspective but that's how i kind of stumbled into bank compliance if you will so so and i will round back to the answer so my original hypothesis was i'm an investment banker i want to do capital raising et cetera et cetera generally that use case still isn't all that true today that is developing and we have expanded to cover publicly traded cannabis companies of all tiers globally but generally the overall appetite for that is still quite small compared to the overall institutional investor market so that's where i kind of did my first pivot into well how can we use this data to help financial institutions depository institutions identify manage and monitor cannabis related relationships so that's what we've been really focused on for the past five years really since i started saying if you're a bank that wants to bank mrbs again here's a public unbiased third-party database that aggregates all this information centralizes in one place so it gives you uh you know a snapshot picture maybe it's not perfect but it's i think the best thing of an owner has this many touch points to this many businesses in this in these different states with these different licenses the only way to do that is to aggregate all that information into one relational database um that being said we are starting to get the original hypothesis of investment bankers coming to me uh who who want to look beyond just the top 50 publicly traded and look at the other 39 500 right businesses saying oh there's a there's a massive opportunity here so non-bank lenders you know private investors etc who are looking to understand the marketplace which anyone could do what i did it's just a pain in the butt right to take all that information and put it in one place so it is what's good for you is because all can most i i think almost all cannabis applications are generally either online or foia you can get through a foia request but it's it's public data because it's a you're applying to a government right it's it's a varying degree so we won't bore the audience with but it's it's public record but every state treats it differently some are more you know delaware is different than massachusetts is different than california so the breadth and depth of information varies uh pretty widely but it's online it's offline it's websites it's pdfs it's databases it's foias so it's really using every kind of trick in the hat to try to aggregate this information and you know it oh i'm sorry excuse me we're going to ask are you going to say something or did i interrupt okay never mind you know so what i was going to say is um and i know we you and i were talking about this but it seems it's it's interesting that your database has as much application for fis that are banking uh cannabis uh for tier one plant touching companies or even tier two ancillary as well as those who don't or have zero tolerance policy um right assuming and you and i were just chatting about this before the start of the call and it's important to for financial institutions to have their definitions correct um as we were i won't get into the detail but as you and i and others on this call have probably experienced you know having bank accounts closed down and you're like hey i'm just an attorney or hey i'm a data vendor that helps banks manage marijuana risk what are you doing um but but it is true there's we we have i believe again the most comprehensive database of unique entities and you know many beneficial owners so a portion of my clients use the database to identify unknown marijuana related relationships because the not so unknown secret is mrbs or crbs will do what they need to do to get a bank account and i'm kind of saying that lightly and i can appreciate that but for those institutions who have a quote unquote strict and i'll use the word strict no direct marijuana policy for to be clear um you know if you're mrb either applying directly or even worse creating shell company holding company to avoid detection or using personal accounts that's that's i i don't to i don't want to be too strong-willed and you're an attorney but that's not it doesn't look good how about that i'll say it doesn't look good um i i get why it happens um i totally get it but there are banks you know believe it or not i think he would scott there are banks in massachusetts i'm told there's five or six in massachusetts competing for marijuana deposits in colorado there are 10 or 12. so it's state by state does fluctuate widely but there are many more banks now knowingly openly serving mrbs marijuana related businesses and many even more serving hemp and cbd but that doesn't change the fact that some mrbs don't feel like paying fees really don't want to turn over beneficial ownership information et cetera et cetera and i don't think that goes away even with a safe banking act passing for example no i i agree i mean i mean frankly under the ben under vincent's beneficial owner rules i mean if it's an llc or an entity and they're going to open up a bank account they need to know if you know who owns 20 if you own 25 or more you have to reveal who those owners are it has nothing to do with cannabis right i i don't think the cannabis industry and that to that point that is we'll say relatively new you know the beneficial ownership rules and enforcement is relatively new but cannabis owners especially you know especially legacy cannabis owners uh don't get it and don't care you know so and it's it's a working process but that is beneficial ownership is a whole major thing outside of cannabis as well right but but even in cannabis you know so we we represent katrina myself we represent many mrbs and you know oftentimes when they're looking to open up a bank account they have to disclose you know all this information and they start complaining to us why do we have to do that why do we have to do that and i think one thing and because you know obviously it's more from the investor side right a lot of investors don't necessarily want their name linked with cannabis for whatever reason job purposes reputational but you know what i tell our clients i think katrina you probably do as well and certainly with your previous employer at safe harbor is that all these most every application requires the list the shareholders are or the equity holders and there's never you shouldn't have an expectation that if you're going to invest in a cannabis company that you won't have to disclose somewhere down the line your name right i mean it just it just happens because the state requires it and then you know the banks are other like insurance may require right and to that point and you know i've had this discussion offline it's it seems like the mrbs are willing to put that information in their application documents which is public record but then have heartburn when they give to banks which is if a bank were to give that information over that would be illegal arguably you know that the banks can't just but again i get it like i can appreciate some paranoia around the industry but banks have confidentiality right requirements right right whereas anything you submit to the state can be found out through a foia