Mark Lozzi seems to choose his words carefully as he speaks. It’s a trait one might expect from someone who built a career out of attention to detail. This attention, after all, is the essence of regulatory compliance.
Lozzi is one of many entrepreneurs finding opportunities in the cannabis industry. He founded and helms Confia, a secure transaction and compliance platform for cannabis industry operators. After moving into the California cannabis market from his native Canada, the company began targeting the American east coast as New York and New Jersey prepare for adult-use sales.
During a recent phone interview, Profiles in Legalization spoke with the Confia chief about the importance of compliance in high risk industries, how blockchain fits into his technology, and the company’s social equity partnerships.
Confia was created by combining two knowledge sets: technology and regulatory compliance.
“The genesis of the idea really came from our past life.” says Lozzi. “My partner and I had built a KYC technology and platform.”
The company’s platform helped major banks manage their “Know Your Client” compliance requirements. Cannabis-related businesses face the same due diligence, anti-money laundering and auditing challenges. The similar needs provided an opportunity for Lozzi’s next venture.
“When we sold the business, we walked away as technologists.” says Lozzi, “We developed technology and built a product, but also had this expertise in high-risk banking and compliance.”
They began identifying industries that were “thirsty for solutions,” where their knowledge base would help solve complicated problems. The nascent cannabis industry, with its patchwork of local, state and federal regulations, seemed a good place to start.
“We developed this technology from the ground up to cater to and serve high-risk industries.” Lozzi told us. “We’re really tailored to how the appropriate evidence is collected, how it’s reported and how it’s communicated between the parties who are transacting and using the platform.”
Confia provides a platform for cannabis-related businesses to process secure transactions while managing their compliance requirements. Much like financial institutions, these high-risk businesses must follow strict auditing and accountability regulations.
Lozzi’s interest in cryptocurrency led to a novel solution to the accountability issue.
Blockchain and the cannabis industry
One thing that makes Confia different from other financial solution providers is blockchain technology. The platform software relies on the same blockchain record on which cryptocurrency is based. In a heavily-regulated industry this technology provides necessary accountability.
“Our platform and technology itself is built on a distributed ledger of record, meaning every action, every click transaction, it’s plotted on our immutable ledger of record.” says Lozzi. “When we’re talking about auditability, we’re talking about transparency. That is our value and core to our system.”
While the technology was developed to cater to many different industries, Confia has taken an interest in joining the cannabis community. Lozzi has spoken at major industry events like the Cannabis World Congress and Business Expo (CWCBExpo) as an expert on cryptocurrency. The company has also joined efforts to try to level the playing field for cannabis entrepreneurs from underserved communities.
As social equity considerations continue to play an important role in the growing cannabis industry, Confia formed partnerships with the National Cannabis Industry Association (NCIA), a national trade group, and multi-state operator, Eaze. Both have their own social equity initiatives to which Confia has added its own expertise and benefits.
“We wanted to find a way to give back and participate,” Lozzi says. “By providing lowest cost financial services to verified social equity applicants. There is such punitive pricing going on in the marketplace.”
They kicked off a partnership with NCIA at the trade association’s annual Cannabis Business Summit & Expo in December. Members of the NCIA’s Social Equity Scholarship Program (SASP) were invited to a full-day workshop that included “entrepreneurship development and community-building exercises, roundtable discussions, resource sharing, intentional networking sessions, and special guest speakers.”
Confia also agreed to provide SASP members with access to their platform at half the normal cost. The same discounts and other funding are helping companies that are part of Eaze’s Momentum Business Accelerator. In the Eaze program, applicants received a $50,000 grant and 12-week business development program.
“We’re thrilled to support Momentum and give back to the cannabis community by helping underrepresented founders access hard-to-find financial services,” Lozzi said in a December statement.
Compliance after prohibition
Asked what effect federal cannabis legalization would have on Confia, Lozzi says he thinks legalization will make them even more relevant. He compared the U.S. cannabis situation to the 2-3 years following legalization in Canada.
“I think that’s the problem in the US at the moment– how are we going to govern? What kind of regulatory oversight policy?” says Lozzi.
Indeed, reform legislation is expected to be introduced in the U.S. Senate soon.
“There’s going to be a very stringent regulatory component to this, that I think we’re best served to support and handle and manage for institutions.”
One thing’s for sure: compliance is key for the cannabis industry.
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