Compliance

Can CUs Serve the Budding Marijuana Industry?

The compliance burden of doing so appears not only insurmountable, but also overreaching.

April 01, 2014
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The Department of Treasury and the Financial Crimes Enforcement Network issued their long-awaited marijuana-related business guidelines [pdf] in February with the stated goal of clarifying Bank Secrecy Act expectations for financial institutions seeking to provide services to marijuana-related businesses.

Will these guidelines allow credit unions to provide financial services to marijuana dispensaries? I suspect after you have reviewed all of the compliance requirements you will come to the same conclusion we have: It’s not likely.

For financial institutions making the business decision to provide financial services to marijuana-related businesses, the new guidelines include three new types of suspicious activity reports (SARs): “Marijuana Limited” SAR, “Marijuana Priority” SAR, and “Marijuana Termination” SAR.

Additionally, there are seven new customer due-diligence requirements, such as verifying with the state whether the business is duly licensed and registered, as well as ongoing monitoring for suspicious activity.

But the real kicker is the due-diligence requirement to determine whether any of the “priorities” listed in the guidance could be “implicated” by the marijuana-related business. The “priorities” include preventing:

  • The distribution of marijuana to minors;
  • Revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels;
  • The diversion of marijuana from states where it is legal under state law in some form to other states;
  • State-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;
  • Violence and the use of firearms in the cultivation and distribution of marijuana;
  • Drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use;
  • The growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and
  • Marijuana possession or use on federal property.

This could mean you will need to determine, for example, whether it is reasonable to believe that a minor will not have access to marijuana from the dispensary, that it is reasonable to believe that drugged driving will not result from the marijuana-related business, and that it is reasonable to believe that marijuana sold from the dispensary in your state will not find its way to another state.

This compliance burden appears not only insurmountable, but also overreaching. If you have a business account that operates a restaurant/bar, does your current due diligence require you to reasonably believe no patron of the bar will drive impaired?

Until Congress changes the federal law so that marijuana-related businesses are no longer illegal at the federal level, credit unions may be taking a great risk providing financial services to these businesses.

Some reports suggest a shorter-term solution may be for state governments to set up financial services for the marijuana-related businesses they have legalized.

COLLEEN KELLY is CUNA’s federal compliance counsel. Contact CUNA’s compliance team at cucomply@cuna.coop.

This article originally appeared in CUNA’s Comp Blog.

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