request right so again depending on the state i mean a lot of states consider that pii will you know even if they have public records rules but i won't get into the intricacies of public records requests which i now know a lot more about than i did five years ago so steve um i'm curious if there's financial institutions who are listening to this today how is it that crb monitor would work for them or in what ways would you suggest it being used as a tool as an example is it used in addition to maybe their bsa software or is it um in conjunction with just kind of tell us how that would work logistically yeah thanks katrina so so it is it's designed to be complementary to what banks are already doing um so to use an overly generic word if you're if you're a cannabis friendly bank who's knowingly setting up a cannabis banking program um my somewhat biased opinion is the first thing you should do before you bother this is my opinion first thing you should do before you bother to set up a program and invest in cannabis banking compliance monitoring workflow software is do you already have these accounts in the first place meaning it's it's kind of ring fencing what do you have and off usually all my clients offer those unknown marijuana related accounts amnesty saying hey you know what maybe you didn't know but we're starting a marijuana program so you don't have to hide in the shadows and it actually is a business development tool in one sense um so step one is understanding you know what is your risk tolerance to certain segments of the canvas market you know if you're yes to mrbs or hemp or cbd but first step in my opinion is always do you already have exposure that you don't know about so that's true for any bank not just marijuana friendly banks or unfriendly but then after that kind of after the initial screen and ongoing screening because mrb's and or will continue to come under the radar um so consuming the screening is they use my database as kind of again this unbiased third-party database that says well here's what crb monitor has about this business as it relates to the beneficial owners as it relates to licenses as it relates to licenses in other states and that's kind of the only only place to do that because otherwise it's a sanity check for what the crbs themselves give the bank right they say well here's my beneficial owners well how does that align with crp monitor has the bank should get way more information than i get from the public realm right but it's still a sanity check and it also says oh i didn't know steve also owned businesses in these other states he didn't mention that and i want to own the entire cannabis relationship not just massachusetts i want to own rhode island in connecticut and massachusetts and ohio so it's it's a sanity check um plus kind of the last main key component is ongoing license monitoring and or supply chain license monitoring so if i have uh let's say so let's say i have a cultivati n client or and we know that that cultivation client is receiving revenue by selling marijuana to a dispensary do we know if that is have we verified the dispensary they're selling to is licensed and vice versa i mean usually they are but again it's a sanity check it's an a sanity check or hey my license was just revoked i'm a testing lab in nevada there's some negative news like i'm probably i might not volunteer that information to my banker so again it's kind of putting all that information in one place as an unbiased source so whether or not you're yes marijuana friendly bank or not screening your relationships to identify unknown relationships is that's a common sense best practice outside of cannabis banks are already doing this they already have the software they already have the policies it's just hey why won't you apply it for marijuana plus and there's a lot more utility if if you are a canvas friendly bank um you can use it as customer it's a crm right it's every single business and a lot of their beneficial owners so there's there's a lot of use cases are are you working with any of the uh cannabis regulators in any of the state because it seems to me that information because most applications will ask you know certainly of the principles what other uh licenses are you involved with etc etc and people sometimes don't necessarily include all the information right and and that and that's not even a softball question scott that's just that's just insightful because i'm i'm literally having kind of two two conversations like that now with the state regulators saying because everyone knows their silo really well right but beyond that particular state silo it's hard to know what else is going on in other states so have all the i won't say which state but the state where i previously lived um i had a when i was starting the company that came up saying hey i'm a regulator in this state but i don't really know besides if they tell me honestly what's going on in other states right i'm a massachusetts regulator and they aren't supposed to be stacking licenses right but maybe they are through subsidiary companies up into one parent holding company again this is also assuming the information's public record and then i've gotten it and i've condensed all of it but it so kind of sword is the short answer but you are international as well right i mean you have a database that covers canada as well correct um in terms of direct plant touching marijuana businesses we cover canada and the united states at this point um is the short answer okay but the canadian especially with some of the canadian parent companies that's important for those financial institutions that are banking them as well yeah i mean i'm a data hound this guy said i like that um canada is pretty darn tight on their information that they publish unless it's publicly traded in which case we're looking at the securities filings the cdar the sec filings to unravel ownership chains and subsidiaries which is i i have some very very very large broker dealer clearinghouse clients because what i'm able to do is tie the publicly traded parent not just saying hey this company says they have locations in these states or these countries but we literally tie the publicly traded parent to those specific entities in those specific states so you can say which states medical recreational which provinces etc etc and that's again that just gets to be the the power of having a holistic database that looks across the board and all the relationships right and and you know talk so we'll talk about the past kind of what you're doing in the present you know let's let's just turn to the future as we kind of uh as usual go over over our time but you know as you mentioned you know i'm a corporate banking lawyer um and i i kind of like to have you just talk a little bit about the possibilities and capabilities of all this data for investment bankers for venture capitalists et cetera et cetera because or even right because it just seems like it's an untapped database with possibilities galore it's exciting and you know i went kicking and screaming like most investment bankers into the compliance realm you know but but that but