Posts tagged ‘marijuana businesses’

New York Goes To Pot, What It Means For Your CU

With yesterday’s announcement that the Legislature reached agreement on legalizing the recreational use of marijuana in New York State, it is time for all credit unions to hurry up and wait when it comes to deciding how aggressively they are going to engage in this emerging field.  The hurry up part applies to all credit unions that, within months, will have to adjust HR policies, review BSA frameworks and generally engage their Boards so that everyone is in agreement on how to operate in this brave new world.  The wait part comes from the need to recognize that even as New York State goes forward with its plans, the stubborn fact remains that the sale and distribution of marijuana remains illegal as a matter of federal law, and that credit unions that ignore this reality are putting themselves at risk of serious legal, reputational and operational consequences.

There is no need to take my word for it.  Just the other day, the American Banker reported that Live Life Federal Credit Union was subject to this administrative order for its non-compliance in relation to its marijuana banking practices.  Among the deficiencies cited by NCUA was the credit union’s lack of automated systems to comply with its requirements to monitor red flags regarding Marijuana-Related Businesses as detailed by FinCEN. 

NCUA’s action is a well-timed cautionary tale to any New York credit union that rushes into the space.  No matter how legal marijuana is made on the State level, there are still numerous additional safeguards that must be put in place such as enhanced due diligence requirements and being able to periodically file up to three different types of Suspicious Activity Reports (SARs) on an ongoing basis.  And remember, you are dealing with a highly specialized business for which your credit union will have to have demonstrable expertise.  Last, but not least, certain Federal Reserve Banks have signaled an uneasiness to provide access to the Federal Reserve System to credit unions that engage in banking marijuana.  Clearly, this system needs to clarify where it stands on this issue.

But even with all these legitimate concerns, it is also time for your credit union to hurry up and start preparing for this new reality.  Even if your credit union decides it wants no part of marijuana banking, it will still have to determine its risk tolerance for banking individuals associated with this industry.  For example, if your credit union decides not to provide banking services to Marijuana-Related Businesses, will it extend this prohibition to employees of these businesses who come to the credit union for a mortgage loan? 

Then, of course, there are a multitude of HR issues.  Is your credit union prepared for the employee who claims that she needs to take marijuana during the day because of a medical condition?  And just how hard a line are you going to take against employees who appear to be working under the influence?  Will your stance change if there is no related diminution in their work product?  These are the type of issues that you can thoughtfully consider in the coming months or be forced to confront for the first time when they occur once recreational marijuana is legal.

March 25, 2021 at 8:59 am Leave a comment

Reefer Madness!



Yesterday, I contributed my 2 cents to a symposium hosted by New York State’s society of CPA’s exploring issues related to medical marijuana. Just as the uncertainty about what is and is not appropriate for credit unions and banks to do has deterred the financial industry from actively engaging with marijuana businesses, think of how confusing it is for accountants working with businesses that are paying taxes on a product that is illegal under federal law.

The Trump administration has to move  early and decisively to clarify this current state of affairs: it is having serious consequences that should no longer be ignored.

First, New York truly has a medical marijuana model. It can only be prescribed by medical professionals who undergo additional training; the patients have to have qualifying ailments; the marijuana can’t be made available in an  inhalable form and it  can only be sold from a limited number of locations.

These are not cynical restraints. One of the persons at  the symposium was Hillary Peckham, Chief Operating Officer, Etain Health located in the Lake George area of upstate New York.  Her business doesn’t cater to Baby Boomers and Gen-Xers out to relive the glory days. It helps people dying of cancer and kids who suffer from seizures.

I will leave it up to the medical experts to debate how helpful marijuana is and can be. What I now believe, however, is that  New York’s medical model is encouraging legitimate businesses and entrepreneurs who truly believe in the medical benefits of marijuana and who have legitimate banking needs.

Nevertheless businesses like Etain Health are running smack up against Federal Law which continues to make the possession and distribution of marijuana illegal for all purposes.  Credit unions and banks are dealing with seemingly  contradictory signals from  regulators which can change as quickly as a new Attorney General is appointed. As I have explained in previous blogs, on the one hand, Fincen and the Justice Department have issued memos explaining to financial institutions the conditions under which they can provide services for marijuana business in states where they are legal. On the other hand, the Federal Reserve and NCUA blocked a state chartered credit union in Colorado from obtaining access to the Federal Reserve System. In addition, there are bankruptcy courts questioning the status of business estates which include marijuana businesses and federal courts which are questioning the enforceability of contracts with them.

This “don’t ask” “don’t tell “ state of affairs, in which states are allowed to “legalize” marijuana while the federal government selectively chooses to look the other way is reaching the  breaking point.  It is time for the Federal Government to get serious and allow both credit unions, banks and these legitimate businesses to  come out of the shadows.

December 14, 2016 at 9:57 am Leave a comment

Congress Not Regulators Must Address Pot Banking

Congressmen and women continue to confuse the issue surrounding why so many banks and credit unions remain reluctant to open accounts for marijuana businesses, even though the DOJ and FinCEN have both issued guidance explaining the circumstances under which institutions will not be accused of violating the law or regulations if they do. THE SALE, DISTRIBUTION, AND POSSESSION OF POT REMAINS ILLEGAL AS A MATTER OF FEDERAL LAW. Rather than prodding regulators to overlook this fact, they should be working on amending federal law so that it is consistent with the law in the many states that have chosen to legalize pot to varying degrees.

What has me going this morning is a letter sent by Oregon’s Senator Jeff Merkley, Senator Patty Murray (D-WA), Senator Michael Bennet (D-CO) and Senator Ron Wyden (D-OR) urging federal financial regulators, including Debbie Matz and Janet Yellen, “to issue clear guidance for financial institutions serving legal marijuana businesses, making it easier for those businesses to access banking services rather than operating on an all-cash basis.”

To be clear, FinCEN has already issued detailed guidance explaining how financial institutions can service these businesses, and DOJ has explained the circumstances under which it will not prosecute them; but, what neither FinCEN, NCUA nor any other federal regulator can do is amend federal law. Last I checked, only Congress can do that. All regulators can do is explain the circumstances under which they will not enforce the law, a troubling enough proposition without Congressmen further confusing the issues with letters seeking guidance.

This isn’t just the Monday morning rant of a father who just hours ago was stuck on the world’s greatest parking lot, otherwise known as the Long Island Expressway on a holiday weekend, with a seven year old who had to go to the bathroom. Perhaps the legislators should take another look at United State’s District judge R. Brooke Jackson’s decision upholding the right of the Federal Reserve to deny Four Corners Credit Union access to the federal reserve system despite the existing guidance. In short, these guidance documents simply suggest that prosecutors and bank regulators might “look the other way” if financial institutions don’t mind violating the law. A federal court cannot look the other way. I regard the situation as untenable and hope that it will soon be addressed and resolved by Congress. Fourth Corner Credit Union v. Fed. Reserve Bank of Kansas City, No. 15-CV-01633-RBJ, 2016 WL 54129, at *4 (D. Colo. Jan. 5, 2016).

Nevertheless, the Senators note with approval that yet more guidance might be forthcoming. We don’t need more guidance; what we need is federal law that explicitly sanctions activities that states have already permitted. Here is the letter.


March 28, 2016 at 9:13 am 1 comment

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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