PORTLAND, Ore. – Now that recreational marijuana use is legal in four states, interest in serving the industry is growing among credit unions. However, they have many questions about how the process would work – and wonder if it's worth the risk.
The benefits of opening membership to marijuana businesses include growth for the credit union and a reduction in crime for the businesses being served, but the workload required on the credit union's end is quite heavy, according to Lynn Ciani, executive vice president and general counsel for Numerica Credit Union. Ciani explained to attendees at an NWCUA Amplify breakout session dedicated to marijuana business banking how her credit union made it happen at the trade association's annual meeting Wednesday.
A pioneer in serving marijuana businesses, the Spokane Valley, Wash.-based, $1.5 billion Numerica CU opened up membership to businesses in the industry last year when recreational pot use became legal in Washington State. Numerica now has between 50 and 100 marijuana business accounts, Ciani said.
Carefully reviewing FinCEN guidance, discussing the security issues around bringing lots of cash into branches, working closely with the state's liquor and cannabis board and establishing internal risk mitigation procedures were critical to the credit union's success, she said. The credit union also visits each marijuana business before taking the owner on as a member, and partners with a company that delivers cash from the businesses to the branch.
"We had to ask ourselves, are we going to limit this to certain branches? Will it be by appointment only? What do we do with smelly cash? And, some branch personnel weren't thrilled with us serving the industry," Ciani said.
Ciani admitted serving marijuana businesses has involved a ton of work for the credit union, and that it's had to hire additional staff members as a result. She said the number of SARs and CTRs the cooperative is required to file has increased by 30 to 40%, for example.
"We got our finance department involved because we had liquidity concerns," she added. "We also established fees to help us cover the costs of running the program. It has been a lot of work."
Noah Stokes, CEO of CannaGuard Security, which provides security services to marijuana businesses, also spoke during the session and encouraged credit union executives in the audience to consider entering the legal pot business market.
He also discussed several challenges he faced launching his own business. For example, after receiving cash payments from his clients, he deposited them into a bank account. However, because the cash deposits raised red flags, his accounts were shut down and his business was accused of money laundering, he said.
Despite the hurdles, Stokes said the payoff of helping increase safety for the businesses has been well worth it.
"Anyone who is stealing money or pot isn't using it for the most wonderful causes," he joked. "So we wanted to come in and prevent that from happening."
He also assured credit union executives that those in the marijuana business do not fit the slacker stereotype commonly associated with pot smokers.
"They're very professional people," he said. "You'd be surprised how professional this industry is getting."
Ciani concluded by offering credit unions looking to serve marijuana businesses the following tips:
- Revise your BSA policy and implement formal procedures for ongoing due diligence.
- Get to know the marijuana regulators on your liquor control board, as they can be very helpful throughout the process.
- Work with your state's regulators and ensure they are happy with your program to avoid an unpleasant exam.
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Natasha Chilingerian
Natasha Chilingerian has been immersed in the credit union industry for over a decade. She first joined CU Times in 2011 as a freelance writer, and following a two-year hiatus from 2013-2015, during which time she served as a communications specialist for Xceed Financial Credit Union (now Kinecta Federal Credit Union), she re-joined the CU Times team full-time as managing editor. She was promoted to executive editor in 2019. In the earlier days of her career, Chilingerian focused on news and lifestyle journalism, serving as a writer and editor for numerous regional publications in Oregon, Louisiana, South Carolina and the San Francisco Bay Area. In addition, she holds experience in marketing copywriting for companies in the finance and technology space. At CU Times, she covers People and Community news, cybersecurity, fintech partnerships, marketing, workplace culture, leadership, DEI, branch strategies, digital banking and more. She currently works remotely and splits her time between Southern California and Portland, Ore.
