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The 10th Circuit Court of Appeals, in a majority panel decision, last week overturned a U.S. district court's ruling in the Fourth Corner Credit Union lawsuit against the Federal Reserve Bank. Fourth Corner was chartered under state law to serve marijuana advocates and businesses operating legally in Colorado.

The 10th Circuit's panel decision allows the institution to reapply for a master account with the Federal Reserve. The court noted that the Fed does not have the discretion to deny the application as long as the applicant meets all of the requirements for a master account.

The court relied upon Fourth Corner's promise that it would service marijuana-related businesses only if federal law permits it.

"The district court should have presumed that Fourth Corner would follow the court's determination that servicing marijuana-related businesses is illegal," according to the ruling. "And in the amended complaint, Fourth Corner essentially promised to obey the law that would be set out in the eventual declaratory judgment. In these circumstances, the district court had little reason to jettison the standard on a motion to dismiss and rely instead on suspicions about what Fourth Corner would do."

Financial Crimes Enforcement Network guidance released in 2014 says an institution handling monetary transactions for a marijuana business must follow the same Bank Secrecy Act reporting and recordkeeping rules it follows in dealing with any other business.

Since marijuana businesses are legal only at the state level, a credit union or bank must file a suspicious activity report each time it handles a transaction for one of them. The institution also must adhere to "know your customer" rules, which require a determination of whether the business is "duly licensed or registered," the guidance says.

NAFCU has raised concerns that the FinCEN guidance doesn't address the legal issue of whether an institution is violating federal law in providing services to marijuana businesses. With its holding by a panel majority, the 10th Circuit Court of Appeals opined that servicing marijuana-related businesses is illegal under federal law.

More on this ruling will be covered in upcoming NAFCU Compliance Blog posts.