Page 15 - 2015 Contact Magazine: 3rd Quarter

Marijuana Morass
Credit Unions Largely in the
Dark When It Comes to Serving
Legal Pot Businesses
Medical marijuana is legal in Michigan, and the number of
dispensaries selling the product has grown significantly over
the course of the last year—but many such businesses operate
largely as cash-only shops, unable to access even basic
depository services from a financial institution.
Because credit unions have a mission to serve the underserved,
some institutions are considering whether or not they should
provide services to this underserved market. If a Michigan
credit union chooses to serve a legal marijuana business, that
credit union may face an increased compliance burden and the
possibility of extra scrutiny from regulators.
One of the hurdles these CUs face is that because the drug
remains illegal at the federal level, there is no direct guidance
from regulators at the federal or state level about how to serve
those businesses. According to Sarah Stevenson, senior regula-
tory and legislative affairs specialist at the Michigan Credit Union
League (MCUL), the only direction provided to these institutions
comes from the Financial Crimes Enforcement Network’s
(FinCEN) Cole Memo, rather than NCUA or DIFS. Stevenson
added that no state or federal regulator is likely to issue any
guidance of its own unless there is a change in federal laws.
ot Cost ecti e
For credit unions that wish to serve this industry, Osborn
suggested starting by examining the FinCEN guidance and then
determining whether or not an institution can comply with the
requirements for increased Suspicious Activity Report (SAR)
filing. She added that each institution should also have an
understanding of expectations within the Bank Secrecy Act
(BSA) surrounding marijuana. Both cautioned that credit unions
should avoid this realm of service unless they are confident
that they have the staffing and resources to follow through
with it.
In many cases, said Melissa Osborn, regulatory and legislative
affairs specialist at MCUL, credit unions determine that serving
these businesses isn’t cost-effective.
“Given the amount of time you have to put into servicing these
accounts, you may not make your money back” she said, citing
the increased number of SARs and BSA paperwork required.
“It does open you up to a lot more scrutiny.”
FinCEN’s guidance has seven pages on BSA reporting alone,
noted Stevenson. Along with FinCEN, League Infosight also
includes an FAQ on the topic.
Another problem that some credit unions have encountered, said
Osborn, is realizing too late that a member business is actually a
marijuana business—something that can be easy to overlook due
to innocuous-sounding names.
If a credit union realizes that it has been unknowingly serving a
marijuana business, said Stevenson, whether or not to continue
to do so is “a business decision. If they want to keep the account,
they have to go back and do the due diligence to make sure
they’re following everything that FinCEN has out there. And
they probably should talk to legal counsel too. They have to look
at the entire transaction history with that member and then
follow the FinCEN guidance.”
CUA s erspecti e
In an interview with C o n t a c t , NCUA Chairman Rick Metsger
indicated he had no problem with credit unions serving legal
pot businesses—provided they perform the necessary due
diligence and are aware of the potential consequences.
“If a credit union wants to serve a marijuana business, as some
have, that’s a business decision for the credit union,” he said.
“But NCUA will expect that credit union to have performed the
necessary risk analysis and have risk-mitigation plans in place to
address that risk just as they would for any other cash business.”
Metsger said that NCUA does not plan to issue any guidance
of its own on the topic and will defer to existing guidance from
FinCEN, as well as any new guidelines it issues—at least until the
drug is decriminalized or legalized nationally.
“The ultimate solution to this is for Congress to address this
through the law,” he said. “As long as it’s illegal at the federal
level, there will be those conflicts and concerns that are unre-
solved, and financial institutions will have to weigh those with-
out clear direction from Congress. And that’s the place where
this needs to be ultimately resolved.”
T hird Q uarter 2016 I Contact 15