Credit unions of all sizes across Montana continue to have questions on how to handle requests for accounts and loans for those involved in the cannabis industry. Compliance officers are also finding their credit union may have unintentionally opened accounts serving the industry or related businesses. This lesson is intended to dispel myths, lay out facts, and help you feel more comfortable with the current state of marijuana banking, even though it can — and probably will — change tomorrow!
Legality
Across the U.S., a majority of the states have approved legalizing either medical or recreational marijuana, or both, and the change in state laws continues at a rapid pace. In Montana, we have had medical marijuana for several years and (limited) recreational marijuana sales since January 2022. Even as the industry grows (and is accepted) in most states, marijuana/cannabis remains classified as a Schedule 1 substance under the Controlled Substances Act. That makes it illegal at the federal level, and no state law can override that. There was a federal agency recommendation made in August 2023 that could potentially impact that classification in the future.
SAFER Banking Act
Passing federal legislation like the SAFER Banking Act has been a priority for a few years now. It would provide a safe harbor to financial institutions serving cannabis businesses that are legal in their communities. It did pass out of the Senate Banking Committee this fall with bi-partisan support, including by Senators Tester and Daines, but has yet to be voted on by the full Senate.
Serving the industry
Marijuana is a booming business and new storefronts and related support businesses open daily in towns across our state. With their local nature, credit unions want to serve their members and communities, but see risk to their reputation if they choose to serve this industry. Most credit unions also don't have the staff or systems in place to monitor the accounts at the level expected by regulators and law enforcement.
There are additional safety and financial concerns for both dispensary employees and communities if the amount of cash in the cannabis industry is not allowed into the financial system and pushed into alleys. Employees may need to be paid in cash. Not only does that make them prime targets for theft, but they have little to no proof of income for gaining loans or filing taxes.
Marijuana-related businesses (MRBs) are cash intensive, so it is challenging to serve them. It requires a great deal of monitoring and reporting of the activity and, of course, the risk of possible seizure of funds if the federal government were to raid them. Since credit unions are often federally chartered and most are federally insured, their ability to serve an industry that is illegal at the federal level is further complicated.
Enforcement
During the Obama Administration, the federal government agreed to let states manage their programs without interference, as long as they were not violating federal law. The Trump Administration hinted at changes and more enforcement, but other than rescinding the Cole Memos (discussed below), they never imposed any further enforcement. The Biden Administration and current Congress continue to talk about changes or other support to states (like Montana) that have implemented legalization of medical and/or recreational marijuana. To date, nothing additional has been formalized and each federal election sets up the potential for shifts.
It is difficult to see where this goes, but having a good paper trail of the industry and their activity only benefits all of us in the fight against money laundering often found in cash-intensive businesses.
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