Posts tagged ‘Pot Banking’

Washington Tees Off On Facebook; Senate to Hear from CU’s on Pot Banking and Main Street is where the $ is

Today is the last day of the blog until I return from a week’s vacation on July 29th. Here is some info I wanted to make sure you knew before I head to Cape Cod this weekend.

Facebook cemented its status as the latest company everybody loves to hate. The US Senate Banking Committee held a hearing yesterday Scrutinizing Facebook’s plans to introduce a block chain cryptocurrency for Consumers sometime next year. As expected. reactions to the plan ranged  from polite skeptical to hysterical.

In the polite skepticism category is this quote in the American Banker from committee chairman Mike Crapo “Despite the uncertainties, Facebook’s stated goals for the payments systems are commendable,” Crapo said. “If done right, Facebook’s efforts to leverage existing and evolving technology and make innovative improvements to traditional and nontraditional payments systems could deliver material benefits, such as expanding access to the financial system for the underbanked, and providing cheaper and faster payments.”

In the hysterical category is this quote from the committee’s ranking senator, Democrat Sherwood Brown: “Facebook is asking people to trust them with their hard-earned paychecks,” said Brown. “It takes a breathtaking amount of arrogance to look at that track record and think, you know what we really ought to do next? Let’s run our own bank and our own for-profit version of the Federal Reserve for the world.”

With all due respect to the senator, a company started in 2004 as a dorm room platform to categorize coeds that grew into the world’s dominant communication platform is entitled to a little breathtaking arrogance. Besides, this country has been breathtakingly slow and arrogant to adopt payment system Innovations. It’s time to give the private sector a turn. The sky is not going to fall. It isn’t time to start the campfire with dollar bills

Upcoming hearing on Cannabis Banking

Speaking of the Senate Banking Committee, it will be holding a cannabis banking hearing on July 23rd and the concerns of credit unions will be front-and-center.

Rachel Pross, the chief risk officer of Maps Credit Union in Oregon,  is scheduled to be the lead speaker on the committee’s second panel following comments by senators Gardner and Merkley, both of whom represent States that have legalized cannabis.

The Credit Union has been on the cutting edge of providing banking services to marijuana businesses. In testimony before a House committee earlier this year Pross explained that the credit union has been providing these services since 2014 when Oregon voted in a referendum to legalize cannabis.

The conventional wisdom is that the House has the votes to pass legislation permitting  states which have legalized marijuana, to continue to do so without violating federal law but it will take a much bigger lift to get this done  in the Senate.

 Consumer Banking Heats up as Investment Banking Cools

The all-important earnings season, when publically traded company’s announce and put their best spin on their quarterly earnings is here. If current trends continue expect the big guys to continue to move aggressively to expand their consumer banking presence.

There is no better bellwether for the state of U.S. banking than JPMorgan Chase so here is a link to information about it second quarter earnings report. Page 3 of the press release demonstrates that  the behemoths are growing by capitalizing on consumer banking. The WSJ points out this morning that while the American consumer is generally in a good mood businesses which generate money for investment are much less sanguine about the economic outlook. Expect to face even more competition.



July 17, 2019 at 10:06 am Leave a comment

Trump Administration Sends Mixed Signals On Marijuana Banking

The legal status of marijuana banking got even more hazy on Tuesday.

Remember when last I blogged about this issue Attorney General Sessions had just rescinded a Justice Department guidance issued by the Obama Administration in which the conditions under which federal prosecutors would not prosecute marijuana businesses in states where it was legal were outlined. FinCen followed with guidance explaining how financial institutions could comply with the Bank Secrecy Act and provide baking services for marijuana businesses.

But right after California implemented its legal marijuana program, the Justice Department announced that it was rescinding its earlier guidance.

