Washington, D.C — After years of litigation, the Federal Reserve Bank of Kansas City has given conditional approval to a Colorado credit union to service cannabis-related businesses. But in order to secure approval, the Fourth Corner Credit Union agreed that it would not serve any business that directly handles funds from cannabis sales or any state-licensed dispensaries.
Fourth Corner Credit Union had originally planned to work with “any legal marijuana enterprise in Colorado,” but modified their plans after being denied by the Fed bank. Now, instead of working directly with dispensaries, the credit union will “focus on individuals and companies that support legalized marijuana” – such as “accountants or landlords,” according to the Wall Street Journal.
Originally, in 2014, the credit union was awarded a charter by the State of Colorado to serve state-legal canna-businesses, but the Federal Reserve Bank of Kansas City refused to honor Fourth Corner’s request for a master account on grounds that federal law prohibits banks from serving businesses that handle funds related to an illegal substance. Without a master account, which allows access to the banking system, the credit union would not be able to operate.
According to a report from Merry Jane, a cannabis culture site, Fourth Corner dealt with a series of delays and legal woes before finally obtaining approval:
“In response to this challenge, Fourth Corner altered their charter, announcing that they would only open accounts for businesses that indirectly serve or support the cannabis sector, such as legalization advocacy groups, and accountants or lawyers with clients in the industry. Hence, the bank would technically would be operating legally, as long as they’re not handling funds directly related to growing, processing, or selling marijuana. Regardless of the change, the Federal Reserve continued to deny the bank’s request for a master account. Fourth Corner sued the Feds in 2016, and after losing the first round in court, finally won the right to a federal master account last summer in the U.S. Court of Appeals.
Despite the court’s ruling, the Kansas City Fed still had not given the credit union their account by last fall, so the bank filed a civil complaint in the U.S. District Court in Denver. After years of disagreement, this month the Federal Reserve finally granted conditional approval to Fourth Corner.”
To secure the deal, the Fourth Corner Credit Union agreed that it would not “serve any state-licensed dispensaries or business that directly handles cannabis funds.”
In an effort to avoid any perception of setting a precedent, the Federal Reserve Bank noted specifically that “this letter does not express the policy views of” the Federal Reserve Banking System as a whole, “nor does it contain any supervisory, regulatory or enforcement guidance or precedent,” the Wall Street Journal reported.
As Truth in Media previously reported, following Attorney General Jeff Sessions’ decision to revoke the Cole Memo— which gave Obama-era federal guidance for a hands-off policy towards state-legal marijuana— the Trump administration has recently been considering the removal of another Obama-era protocol, one that that permits banks to open accounts for marijuana-related businesses without being considered in violation of law.
Despite that move from Sessions, a bipartisan group of 31 House members recently collaborated on a letter that asked the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) agency to continue this cannabis banking guidance.
“FinCEN’s stated priorities have allowed such businesses to conduct commerce more safely through financial institutions which reduces the use of all cash, improves public safety, and reduces fraud,” the House lawmakers wrote in their letter. “Leaving your guidance unchanged will continue to encourage small companies to make investments by freeing up access to capital. It will also further provide for well regulation and oversight through suspicious activity reports. Rescinding this guidance would inject uncertainty in the financial markets.”
Drew Maloney, the U.S. Treasury Department’s assistant secretary for legislative affairs, wrote in response that his agency is “reviewing the [banking] guidance in light of the Attorney General’s announcement and are consulting with law enforcement.”
In testimony before the U.S. Senate, Deputy Secretary of the Treasury Department Sigal Mandelker said that the FinCEN memo remains in effect as the Trump administration examines the possibility of revocation. On Wednesday, Maloney confirmed in his letter that prior guidance “remains in place” for now, adding that Congress would be informed of any policy changes.