Oregon Bank Welcomes Cannabis Industry Money

Oregon Bank Welcomes Cannabis Industry Money

During a time when it is still taboo for financial institutions to work with cannabis producers and retailers, one Oregon bank has bravely announced that it will not only work with marijuana businesses in it’s own state, but it will also gladly work with those operating in other states like Colorado and Washington.

Gaining access to normal business banking services has been a tall hurdle for cannabis industry businesses in Colorado and all of the other states with legally operating recreational and medical marijuana producers and retailers. MBank of Oregon, and any others interested in working closely with marijuana businesses, must elect to operate under a bigger federal magnifying glass than banks that do not associate with the industry.

All banks must file a suspicious activity report (SAR) if there is even the slightest belief that a transaction is drug related, but to work with a cannabis business, the bank must also abide by the extensive guidelines set forth by the Department of the Treasury’s Financial Crimes Enforcement Network in February 2014.

These guidelines require the banks to thoroughly learn the operational ins and outs of the marijuana businesses it chooses to work with so that the bank may red flag any business in violation of the eight regulations set forth by the Cole Memorandum, the compromise between state and Federal governments which allows states to enact their own marijuana laws even though it is still Federally illegal. It is crucial that the banks be able to recognize and report an illegally operating marijuana client because, if not reported, the bank could potentially be prosecuted for participating in illegal activity. It is technically risky for banks to work with any marijuana businesses at all because the Federal Government could decide to overturn the Cole Memorandum and take criminal action on all marijuana businesses and the banks that choose to work with them.

On top of that extra work, the banks must also understand the three tiers of SARs specific to the cannabis industry — Marijuana Limited, Marijuana Priority, and Marijuana Termination.

Being categorized as Marijuana Limited means that the business seems to be operating in accordance with state law, but an SAR is being filed only to identify that the business of the client is cannabis. Filing a Marijuana Priority SAR means that, based on its customer due diligence, the bank suspects that the marijuana client may be in violation of one or more of the Cole Memorandum regulations, and they have been red flagged. A Marijuana Termination SAR is filed when the bank must terminate the relationship with the cannabis business “in order to maintain an effective anti-money laundering compliance program.”

The extensive list of regulations regarding the “expectations for financial institutions seeking to provide services to marijuana-related businesses” also outlines several scenarios in which the bank would be expected to file a SAR.

There are many extra steps involved for banks willing to work with marijuana businesses, but that is something MBank is willing to do according to Jef Baker, president and CEO. Baker told the Denver Post,

“It’s a bold maneuver and not one for a lot of folks to take on. We looked to regulators, both state and federal, to help us come to the conclusion that we can do banking in this sector.”

The public announcement by MBank has received scrutiny from industry experts who witnessed what happened when Colorado banks were openly working with dispensaries in 2011. Jennifer Waller, vice president of the Colorado Bankers Association reported,

“I wonder if this bank will suffer the fate as those in Colorado that tried to work openly, only to be told to close accounts. I’m not sure Colorado banks will step out again after this since each test trial has met with the same result: closed accounts.”

For now the announcement has worked in MBank’s favor, as five Colorado businesses have already opened accounts and six times that number of applications are pending. It will be interesting to see how banking services for the cannabis industry develop over the next few years, and whether there will be another big hiccup before the dust settles.

Marijuana Credit Union Gets Green Light in Colorado

Marijuana Credit Union Gets Green Light in Colorado

One of the largest obstacles facing the legitimization of the cannabis industry in Colorado, today, is the issue of banking. Since marijuana is still federally illegal, and classified as a scheduled I drug in the United States, banks will not do business with even legally operating marijuana dispensaries. Dispensaries have encountered issues with all banking aspects from employee payroll and revenue deposits to ATM and credit card access and more.

By next month, this problem may find a solution in the Fourth Corner Credit Union, an institution that will offer marijuana dispensaries bank access, allowing the ability to make cash deposits as well as electronic transfers. In other words, marijuana dispensaries operating within Colorado regulations may finally be permitted to operate in the same manner as any other legitimate business.

On November 19, Fourth Corner Credit Union was granted a charter in Colorado. The bank will need to secure a master account number from the Federal Reserve before it can move forward. It is, reportedly, likely that the credit union will receive the needed number, giving it access to electronic banking, because the Federal Reserve is required to issue accounts to organizations that have received charters from the state. Once a master account number is received, the final steps before opening doors will be to secure insurance and a space in which to operate.

So far this year, when both recreational and medical totals are combined, over $60 million in marijuana sales, taxes, licenses and fees have been collected in the state of Colorado. Most of that money has been represented in cash, and dispensaries desperately need a safe and reliable institution in which to deposit that cash. Having a reliable bank will also allow for electronic money to be collected more when debit and credit cards are able to process marijuana dispensary purchases.


photo credit: Huffington Post

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