As Privateer Holdings’ Director of Treasury Compliance, Dante Tosetti is focused on setting standards to ensure compliance with the complex financial regulations governing the rapidly evolving legal cannabis industry. In the first installment of our employee Q&A series, Dante discusses why he left his previous job at the Federal Reserve Bank of San Francisco, current banking challenges facing cannabis businesses and policymakers, and why he’s excited to be a part of Privateer.
Before joining Privateer, you worked at the Federal Reserve Bank of San Francisco. What did you do there?
At the Fed, I was a commissioned bank examiner. I examined the affairs of community banks, regional banks and large banks throughout the 12th District. The 12th District runs as far east as Utah and as far west as Hawaii. My job was to make sure the banks were operating in a safe and sound manner. Then prior to the Fed, I was a commercial banker in San Francisco.
Why did you decide to leave the Fed for a cannabis company?
Banking is a major issue facing the cannabis industry right now, and I saw a unique opportunity to help address that issue using my background and skillset as a commercial banker and regulator. The integration — or the eventual integration — of the cannabis industry with the banking sector is going to produce reciprocal benefits: The benefits to the cannabis industry are clear, yet the benefits to the banking sector could be even bigger.
I’m also attracted to the social and economic prospects of mainstream cannabis, as well as all the clinical research occurring now. It’s exciting to be a part of changing history.
How did your colleagues react when you told them why you were leaving?
The response was very positive. Most of my colleagues at the Fed are aware of the need for this type of work to be done. I didn't need to explain my decision. The Fed is run by some of the most intelligent, socially conscious professionals I've come across in my career. So their positive reactions confirmed that I made the right decision to join Privateer.
Now that you’re here, what will you be focusing on?
I focus on ensuring the highest level of financial compliance for each of our brands, which is especially important as we scale those businesses globally. I will also be working to set industry standards for banking the cannabis industry as a whole.
What are some of the big issues in banking cannabis?
Restricting access to banking for legal cannabis businesses is extremely problematic for the cannabis industry, for banks, and for public safety. The greatest risk to a bank is not knowing its customers. A lot of cannabis businesses are concealing the true nature of their operations in order to obtain banking.
Cannabis is a $40-$50 billion market opportunity in the U.S., so of course banks are going to want a piece of that. In fact, there are several banks – including the banks we work with – that are already successfully servicing the cannabis industry. Some banks have waded into servicing the cannabis industry and then decided to withdraw due to a misperception of an onerous compliance burden. Most banks are taking a wait-and-see approach, which is not that surprising given the federal-state conflict and how risk averse the banking sector can be.
Wouldn’t the banks want to seize the opportunity?
Like I said, there’s a misconception among some banks that banking legal cannabis businesses creates this onerous compliance burden. That’s actually far from the case. My goal here is to change the misconception that servicing the cannabis industry is a compliance burden, and to work with banks to show them that working with the cannabis industry is actually a better risk management strategy than ignoring the sector all together.
What does an effective compliance program look like?
In the cannabis industry, like in any industry, it comes to down knowing the customer — that’s what banking is. So an effective compliance program for a bank is based on a thorough understanding of the industry, independent testing, well-trained staff, and strong leadership. But again, compliance doesn't necessarily need to be a sore subject for bankers. It could be argued that the banks with the most effective compliance programs today could very well be the most relevant banks tomorrow. And banks should not be left alone to deal with the issue. The industry must also take on its fair share and that's by offering transparency and cooperation to the banks. That will help the banks better understand the risks of the industry and how to best manage them.
Dante isn’t the only former federal employee currently working at Privateer Holdings. He joins Patrick Moen, who in 2013 left his role at the Drug Enforcement Administration to join Privateer. Patrick, our Managing Director of Compliance and General Counsel, was the first DEA official to leave the agency for a position in the cannabis industry.
This Q&A with Dante Tosetti is part of an ongoing series. Stay tuned for more interviews that go inside what's going on at Privateer Holdings and learn what it's really like to work in the cannabis industry.