Mike Kennedy
Co-founder and Head of Product, Green Check Verified
Age: 29
Industry experience: 10 years
While working at a software firm that helped community banks and credit unions manage Dodd-Frank requirements, Mike Kennedy heard from executives who were looking for niche market opportunities to grow deposits and remain competitive against larger banks and fintech providers. At the time, the cannabis companies across the U.S. were often unbanked, and Kennedy became interested in how to guide financial institutions through regulatory requirements so they could work with the cannabis industry. The result was Green Check Verified, a New Haven, Connecticut-based software company Kennedy co-founded in 2017. Green Check provides banks and credit unions, including some in Massachusetts, with an automated account-opening process that complies with appropriate state requirements, ongoing transaction monitoring oversight, and regulatory reporting.
Q: How did you get together with Green Check Verified’s other co-founders?
A: Our CEO, Kevin Hart, is my college roommate’s dad. I’ve known him over a decade. His background is in enterprise software, and he was approached to build a point-of-sale system for the cannabis industry. He saw firsthand the challenges cannabis businesses had in not being able to access the financial system. I was in the banking world stumbling on this problem, but from a different perspective. I’m seeing this growing need from the financial system for these cannabis deposits. So, we put our heads together to try to come up with a solution.
The rest of the founding team gravitated around that core mission. As we built out our team even further, we really had to make sure that we didn’t just have the technology experts and the folks on the software side but also the subject matter experts who can help inform and guide the development of our products.
Kevin and I are a generation apart. He has a proven track record of success whereas I’m at a different point in my career. I think that’s worked really, really well for us – being able to blend new perspectives with existing experience and understanding of certain market dynamics.
Q: What’s the biggest challenge for banks and credit unions?
A: Education, definitely. I think because this industry moves so quickly, there’s a large opportunity for signals to get crossed, information to be misunderstood or misconstrued, assumptions to be made. Because cannabis as a whole has this negative connotation to it, it does create this sort of invisible force that holds a lot of bank boards of directors from openly talking about it at a board meeting.
Q: Green Check recently launched a new consulting service for financial institutions looking to enter cannabis banking. What brought that about?
A: We were getting clients coming to us with programs that were “developed” by other consultants – maybe they were compliance specialists in another domain, maybe they were just trying to get out ahead of an emerging market – but the resulting deliverables were just not up to par. Some of the policy templates that we saw and some of the workbooks put together for these banks and credit unions didn’t account for the necessary regulatory requirements. They didn’t provide for realistic oversight given the constraints many banks are under.
We decided that we were going to formalize the work that we were already doing and use it as an entry point for some banks that were maybe canna-curious: They’re thinking about getting into the industry, but they aren’t quite ready to make the jump to contract with a software provider like Green Check.
You could have a strong cannabis banking policy and all the right account opening documents and a good risk assessment, but if you have a commercial account-opening policy totally separate from that program that has a line such as, “We won’t open accounts for any federally illegal business,” you’ve now just created a conflict in your own policy. So we’re looking beyond just the narrow view of, “We’re going to bank cannabis so we need these documents and these controls in place” to “We’re going to bank cannabis so we need to look holistically at our compliance function and determine if there are other areas throughout the bank that need to be revisited as a result of this decision.”
Q: What does the cannabis banking landscape look like in Massachusetts?
A: It’s a relatively stable landscape in terms of a business trying to get access to a compliant bank account. That creates a better oversight environment for the regulators because it’s a little easier obviously to track financial statements and tax revenues if the financial system is in play in moderately full force.
Q: How does the coronavirus crisis affect cannabis banking?
A: In terms of the economic climate, with the Fed dropping interest rates going down to zero, that creates an additional incentive for financial institutions to grow deposits. Financial institutions, as is the case through any economic crisis, will play a very large role in their ability to deploy capital, to provide the products and services that their customers need. In particular, we anticipate seeing a number of institutions coming off the sidelines to work with cannabis not just for those reasons, but also to grow net new deposits so they can continue to provide those benefits at an even higher scale.
It’s encouraging to see banks and credit unions stepping up to play their role. The institutions that are willing to deploy capital directly into the cannabis industry may also have an opportunity because a cannabis business is not eligible to receive funds through a Small Business Administration loan. Despite some provisions that are out there for other small businesses, the cannabis business will have to look to the private market or their financial partner in order to get access to operating capital that they need right now. Lending in general is the next frontier to be explored in cannabis banking.
Kennedy’s Five Favorite Woods to Use When Building Furniture
- Walnut
- Sapele
- Jatoba
- Cherry
- Mahogany
