The Cannabis Industry and Credit Unions: Need Meets Philosophy
As credit union professionals, we pride ourselves on doing what is right, not just what everyone else is doing. The backbone of the credit union movement is service to all segments of society – including those that are underserved and unbanked. It's not our only mission, but it is one of the key factors that make credit unions different from other financial institutions, especially banks. If credit unions turn their backs on those that need their help, it is a disservice to those that built the movement by serving all those in need.
Credit unions have an opportunity to “put their money where their mouth is” when it comes to cannabis banking. With a number of states’ voters approving the use of medical and recreational marijuana, there is an urgent need for financial services for this entire industry. However, federal laws make it difficult, if not impossible, for cannabis businesses to open checking accounts, wire funds, access lines of credit or maintain payroll accounts. This is where credit unions enter the picture.
The Need for Leadership
There have been a number of credit unions that have entered the cannabis arena, but one CEO and her credit union have been leaders in this field. Sundie Seefried and the board at Partner Colorado Credit Union set up a program to offer financial services to Colorado's cannabis industry. Their Safe Harbor Private Banking offers services to law-abiding cannabis companies – those companies that do proper due diligence, document all transactions and obey the law. Sundie and her board deserve special mention as pioneers in this field. Being among the first to do something is never easy and often brings scrutiny, but Partner Colorado is a leader when the industry needs one.
Credit unions should be at the forefront of the cannabis issue. It is no longer a moral question – eight states plus the District of Columbia now allow recreational use while another 28 states have approved medical programs. Whether one agrees with the concept of legalized marijuana is not important. Credit unions and their boards ought to examine why they are not serving this industry. The genie is out of the bottle and will not be returned. Not having a financial services option results in large sums of cash on the street. This forces the cannabis industry to pay its bills, employees, suppliers and taxes in cash. Where there is this much cash, crime may soon follow.
Policy makers and regulators need to provide leadership on this issue. Congress and the financial regulators, including the NCUA, have to work to bring stability and safety to this marketplace.
The Need for Due Diligence
For credit unions seeking to enter this market, client knowledge is a requirement. This is one of the hallmarks of the movement. A credit union must be very familiar with the cannabis-dispensing member – know the business owner, know the member, know how they operate, and know whether the business properly mitigates risk and complies with rules on money tracking. The cannabis business owner has to be able to show the credit union and regulator that their money is legitimate. There are compliance programs that can track money from the time it comes into the dispensary to the time that it is deposited in the credit union. This type of tracking system is essential for credit unions that want to remain compliant with all regulations.
There are other questions that a credit union should ask: How does the business monitor for theft? What are the steps that are taken when a theft is discovered? How does the business prevent leakage of the product? Are licenses monitored on a regular basis? How is the business protecting itself?
The Need for Speed
Even if credit unions were among the first to serve this emerging industry, we can't kid ourselves – when it becomes more commonplace, the bankers will attempt to swoop in and dominate the market. Large banks already understand the profit potential of cannabis but they want credit unions to serve as the regulatory and legal guinea pig. Credit unions that can successfully serve this industry now will reap the benefits later when banks enter the market. One of the statements that Seefried heard from a client spoke volumes: “I didn't know what a credit union was, but if this is what a credit union is, I really like credit unions.”
Let's allow everyone to really like their credit union.
Geoff Bacino is Principal of Bacino & Associates. He can be reached at 202-549-0253 or firstname.lastname@example.org.