Marijuana banking

State-Legalized Marijuana: Opportunities for Credit Unions

By April 26, 2017 No Comments

In the current low-interest-rate environment, credit unions are exploring new sources of revenue to augment deposit and non-interest revenue.

One new market that has emerged in recent years is state-legalized marijuana, which has created opportunities for credit unions willing to service marijuana-related businesses (MRBs).  This articles focuses on the challenges and opportunities associated with banking MRBs.

The first thing to understand is that, as of the date of this article, it is permissible under federal policy for credit unions to provide banking services to MRBs.

This policy is reflected in a pair of memos issued by the Department of Justice (DOJ) and FinCEN on February 14, 2014 that collectively set forth the parameters by which banks and credit unions can service MRBs consistent with their anti-money laundering (AML) and BSA obligations.

The memos identify eight priority factors that guide federal enforcement of AML and BSA laws with respect to the banking of MRBs in states where marijuana has been legalized.  So long as financial institutions and their MRB customers avoid implicating any of the eight priority factors, they are effectively immune from federal enforcement action.

While initially met with skepticism, it has become increasingly clear over the last three years that financial institutions can rely upon the DOJ and FinCEN memos to service MRBs.

Lack of DOJ or FinCEN enforcement

As marijuana legalization has expanded to over half the states, banks and credit unions across the country have been responsibly and profitably banking MRBs with no interference from DOJ or FinCEN.  In fact, I am not aware of any DOJ or FinCEN enforcement actions against a bank or credit union in compliance with the respective memos.

The X factor has been the regulators, whose approach to MRBs can vary considerably from agency to agency, and even within agencies themselves. In this respect credit unions are better positioned to service MRBs than banks because unlike the banking regulators, the NCUA has adopted the FinCEN guidance with respect to serving MRBs.

In a July 18, 2014 letter, Larry Fazio, Director of the Office of Examinations and Insurance, noted that the NCUA “has provided the FinCEN guidance to agency examiners, who are responsible for determining the compliance of financial institutions that provide services to marijuana-related businesses.”

I am not aware of any corresponding guidance from any banking regulatory agency even acknowledging, let alone adopting, the FinCEN or DOJ policy memos.  Thus, under the status quo, the regulatory climate is more favorable for credit unions than banks interested in servicing MRBs.

The critical question is whether the status quo will survive with the coming Trump administration.

Appointment of Jeff Sessions

In wake of the election there has been considerable speculation about what Attorney General nominee Jeff Sessions, a prominent marijuana critic, will do about state-legalized marijuana. As Attorney General, Sessions could unilaterally rescind the DOJ policy memo, which would effectively gut the FinCEN memo as well, and announce the end of federal deference to state-legalized marijuana.

But given that legalized marijuana has become a multi-billion industry operating across the country, employing thousands of people, and generating significant tax revenue, this decision is unlikely to be made exclusively by Sessions.

President-elect Trump has indicated support for leaving the issue of marijuana to the states, and may decide that ending the state legalization experiment would be an unnecessary political fight with over half the country.

Role of Congress in enforcing marijuana laws

Despite the intense speculation about what Sessions may do as Attorney General, the Executive Branch is not the only player when it comes to state-legalized marijuana. For the past few years, Congress has included an amendment to the annual appropriations bill that prohibits DOJ from spending federal funds to interfere with the implementation of state medical marijuana laws.

The courts have also weighed in, with the Ninth Circuit Court of Appeals recently upholding the DOJ funding restriction in challenges to federal prosecutions in states where medical marijuana has been legalized. Thus, even if Sessions rescinds the marijuana policy memos, the DOJ may still be prohibited from enforcing federal marijuana laws in states where it has been legalized.

The first public indication of the Trump administration’s approach to state-legalized marijuana may come during Senator Sessions’ confirmation hearing to become Attorney General, likely to take place in January.

As developments affecting banking MRBs unfold, I intend to issue additional guidance as to how credit unions can take advantage of this new market.

A version of this article originally appeared on