Medical marijuana is now legal in over twenty states plus the District of Columbia. Washington, Colorado, Alaska and Oregon have agreed adults may enjoy it for the pleasure it provides. There is an opportunity for credit unions to make money from shopkeepers and producers, at least as long as commercial banks refuse involvement.
But there is a catch to work around. The devil is in the detail of a document issued by the Financial Crimes Enforcement Network under Guidance 2014 G001. In summary, the document says prosecution of financial institutions, including credit unions lending money to marijuana businesses may be appropriate, if they interfere with any of the following Congress priorities, and we quote:
- Preventing the distribution of marijuana to minors;
- Preventing revenue from the sale of marijuana from going to criminal enterprises, gangs and cartels;
- Preventing the diversion of marijuana from states where it is legal under state law in some form to other states;
- Preventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;
- Preventing violence and the use of firearms in the cultivation and distribution of marijuana;
- Preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use;
- Preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands;
- Preventing marijuana possession or use on federal property;
This is some tall order but things are still possible, provided a credit union can prove it took reasonable steps to do due diligence and comply. Their first step would be to confirm the business has current registration and license with the appropriate authority, and to review its intentions per its application for these permissions.
It should then follow up with the authority and ask to sight information regarding the credit application, and the persons related to it. It should also research the client market and product ranges, and establish whether these products are recreational or medical.
Assuming the above check out and pass the scrutiny of the credit union’s legal advisor, it may decide to pass credit subject to the usual checks and balances. The job is however never complete because you have to keep monitoring the client.
The union should regularly scan the media for events that conflict with its current impressions, or cause it to suspect illegal activity. It should also schedule update reviews to reassess the credit decision, as it should in any case with all its clients. Here is a link to Guidance 2014 G001.