that's what that's don't really like comply right but but it's needed for transparency you know and again it's it's it's a holistic database and given where the market is um compliance aml focused and and i'm going to get into the future part you answered asked this question earlier but good compliance is good business development frankly it gets to better underwriting it gets the better risk management it gets the better um opportunity identification so i get super jazzed and i'm caffeinated really well but it gets really exciting when i look at this is i look at you know all of the um you know simple as commercial mortgages that there are there's some there are reits there's one mortgage rate there's some private deals but i mean you're looking systemically at an under capitalized under lent to industry um it's it's lending underwriting risk rating you know sorting the weak from the chaff um mergers m a it's it's almost so broad i get lost but for me for me the immediate use case is is underwriting and and lending commercial like vanilla commercial lending it's you know not doing 20 interest rates and warrants no offense that deal like if you can do it get it while you can while it's hot but as banks are starting to compete now on price pricing pressure just on deposits the natural tendency and this is kind of the present is we haven't seen regulators it is it is a myth to say regulators are clamping down on banks for banking marijuana that that's patently false it's almost the opposite um that doesn't mean we shouldn't pass safe banking but now that banks and regulators are getting comfortable with the first step which is deposit accounts right now we're looking at payments and after payments lending i mean that's what banks that's how they make money you know other than your non-interest income if you aren't lending you're not a bank right and some some banks in the industry are exploring i call it indirect loans so to the extent they're banking marijuana if there's a landlord who has their mortgage with an institution that has zero tolerance and there still are many of them you know there's an opportunity to finance out so they don't get actually pushed out of the bank um i think that's you know i think and it's easier to underwrite commercial real estate than it is a partially sometimes cash flowing industry right i mean we'll get there you know it's go it goes checking you know demand deposits right it's where we start and then it's like let's do commercial vanilla commercial underwriting and then equipment and then maybe you know then cash flow it will all eventually occur um but i i do think unless until marijuana itself is federally legalized under clear regulatory expectations you we will continue to have a dampened banking industry um to this space relative to unequivocally legal industries right and i i don't sound too negative when i when i say that but it's um even with safe banking you'll still have i personally believe and i might be totally wrong a significantly damp appetite for most banks getting the space but you know banks bank msbs adult entertainment and all gambling and all sorts of other high-risk stuff they do it and we're already seeing banks banking marijuana in certain states go ahead oh i should say but a lot of banks um and certainly a lot of regulated non-regulated lenders they will stay away from like the sins right tobacco i'm not saying these are sins but it's a term like tobacco gambling adult entertainment um and you know i could easily see cannabis be put in that category or at least maybe even maybe just adult use cannabis certainly yeah yeah so i mean there it's you know i i'm so excited it's i i think for those of us who've been in the industry for four or five years we're like oh man we're getting tapped out but in reality when i step back i still think to use a cliche that we're in i think we're in the second or third inning of the ball game i still think there's you know we're talking international we're talking tier two hemp and cbd are still huge question marks um the industry as a whole we have decades ahead of us hopefully we'll we'll all be retired yeah when all this stuff gets figured out but it's it's it's it's massive katrina did you have no i was just gonna say we need to wrap it up so everybody so we can be cognizant of everybody's time and so thank you everyone there is one question let me let me just ask this quickly it's for stephen what would you say are the distinctive benefits of crb monitor as opposed to a data warehouse service like lexisnexis yeah good question for from my experience even as an investment banker there's of course it's self-serving right but there's subject matter expertise all we do all day long is think about identifying and building out profiles of marijuana related businesses so alexis nexus the dow jones thompson reuters all all great firms right don and brad street all great firms um but it's one of 300 products data assets that they build um they and all at least two or two of those have marijuana business lists they're csv files and that's all you're going to get you're going to get a csv file you know none of the license none of the beneficial ownership no user interface no website no source documents it's hey here's a spreadsheet they patch you on the back which is fine for them but for an investment banker again maybe it's okay for a call sheet but i'm looking for more information and subject matter expertise and news and market concentration good good question so so almost in that you are so focused on this particular industry with respect to the data hounding you can put the correct algorithms and and search terms and whatnot i think that's probably the distinction with like yeah and and we'll i'll be quiet here but it's when i when i hear what the big guys are doing like i'm against self-serving but i think i'm i'm the leader so i started with i started with definitions and before no one else had a definition of an mrb so it's like how do you even know what's going in the list or what's not going to list and then uh i'm the only one who uses foias for whatever reason the big companies their their legal departments say we only include something that has a url attached to it like a news article right or a database well there's no url you're not including it um you know so that i started adding beneficial owners and we said why would you add the beneficial owners like why wouldn't you and then people started beneficial owners and i started adding licensing information and the big guys started adding licensing information so it's sorry it's it's follow the leader i i think so but it's what i'm doing isn't the first time like there are again there's industry specific databases and companies that focus on banking or energy and power or insurance i'm doing that for cannabis you know that's what investment bankers use so it's just different great well listen i know we're definitely over time but i want to thank you this has been really awesome really um informative um on behalf of burns and levinson katrina myself thank you so much thank you have a good day bye everybody thank you thanks everyone you