February 06, 2018

Fed approves Fourth Corner CU's request to serve marijuana advocates

The Federal Reserve Bank of Kansas City has granted Fourth Corner Credit Union conditional approval to serve marijuana advocates and groups that support the legalization of marijuana in Colorado.

Fourth Corner's services can be provided to individuals and companies that support the legalized marijuana industry, such as accountants, lawyers and landlords, but not state-licensed dispensaries directly. Fourth Corner has promised it would service marijuana-related businesses only if federal law permits it.

The credit union initially applied for a master account with the Federal Reserve Bank of Kansas City in November 2014 after it received a state charter to serve the marijuana industry in Colorado. The Fed denied its original application, over which Fourth Corner sued and has been engaged in lawsuits since.

Fourth Corner still needs to obtain share insurance, but there is ongoing litigation between the credit union and the NCUA over the credit union's request for federal insurance.

The Federal Reserve Bank of Kansas City said that its approval is not an indication of the Fed's views on the issue and isn't meant to offer regulatory or enforcement guidance, according to a Wall Street Journal article.

Earlier this year, U.S. Attorney General Jeff Sessions rescinded directives that had instructed federal prosecutors to ease marijuana enforcement in states that have legalized the substance. The change in federal drug enforcement priorities creates additional legal and compliance challenges for credit unions serving marijuana-related businesses.

Treasury Secretary Steven Mnuchin said Tuesday that the Financial Crimes Enforcement Network (FinCEN) is reviewing its marijuana-related guidance. FinCEN issued guidance in 2014 to clarify Bank Secrecy Act (BSA) expectations for financial institutions providing services to marijuana-related businesses, which depended heavily on now-retracted federal enforcement directives.

NAFCU has resources available on its Compliance Blog and has explored the issue in its monthly Compliance Monitor newsletter to help credit unions understand the compliance risk of serving marijuana businesses.