By Ken McCarthy, S&P Global Market Intelligence staff writer
Colorado credit unions that do business with cannabis-related companies will likely take a wait-and-see approach to those operations in the wake of the recent announcement on the issue by President Donald Trump's administration.
Attorney General Jeff Sessions on Jan. 4 rescinded several memos outlining federal enforcement of marijuana laws, potentially disrupting business at credit unions that provide banking services to the marijuana industry.
But Sundie Seefried, president and CEO of Partner Colorado CU, said in an interview that it will be "business as usual" in serving clients until there is guidance from the federal agencies that regulate the industry. [BE Editor’s note: As of mid-January the key agency, Treasury’s Financial Crimes Enforcement Network—FinCEN—has not officially commented on the shift.]
The Arvada, Colo.-based credit union operates Safe Harbor Private Banking as its cannabis banking division. Safe Harbor has $80 million in deposits directly related to the marijuana industry, Seefried said.
Eight states and the District of Columbia have legalized recreational marijuana sales. More than 20 have legalized medical marijuana.
Shift surprised CUs
Timothy Dore, senior vice-president of government affairs for the Mountain West Credit Union Association, said in an interview that he was a bit surprised by Sessions' announcement, particularly after talks with Sen. Cory Gardner, R-Colo., indicated that the issue was not one that Sessions intended to interfere with.
In a press release, Senator Gardner said Sessions assured him that marijuana would not be a priority for the administration. "I am prepared to take all steps necessary, including holding DOJ nominees, until the Attorney General lives up to the commitment he made to me prior to his confirmation," Gardner said.
According to data from the Financial Crimes Enforcement Network, there were 400 depository institutions banking U.S. marijuana businesses as of Sept. 30, 2017. Most are small banks and credit unions. Dore, who is also a former state representative, said it is unclear exactly how many Colorado credit unions are working with those businesses.
Considering demise of “Cole Memo” and more
Likely the most significant of the rescinded guidance was the Cole Memo, a document released in 2013 that dictated that the federal government would not prosecute marijuana laws as long as industry participants followed certain priorities including ensuring that the drug was not sold to minors.
Seefried said the Cole Memo, while mentioned in the FinCEN guidelines, does not drive the credit union's Safe Harbor banking program. "FinCEN guidelines and BSA/AML regulations drive our program and risk mitigation strategies," she said.
Dore called the Cole Memo one part of a multi-piece puzzle that credit unions had to put together so the Feds wouldn't be "blowing their doors down."
Sessions also said the administration was rescinding the Feb. 14, 2014, memo that stated financial institutions could service the marijuana industry as long as they followed the principles outlined in the Cole Memo. Other rescinded memos date back to 2009 and cover the Justice Department's treatment of states that allow the sale of medical marijuana.
Dore said his primary concern now is what the announcement means for credit unions that want to do business with marijuana-related companies in Colorado. "But credit unions have always had to be cautious in regard to this industry," he said. That is because even credit unions that were following the Cole Memo still faced compliance procedures related to it and other federal memos.
Impact seen on marijuana businesses
Businesses that might have been considering a push into the cannabis-related space are less likely to do so now, especially in California, which voted to legalize recreational sales of marijuana, but had only been operating under the new law for a matter of days before the Sessions announcement. Dore said, however, the DOJ budget restricts how much money can be spent prosecuting marijuana-related activity.
"So I can't imagine there being a huge change immediately," he said. "But it's going to have a chilling effect."
This article originally appeared on S&P Global Market Intelligence’s website on Jan. 9, 2018, under the title, "For now, it's 'business as usual' for Colorado CUs that serve cannabis industry"
- The Deutsche Bank-Commerzbank Teaching Moment: Learn From History or Risk it All
- How Dutch Bank ABN AMRO Describes Strategy and How it Differs from US Banks
- Compliance Automation to Increase Consumer Protection and Enhance Customer Experience
- Predict Illicit Transactions Faster, Meet Regulators’ Expectations Earlier
- Fending Off Tech Giants Through Digital Transformation