Hardcar Security Makes Transporting Cannabis and Cash Easier

Cannabis companies have three options for dealing with cash: bank it, vault it, or bury it.

HardCar Shoot  mg magazine
HardCar Shoot mg magazine

Cannabis companies across the United States face many challenges in the age of legalization, but one of the biggest conundrums is what to do with all that cold, hard cash. Until cannabis is removed from Schedule I under the Controlled Substances Act or (gasp!) de-scheduled altogether, most banks will remain hesitant to do business with companies that trade in a federally illegal substance. The tide is starting to turn, though, in some legal states. In three states, at least part of the credit for the shift in attitudes belongs to Hardcar Security.

“We were the first company to [transport] cash into the federal reserve for multiple banks,” said Chief Executive Officer Todd Kleperis. “That gives us a leverage point [with banks]. Most [cannabis businesses] come to us because we have the banks. They also see we have military guys and move product, and they like the sound of all those things together.”

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Founded in 2015 in Palm Springs, California, Hardcar is trying to cement its position as a leader in the cannabis industry before Brink’s and other major players in the armored-truck transport business move into the space. Hardcar’s leadership and a majority of its staff are military and law enforcement veterans. With divisions in California, Nevada, and Florida, the company has been ramping up services that include delivering products from farms and manufacturers to distribution hubs and facilitating relationships between cannabis companies and financial institutions.

It’s the cash, stupid
Hardcar is a broad-spectrum security company offering cybersecurity services, surveillance robots, and advanced threat-detection systems, but its bread and butter of late has been cash-in-transit (CIT) services. Cannabis companies have three options for dealing with cash: bank it, vault it, or bury it. While Hardcar doesn’t provide shovels or barrels, it does work with banks and vaults.

After establishing partnerships with Colorado and California financial institutions insured by the Federal Deposit Insurance Corporation, Hardcar secured relationships with California’s thirty largest cannabis-related companies. The move made Hardcar the largest armored distribution company in California’s weed economy.

Mariko Augustis, head of banking and cash compliance, said one of Hardcar’s major jobs has become facilitating client banking relationships, primarily with credit unions. “Most of the financial institutions we work with are credit unions. Because they are member-based, we find they are more willing to take on cannabis-related accounts.”

While their deposits are not insured by the FDIC, members of federally chartered credit unions are protected by the National Credit Union Association (NCUA). Whether a cannabis company works with a credit union or an FDIC-insured bank, the federal reporting requirements are the same and fall under the Financial Crimes Enforcement Network (FinCEN).

“Any banks or credit unions that take on cannabis companies as clients have to monitor their accounts in a specific way to make sure they are staying compliant and aren’t money-laundering or racketeering, things like that,” said Augustis. “So, in order for the banks to stay compliant, the cannabis businesses have to stay compliant.”

That’s no simple matter. All government bureaucracies thrive on paperwork and fees. Thus far, larger cannabis businesses have been the most able to secure accounts, because they are able to absorb the fees associated with credit unions’ FinCEN compliance requirements, Augustis noted.

Growth opportunities
Because Hardcar serves clients in three states, the company sometimes transports cash across state lines for entities that operate in one state but hold bank accounts in another. The company also has at least one client that uses its service for delivering municipal taxes, an area where Hardcar sees opportunities for more growth.

Kyle Knopp is the city manager for Rio Dell, California, located in Humboldt County, in the middle of the Emerald Triangle. Developers there are building a cannabis business park—for manufacturing and testing labs, distribution, and other operations—and Hardcar is poised to become the on-site transportation service for tenants.

“We’ve had multiple meetings, and I’m really impressed by the level of knowledge [the developers] bring to the table for what they do,” said Knopp. “I think they are a fantastic asset, working directly in the business park physically close to where a lot of the action will be in the industry.”

Rio Dell has set a 2-percent tax rate for cannabis companies operating in the city, and the companies will make their payments at city hall on a quarterly basis. Knopp said “the vast majority” of the taxes will be paid in cash, so “having ready access to experts in cash handling, transportation, and security is a huge asset.”

The fleet
For strategic reasons, Hardcar operates under a distribution license in California. Since most distribution companies don’t employ a fleet of armored vehicles and security guards, Hardcar has built partnerships with other distribution companies, which gives clients multiple distribution hubs for pickup and storage. Hardcar’s client list includes giants like MedMen and small Humboldt County farmers who need to distribute product across the state.

“No other company moves product and cash in the volumes we do,” said Kleperis. “Also, no one in the industry has a $10-million insurance policy that covers cash and product.”

The most notable thing about Hardcar’s heavily-customized, armored vans is how non-descript and ordinary they appear: white, mid-sized cargo vans that could be carrying any Amazon order but, in fact, ferry a few thousand pounds of OG trim. In all, Hardcar operates fourteen vehicles in California, including a large van for trim loads and several other insulated vans dedicated to “frozen-in-transit” service for live resin and sauce manufacturers. All vehicles are armored and bulletproof, with small infrared cameras inside and out to monitor and record activity. The vehicles also incorporate built-in safes, GPS devices to map and track their course, and satellite phones that may come in handy as the company’s off-grid client base grows. In the extremely unlikely event a Hardcar vehicle is lost or stolen, a remote shut-off switch can be activated.

With tactical training in the military and/or law enforcement, Hardcar’s armed staff possesses a unique set of skills in the security realm. Fortunately, they haven’t had to prove their mettle in action, said Kleperis. No criminal incidents have occurred during pick-ups, transport, or deliveries. Bad guys aren’t the biggest threat, however. That honor belongs to the feds. Routes must be mapped with care to avoid federal lands, which cover 15 million acres in California, or 15 percent of the state’s total land mass. Transporting Schedule I substances across federal lands is verboten, and mixing cannabis with firearms could lead to felony charges.

Hardcar has grown significantly over the past three years but still faces plenty of challenges as it strives to become the industry’s de facto armored vehicle company. Already, Brink’s and other armored security companies are starting to offer similar services in Canada, where federal legalization has made operating easier. Kleperis said it won’t be long before the big dogs start looking for clients closer to home. Brink’s CEO Douglas Pertz said as much during a conversation with CNBC financial pundit Jim Cramer earlier this year.

HardcarSecurity.com

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