Banking on Cannabis

Two credit unions on opposite sides of the country explain why they’re standing by their decision to offer financial services to state-legal marijuana businesses

If you ask anybody involved in legal cannabis about their biggest concerns for the industry, banking will certainly be one of the top answers.

It’s been an ongoing and much-talked-about issue for years — and escalating with every new state that implements a regulated medical or recreational program — yet progress seems nonexistent and relies on the tenuous standing of a 2014 guidance memo from the Financial Crimes Enforcement Network (FinCEN).

As Washington and Colorado enter their fifth year of recreational marijuana sales, the banking situation remains much the same as was in 2014: A few financial institutions have opened their doors to cannabis businesses, but by and large the options are limited and little to no headway has been made at the federal level to ensure access to traditional financial services.

While many cannabis industry professionals braced for bad news on the banking front following U.S. Attorney General Jeff Sessions’ move to revoke the Cole Memo, representatives from at least two credit unions — Bulldog Federal Credit Union in Maryland and Salal Credit Union in Washington — have been undeterred in their mission to provide services to marijuana-related businesses (MRBs).

Marijuana Venture spoke with Bulldog president David A. Barrett and Salal vice president of business services Carmella Murphy Houston about banking what many larger financial institutions have deemed an unbankable industry.

Bulldog is a newcomer to the market, having recently announced plans to offer banking services to cannabis businesses in Maryland’s fledgling medical cannabis industry.

“It’s a perfect fit,” Barrett said.

“As a financial institution, we recognize the need for medical cannabis entrepreneurs to be able to conduct business in a forthright, transparent and compliant manner that is both safe and part of the state regulatory environment,” he added.

Meanwhile, Salal Credit Union was one of the first financial institutions in the country to openly welcome legal cannabis businesses. It began serving state-licensed businesses in Washington in June 2014 — just one month before the state’s first legal, recreational sales.

“It’s gone very well but we’ve undergone a lot of regulatory scrutiny,” Houston said. “Lessons learned: Make sure you fully understand the market, current regulations and take time to educate your regulators on your program. We had to define our target market quickly as there were more inquiries than we could assist.”

Marijuana Venture: Why do you see cannabis businesses as a good fit for your respective credit unions?


David A. Barrett: Many reasons. We’re kindred spirits. Credit unions and MRBs both were borne of grassroots movements — of common people working together to meet a common need and to better the lives of those who share common beliefs.

Credit unions exist to serve the unbanked and underserved segments of society. Unlike other unbanked consumers who have relinquished their right to banking services through their own indiscretions, cannabis businesses are legitimate, financially viable entities that lack access to even the most basic financial services. Bulldog’s core competency is transactional banking, and that’s exactly what MRBs need at this point in their evolution.

Finally, it’s a matter of living up to the credit union motto of “people helping people.” Medical marijuana businesses exist solely to help people, many of whom may be in our own field of membership. By helping the people in Maryland’s medical cannabis industry, we’re ultimately helping our own member base.


Carmella Murphy Houston: We are a medium-sized, innovative credit union with a health care background and saw it as an opportunity to advance the research of the proven and potential health benefits to patients suffering from chronic health issues, as well as support professionally managed small businesses that provide jobs and tax revenues for substance-abuse prevention, research and education. We also saw it as an opportunity to become a leader in an underserved, emerging market.


MV: Do you believe the decision to provide services to cannabis businesses is an overall benefit to the safety of the community and the cannabis industry?


Houston: Absolutely. By serving the cannabis industry we are able to remove a lot of the cash and improve public safety by reducing the likelihood of armed robberies and money laundering.


Barrett: Large sums of accessible cash are always a risk. By allowing cannabis cash to move into the legitimate banking system, we reduce the risk not only to those who own the cash, but to the community at large who may be caught in the “crossfire” so to speak. Plus, compliant financial services prevent cannabis funds from finding their way into the black market.


MV: Do you expect any blowback from the federal government, particularly at a time when the progressive legalization of marijuana stands at such odds with high-ranking members of the current presidential administration?


Barrett: No. The current administration, I believe, has expressed a desire to return control to states for issues outside the constitutional requirements of the federal government. That puts the cannabis issue squarely in the states’ domain.

The current administration also recognizes a need to separate itself from the extreme right who have tried to claim the presidency as their own personal pulpit. What’s more, the federal government has provided no funding to support an about-face on their stance on the cannabis issue. Finally, no one can dispute the financial windfall gained by an infusion of cannabis funds into the American economy. The financial benefits are deep and far-reaching.


Houston: We have worked closely with both our state and federal regulators to ensure that we have a robust on-boarding and ongoing due diligence program that is compliant with FinCEN guidance. As long as the FinCEN guidance remains in place we do not anticipate any blowback.

MV: How does U.S. Attorney General Jeff Sessions’ rescission of the Cole Memo impact your credit unions’ operations within the cannabis industry?


Barrett: It doesn’t. We’ve built our cannabis banking program around the regulatory requirements set forth by FinCEN and the state of Maryland to be compliant, transparent and flexible.


Houston: Our management team and board of directors have carefully reviewed the pros and cons of banking the industry and we plan to stay the course and continue with business as usual.


MV: Would you consider providing services to any businesses outside your respective states, either in the near future or as part of a long-term strategy?


Houston: Salal is expanding into Oregon and we are reviewing regulations in California and Nevada for potential future expansion.


Barrett: Bulldog Credit Union is bound by the requirements of our NCUA (National Credit Union Administration) charter. Our charter allows us to provide membership to “persons who live, work, worship or attend school in, and businesses and other legal entities in, Washington County, Maryland; spouses of persons who died while within our field of membership, employees of the credit union; volunteers in the community, members of their immediate families or households; and organizations of such persons.”

We will offer services to any business who meets one of those qualifications.

MV: How do your respective states’ licensing structures help you vet potential clients in the cannabis space?


Barrett: Actually that probably makes the process a bit easier for the cannabis business, but it’s no shortcut for us. Having been awarded a Maryland license means the cannabis business has already done a lot of legwork and should have a lot of the paperwork we will require in our on-boarding process at the ready.

But we have a completely different set of vetting requirements for the financial industry, and we will be following a strict process for overseeing their operations throughout the term of their relationship with us.


Houston: We have a good relationship with the Washington State Liquor and Cannabis Board and appreciate the in-depth due diligence and ongoing monitoring they do on each licensed business. We review their due diligence and piggyback on it by adding our own without duplicating efforts. They provide ongoing access to sales and violations that we monitor, which helps us monitor our business members’ compliance.


This interview has been edited for clarity and length.


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