State legalized marijuana – Opportunities for credit unions

In the current low-interest-rate environment, credit unions are exploring new sources of revenue to augment deposit and non-interest revenue.  One new market that has emerged in recent years is state-legalized marijuana, which has created opportunities for credit unions willing to service marijuana-related businesses (MRBs).  This is intended as the first in a series of articles about the challenges and opportunities associated with banking MRBs.

The first thing to understand is that, as of the date of this article, it is permissible under federal policy for credit unions to provide banking services to MRBs.  This policy is reflected in a pair of memos issued by the Department of Justice (DOJ) and FinCEN on February 14, 2014 that collectively set forth the parameters by which banks and credit unions can service MRBs consistent with their anti-money laundering (AML) and BSA obligations.  The memos identify eight priority factors that guide federal enforcement of AML and BSA laws with respect to the banking of MRBs in states where marijuana has been legalized.  So long as financial institutions and their MRB customers avoid implicating any of the eight priority factors, they are effectively immune from federal enforcement action.

While initially met with skepticism, it has become increasingly clear over the last three years that financial institutions can rely upon the DOJ and FinCEN memos to service MRBs.  As marijuana legalization has expanded to over half the states, banks and credit unions across the country have been responsibly and profitably servicing MRBs with no interference from DOJ or FinCEN.  In fact, I am not aware of any DOJ or FinCEN enforcement actions against a bank or credit union in compliance with the respective memos.

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