Sacramento financial software company NatureTrak signs up bank for cannabis validation

Sacramento-based financial technology software company NatureTrak Inc. has signed up a bank in New Mexico to use its tracking software to validate cannabis-related business deposits. It is the first bank to use the product, but several more banks are in the pipeline, with another expected to sign a contract next week, said Jontae James, CEO and founder of NatureTrak, via text. "The cannabis industry is exploding, and will continue to do so, as more and more states legalize medical and adult-use cannabis,” James said, in a news release.

NatureTrak developed an accounting and tracking system for financial institutions to be able to create an auditable supply chain record for their legal cannabis business customers. It has been used by North Bay Credit Union of Santa Rosa to validate more than $2 billion in cannabis-related transactions, including over $700 million in cash deposits and more than $250 million in tax payments, NatureTrak said.

The new bank customer is Southwest Capital Bank, a 131-year-old bank based in Albuquerque, New Mexico, with six branches. The bank had assets of $414.9 million as of June 30, according to the Federal Deposit Insurance Corp.

California legalized adult-use recreational marijuana in 2018, and New Mexico legalized it this year. However, under federal law, marijuana is still illegal, so banks, credit unions and brokerages — all of which have federal oversight — are at risk of losing their licenses to operate if they take money directly associated with cannabis without a rigorous audit trail.

NatureTrak’s platform accesses licenses in state and local databases and checks that they are valid for the transactions being done. It also creates receipts along the way from grower to processor to distributor and eventually sales. All those receipts, in turn, are meant to create an audit trail that can make more financial institutions comfortable in banking cannabis-related businesses, which otherwise are locked out of the financial system because recreational cannabis is still illegal under federal law. NatureTrak is paid by the bank or credit union for its software. All the tracking, verification and record-keeping gives a provenance to the money, which could allay the federal government's primary concern about money laundering.

Earlier this year, New Mexico Gov. Michelle Lujan Grisham signed a law that makes adult-use cannabis legal for up to two ounces. The state legalized medical cannabis in 2007 for compassionate use. Albuquerque, the largest city in New Mexico, decriminalized an ounce or less of cannabis in 2018.