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Colorado Credit Union Issued Conditional Account by the Federal Reserve

By Ayanna Rutherford
Feb 13, 2018

Denver-based Fourth Corner Credit Union was granted a small win when the Federal Reserve Bank of Kansas City issued them a conditional master account, according to an article in Westword.

In a letter, the Federal Reserve agreed to issue the credit union a master account with a number of stipulations including that the credit union provide them with a letter stating that they obtained deposit insurance from the National Credit Union Administration as well as agreeing not to provide banking services to cannabis-related companies until it becomes federally legal to commence such activities.

The decision comes at an interesting time as the Attorney General Jeff Sessions has reignited federal efforts to enforce laws related to marijuana-regardless of the battle over states’ rights.  

Meeting The Stipulations`

The credit union may have difficulty reaching the stipulation where they must obtain deposit insurance from the credit union administration, an independent federal agency.  A New York Times report explained that Fourth Corner was denied deposit insurance by the administration because they could not demonstrate how they plan to “mitigate the risk associated with serving a single industry that does not have an established track record of success and remains illegal at the federal level.”

Fourth Corner is currently suing the administration over the issue of deposit insurance.

As for the other stipulation stating that they cannot primarily be a bank for cannabis businesses, Fourth Corner CEO Deirdra O'Gorman determined that this is only for marijuana businesses with licenses that directly deal with the plant. In other words, it should open up banking opportunities for ancillary services.  It appears that the company will focus on industries that support the cannabis sector instead of dealing directly with dispensaries, grow houses and processors.

Banking In Secrecy

In a new report earlier this month, The ArcView Group estimated that the global marijuana market could generate up to $40 billion in economic impact by 2021. Which leaves one to wonder where do businesses keep all of their money?

Since marijuana is federally illegal, banking has been an industry issue since day one.  Sliding around this point, marijuana businesses have been quietly banking with small local banks.  The accounts are basic business accounts and are not usually identified as “cannabis” accounts. According to Leafly, the financial institutions who are accepting cannabis company accounts see it as not only a business opportunity; they are also viewing their participation as doing a public service.  Some have pointed out how they are very concerned about individuals walking around with a lot of cash and now are helping them to make legal deposits.

“The thought of some guy walking out of his business at night, and going to an environment where there might be lots of people, with $25,000 in cash in his backpack to buy money orders just doesn’t sit right,” Vice President Shane Saunders told the Salem Statesman-Journal according to Leafly.

The same Leafly report identified that in 2015 there were “266 depository institutions nationwide currently maintaining marijuana-related businesses”.

While the Fed ruling is, in many ways, in line with the Trump administration's anti-pot view, it does offer hope for banking with cannabis-related businesses.  

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