Alaska Credit Unions Await Final Marijuana Laws
Alaska's recent legalization of recreational marijuana means that America's last frontier was among the country's first states to tell residents it's OK to fire up the bong.
But marijuana sales won't become legal until May 2016, giving the state's financial institutions, including credit unions, more than a year to decide what role, if any, they want to play in serving what will inevitably be a budding crop of marijuana-based business enterprises.
Alaska voters on Nov. 4, 2014, gave the high sign to AS17.38, also known as Proposition 2, allowing state authorities to tax and regulate the production, use and sale of marijuana. Initial oversight was given to the Alaska Alcohol Beverage Control Board, which was allowed nine months after the law's effective date of Feb. 24, 2015, to develop regulations governing marijuana-related entities and other aspects of the newly-formed industry.
The Alaska legislature further set a 16-month timeframe before the first legal marijuana sales can occur in the state. Initial licenses will be issued starting in May 2016, and any sales prior to that date will be considered illegal and may be prosecuted as a crime, according to FAQs on the board's web page.
During the same election cycle and on the same date, Oregon voters adopted Measure 91, which legalized recreational marijuana use in that state. The Oregon law allows both usage and sales of marijuana as of July 1, 2015, putting Oregon ahead of Alaska in terms of commercialization.
Meanwhile, Wash., D.C. voters supported Initiative 71, which legalized limited possession and cultivation of small amounts of recreational marijuana within the district, on Nov. 4. The new law, which takes effect Feb. 26, does not allow the sale of marijuana nor does it override federal regulations, which still classify marijuana as a Schedule 1 drug.
Alaska, Oregon and Wash., D.C. have joined Colorado and Washington, which legalized marijuana in 2012, in the cannabis crusade.
Alaska's lengthy wait time to commercialization gives credit unions ample opportunity to consider whether or not supporting marijuana-related businesses fits within their mission of serving the underserved. Right now, interest is tepid at best, according to Alaska Credit Union League Chairman Lauren MacVay, who also serves as president/CEO of $131 million True North Federal Credit Union in Juneau, Alaska.
“Statewide attitudes range from ‘wait and see’ to ‘no, we’re not going there,’” MacVay said. “Until the State of Alaska and local governments figure out how they are handling commercialization, most credit unions will wait on the sidelines until those decisions are reached.”
Alaska's lengthy and complicated history with marijuana legalization may have had some bearing in giving the state's 12 credit unions pause.
The state's first marijuana legalization bill was introduced to the legislature in 1972, and in 1975 the Alaska Supreme Court ruled that personal marijuana possession was protected under the state constitution's right-to-privacy clause. Voters in 1998 legalized medical marijuana, but state lawmakers never quite got around to creating laws under which medical marijuana dispensaries could operate, which resulted in an ongoing legal limbo for marijuana users and providers.
Kevin Anselm, director of Alaska's Division of Banking and Securities, echoed MacVay's observations for Alaska's financial institutions overall.
“I have not heard that anyone is looking to serve these businesses, but then I wouldn't,” she said. “It's our impression that financial institutions are taking a wait-and-see attitude, and I think many are concerned about the implications under federal law.”
Alaska's only state-chartered credit union that falls under Anselm's authority is the $923 million Credit Union 1 in Anchorage. Calls to Credit Union 1 President/CEO Thomas Newins seeking an opinion were not returned at press time.
The “gray area” in Alaska state law is further complicated by federal statutes that still classify marijuana possession as illegal, MacVay said. Such uncertainty will require more effort and potentially higher overhead costs for credit unions that may want to serve marijuana-related businesses once the opportunity becomes legal.
“There are workload concerns in terms of increased Bank Secrecy Act reporting obligations and general due diligence,” MacVay said. “A recent report stated that managing a marijuana business takes four times more time that it would take a credit union to manage the oversight of a regular business. This is a major factor for a credit union to consider due to the additional staff resources.”
For $5.7 billion Alaska USA Federal Credit Union in Anchorage, the state's largest credit union, the issue of available resources comes secondary to legal concerns, according to Dan McCue, senior vice president of corporate administration for the credit union.
“Alaska USA FCU is a federally chartered credit union,” McCue said. “Since the federal government has not legalized marijuana, Alaska USA has made a business decision not to open accounts related to the marijuana industry.”
Despite the strong attitudes, few have made a final commitment to serving an industry still in its nascent stages. Alaska's financial institutions will have a better sense of the future of marijuana businesses after the legislature ends its spring session on or around April 19, Anselm said.
“The only thing that I have heard for sure is that certain entities are not interested, but we have another year,” Anselm said. “Given that financial institutions are conservative by design, I get why they are reticent to stick their toes in the water.”
From a personal standpoint, Anselm takes no position on marijuana legalization and how to go about serving the industry in the months and years to come.
“I don't have a personal opinion,” she said. “The will of the people is fine with me.”