Federal Reserve denies cannabis credit union’s application.
As many of you know, one of the biggest issues facing the cannabis industry is the lack of meaningful banking services. Without a bank account the simplest business transactions become huge hurdles. How do you pay your employees? How do you buy your products? How do you pay your taxes? How do customers pay you? The answer, of course, is cash. Legitimate cannabis businesses take duffle bags full of cash to the IRS office. They hire security trucks and teams of officers to deliver cash on a daily basis to offsite safe houses. And they worry every day about being the victims of violent crime.
The Federal Government purports to want the cannabis industry to use banking services. Aside from concerns about cannabis businesses being the victims of armed robbery the Feds want transparency. It’s no surprise, for instance, that the IRS wants to be able to audit tax returns with reliable information. Unfortunately, this stated desire for transparency does not match Federal banking policy. The Feds have put up roadblock after roadblock to banking access.
The most recent FinCen memo on the subject of cannabis banking, released over a year and a half ago on Valentine’s Day 2014, is a thicket of dense regulations that banks must follow in order to do business with the cannabis industry. The memo is a seven page laundry list of overbearing rules a bank must follow with its cannabis customers, ostensibly to prevent money laundering and other illegal activities. Tellingly, the memo gave no “safe harbors” or even reassurances to banks that they would not be prosecuted so long as they followed the rules. Understandably, banks said, “No thank you” and almost all banks simply refuse to do business with cannabis industry customers.
The Feds have just put up another roadblock. At a time when banks are flatly refusing cannabis customers, The Fourth Corner Credit Union (Fourth Corner), based in Colorado, is actively courting the cannabis industry. Fourth Corner has the support of the governor, obtained a Colorado charter, prepared lengthy business plans, and hired anti-money laundering experts with the explicit aim of complying with the FinCen memo. After a nine month wait the Kansas Federal Reserve Bank just denied its application for a master-account with the Fed, despite no apparent legal support except an amorphous concern that, “Risks to the more than 6,000 credit unions NCUA insures through a shared fund were simply too big.”
Fortunately, Fourth Corner is not giving up the fight. It has filed two lengthy lawsuits, the outcome of which will almost certainly steer the future direction of cannabis banking services. I stand with Fourth Corner and encourage you to contact your Senators and Representatives to let them know that you do, too.