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Could ganja add to NCB's high profits

Business reporter

Sunday, November 12, 2017

As local banks receive flak for not facilitating transactions in the marijuana industry, National Commercial Bank (NCB) has come out to say that it is in dialogue with ganja stakeholders — but warns that it will proceed very cautiously.

“As much as there are some legislative provisions for marijuana, we as a financial institution cannot do anything in terms of our relationship, whether it is with our existing customers or prospective customers, to put the business at risk. We are constrained,” President and CEO, Patrick Hylton told investors during the NCB Investor briefing on Friday. The event was held at the NCB Wellness Centre in Kingston.

To date, NCB is the only local bank that has openly confirmed that it could engage stakeholders in the industry. On Thursday, Member of Parliament for Trelawny Southern, Marissa Dalrymple-Philibert, called on the Cannabis Licensing Authority (CLA) to move quickly to forge a relationship with banks to assist stakeholders in the industry who are now having difficulty conducting transactions with the institutions.

However, the banks have raised concerns about the impact the business which remains illegal at the Federal level will have on its operation.

Hylton, in responding to the media about the risks of interacting with the cannabis industry, referenced financial institutions in the United States that are also constrained by the regulations of correspondent banking, so much so that it has led to industry players dealing exclusively in cash.

The bank cautioned that its relationship with correspondent banks remains important, and until that is clarified, it will remain constrained in terms of how it can interact with the market.

“If we are to do business with a marijuana-related company it requires a pretty high level of approval and review for us to proceed and we will proceed very cautiously, bearing in mind not just the risks but also how we do our correspondence,” reasoned Group General Counsel and Corporate Secretary Dave Garcia.

He added that under the existing rules foreign currency transactions varying from wire transfers, bank drafts, to just holding a foreign currency account with the Bank are going to be things that it will not be able to facilitate even if it falls within NCB's own risk appetite.

“We have been pretty active in having dialogue with our correspondents and the CLA on this. In February we invited both the CLA and one of the leading correspondents to come in for meetings with our board and senior officers. The truth is, coming out of those discussions, it seems reasonably clear to us to move early and quickly in this area,” Garcia told investors.

He said from a risk assessment standpoint the CLA has outlined very detailed procedures that it employs, and the legislation and regulatory framework required in relation to the assessment and monitoring of marijuana-related business.

“That's something which augurs well for the future and something that we have under continuous assessment. We are still actively looking at the issue and particularly in relation to Jamaican dollar services,” Garcia said.



Meanwhile, Group CFO and Deputy CEO Dennis Cohen is predicting another milestone year for the company come 2018 — driven by core banking and other financial services. His statement comes on the heels of the NCB Financial Group posting record profit of $19.1 billion for the year ended September 30, 2017.

“The numbers are not a material, one-off occurrence. In other words, this is driven by what we expect to be core financial group performance, and also this performance is in the context of significant investments we are making,” he said, adding that the significant increase in operating expenses posted by the company is in line with investments in technology that enhance digital capabilities.

“We are making investments, and our core business is performing. It is clear to us that it is sustainable and we also expect improvements because we are yet to realise the significant investments we are making today,” he said.