On Tuesday speaking before the House Financial Services Committee, Treasury Secretary Steven Mnuchin testified that, In the aftermath of the Justice Department’s decision, the Treasury Department is reviewing FinCen’s guidance outlining the application of the BSA. The Treasury Secretary assured the Committee that no one wants to see a Justice Department crackdown resulting in bags of cash being used to transfer marijuana profits.  He also stressed in later testimony that the Treasury Department has not rescinded the FinCen’s memos and doesn’t want to do so until it has a reasonable alternative.

Meanwhile, the Federal Reserve Bank of Kansas sent a letter to Fourth Corner Credit Union in Colorado laying out the conditions under which it will be able to access the Federal Reserve System.  This is a huge development.  Joined by the NCUA, the bank had previously blocked The credit union’s access to the Federal Reserve. A subsequent lawsuit went all the way up to the Court of Appeals for the 10th circuit.

So where does this leave us? On the one hand the Treasury Department fully wants to allow financial Institutions to provide banking services in states where marijuana is legal. On the other hand, the Justice Department, which ultimately has responsibility for enforcing federal law, clearly has people In high places who are opposed to legalization. On the bright side, it appears that the issue has finally been joined and that we should get a resolution from the Trump Administration sooner rather than later.


February 9, 2018 at 7:48 am 1 comment

Pot Banking Up In Smoke

Image result for pot bankingYesterday, Attorney General Jeff Sessions put an end to any straight-faced argument a credit union or bank had for extending banking services to marijuana businesses in states that have legalized marijuana possession and distribution. With a short statement, he retracted the Justice Department’s policy since 2013 that it would not prosecute marijuana crimes in states that legalized marijuana for recreational and medical purposes provided these businesses followed strict protocols. If credit unions and banks are going to be able to provide banking services to pot businesses then they must get Congress to act. It’s that simple.

Regardless of what you think of the policy implications arising from  Sessions’ announcement, his decision clears the legal haze surrounding this strange legal issue. By 2013, 20 states had legalized marijuana use in some form even as it remained illegal as a matter of Federal law. The Obama Administration’s Justice Department, responding to pleas from among others, the Colorado Banker’s Association, issued the so-called Cole Memorandum. This memo stipulated that while the possession and distribution of cannabis remained illegal the Justice Department would effectively adopt a willful ignorance policy. Federal prosecutors were instructed not to prosecute properly run marijuana businesses in legal states.

FinCEN followed suit with a memorandum outlining the conditions under which credit unions and banks could both provide banking services to cannabis businesses and comply with the Bank Secrecy Act. Many financial institutions remained hesitant to provide services and the state of Colorado ultimately chartered a state chartered credit union specifically to provide banking services for these businesses. But the Federal Reserve refused to provide this bank access to the system and the NCUA refused to provide share insurance. A resulting lawsuit has done nothing to clarify the confusion. An Appellate Court ruled that the Federal Reserve acted within its authority but that Colorado could try again to show how it could legally provide banking services.

Yesterday’s announcement makes all this history obsolete. The Cole Memorandum has no legal effect and without the Cole Memorandum, FinCEN’s memo can’t survive. In fact, I would shortly expect an announcement that the memo has been withdrawn.

If you are one of the estimated 400 banks and credit unions across the country that decided to provide services, then you have some awfully tough decisions to make. Simply put, you’re providing services to a business that could be prosecuted for violating Federal drug laws. This is a clear violation of your BSA obligations. Individual US attorneys could decide not to prosecute but this is no basis for maintaining a stable cost intensive lending program.

By the way, I’m not saying any of this because I’m against legalized marijuana. I actually have come to accept that there is a place for the industry at least in states like New York that are willing to permit it for legitimate medical reasons. But I’ve always felt that legalizing cannabis on a state-by-state basis ignores bedrock legal principles: states can’t pick and choose what Federal laws they have to follow. And the Justice Department shouldn’t be in the business of ignoring laws passed by Congress that it doesn’t agree with. Whether you feel that smoking pot is your right or a clearly illegal activity, the banking industry now has clear guidance. The next step has to be to get Congress to change Federal law and allow marijuana to be legal in states that choose to make it legal.




January 5, 2018 at 9:00 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.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 755 other followers