NYS Takes Strong Stand In Favor Of Marijuana Banking

July 9, 2018 at 10:08 am 1 comment

On July 3rd, New York State’s Department of Financial Services issued a strong statement encouraging both credit unions and banks to consider providing banking services to marijuana and hemp businesses legally operating under state law.  Full disclosure: the Association advocated for the Department to come out with just such guidance.

“The Department of Financial Services is aware…, that the unsettled legal environment at the Federal level has discouraged institutions from providing financial services to companies with medical marijuana or industrial hemp operations. This guidance is intended to clarify the regulatory landscape and encourage New York State-chartered banks and credit unions to offer banking services to these New York businesses. Institutions prepared to apply sound practices of customer due diligence and transaction monitoring. . .should consider to commence providing financial services.”

In addition, the Department stressed in an accompanying statement that it is ready to “work with chartering institutions to assist them in moving forward towards commencing operation [in a] very safe and sound manner” Industrial Hemp refers to products produced from cannabis plants that don’t have high levels of  Tetrahydrocannabinol (THC). Both the federal government and New York State have authorized the limited growth of this product in recent years, hoping that its wide variety of uses will spur economic growth in areas such as New York’s Southern Tier, but financial institutions remain reluctant to provide banking services.

Even with the guidance and its strong endorsement of banking services, there’s no getting around the fact that marijuana banking remains illegal as a matter of federal law.  In addition, the Federal Reserve has so far been unwilling to provide access to institutions providing banking services: So, what value is there in the guidance?

First, there are cracks, or at least fissures, in the federal government’s opposition. For example, the Treasury Department has not rescinded its guidance explaining how credit unions and Banks can provide banking services consistent BSA obligations; Congress passed legislation prohibiting the Justice Department from spending money on the prosecution of marijuana in states where it is where it is legal; and we know there are approximately 400 financial institutions currently providing banking services to marijuana businesses.

HMDA Guidance Released

In case you missed it, on July 5th NCUA joined other financial regulators in providing some initial guidance on how the implementation of S.2155 will impact credit unions exempt from certain, but not all, reporting requirements under the Home Mortgage Disclosure Act changes that were approved by Congress in May. S. 2155 increased the reporting exemption threshold for some HMDA data to exempt credit unions that originate fewer than 500 closed-end mortgages in each of the preceding two calendar years and credit unions that originate 500 open-end lines of credit in each of the last two years. Specifically, the reporting requirements are mandated by 12 USC 2803 B(5)(6). This statement informs us that the changes will not affect the format of the loan application register for data collected in 2018 as a result: https://www.ncua.gov/regulation-supervision/Documents/recent-changes-hmda-july-2018.pdf https://www.dfs.ny.gov/about/press/pr1807031.htm

Entry filed under: Advocacy, General, New York State, Regulatory. Tags: , .

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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