Credit unions of all sizes across Montana continue to have questions on how to handle requests for accounts and loans for those involved in the cannabis industry. Compliance officers are also finding their credit union may have unintentionally opened accounts serving the industry or related businesses. This information is intended to dispel myths, lay out facts, and help you feel more comfortable with the current state of cannabis banking, even though it can — and probably will — change tomorrow!

Legality

Across the U.S., a majority of the states have approved legalizing either medical or recreational marijuana, or both, and the change in state laws continues at a rapid pace. In Montana, we have had medical marijuana for several years and (limited) recreational marijuana sales since January 2022.

Even as the industry grows (and is accepted) in most states, marijuana remains classified as a Schedule 1 substance under the Controlled Substances Act. That makes it illegal at the federal level, and no state law can override that. President Trump recently signed an Executive Order encouraging the DEA to reclassify marijuana as a Schedule 3. That process is expected to take at least a year to complete.

Serving the industry

Marijuana is a booming business and new storefronts and related support businesses open daily in towns across our state. With their local nature, credit unions want to serve their members and communities and see risk to their reputation if they choose to serve this industry. Most credit unions also don’t have the staff or systems to monitor the accounts at the level expected by regulators and law enforcement.

There are additional safety and financial concerns for both dispensary employees and communities if the amount of cash in the cannabis industry is not allowed into the financial system and pushed into alleys. Employees may need to be paid in cash. Not only does that make them prime targets for theft, but they have little to no proof of income for gaining loans or filing taxes.

Marijuana-related businesses (MRBs) are cash intensive, so it is challenging to serve them. It requires a great deal of monitoring and reporting of the activity and, of course, the risk of possible seizure of funds if the federal government were to raid them.

SAR Filing Expectations

FinCEN issued guidance in 2014 on BSA Expectations Regarding Marijuana-Related Businesses. Even with changes in state law, FinCEN’s publication is still considered the primary guidance for the reports your credit union is expected to file.

The following three SAR filings may be necessary in various situations. Note these by naming them appropriately in the narrative section when you file one.

• Limited SAR: Filed if your credit union is providing financial services to a marijuana-related business that you reasonably believe, based on your member due diligence, does not implicate one of the Cole Memos priorities or violate state law.
• Priority SAR: Filed on a marijuana-related business that the credit union reasonably believes, based on its member due diligence, implicates one of the Cole Memos priorities or violates state law.
• Termination SAR: Filed when the credit union terminates an account or relationship with a marijuana-related business. Even if you do not serve the industry, you need to file this SAR if you discover accounts that are already open or accounts (perhaps MRB employee accounts) that are being used for dispensary or MRB activities.

Recognizing MRB Activity

You might be seeing activity to indicate a member is either operating or employed at a marijuana dispensary. And don’t forget all the businesses that are supporting the industry as it grows and becomes more complex. They may be an MRB too.

We have had several credit unions report finding dispensary activity, including payroll and payments to suppliers, being run through employee accounts. That makes sense given the difficulty the businesses are currently having in getting banked in traditional financial institutions. Your policy needs to address how to handle that scenario, and if you close the account, a termination SAR needs to be filed.

MRB Policy Decision

It is highly recommended that your credit union have a board-approved policy on whether or not you will serve marijuana-related or cannabis businesses.

When you do not serve MRBs, your policy should still detail how your credit union will respond if you are approached about accounts or loans and include the steps that will be taken if you find you already have accounts open that serve the industry or activity running through an existing account.

If you do choose to serve the industry, your policy should lay out the steps you will take for filing the necessary SARs and collecting and tracking needed information. In fact, you need a policy and an exit strategy to be compliant.

A possible third policy option is to allow management to make case-by-case decisions. While we do not have a sample policy for that scenario, some credit unions have been approached by businesses or individuals who support the growing industry with requests for accounts. Each decision should include thoughtful consideration of the regulatory expectations, including monitoring and reporting, but a policy of this nature can help with some of the gray areas that exist in defining service to the industry.

There are some great policy examples available in InfoSight360 (CU PolicyPro) #2113 (Not Servicing Marijuana-Related Accounts), #2112 (Servicing Marijuana-Related Accounts), #2111 (Hemp-Related Accounts), and #7450 (Marijuana-Related Business Lending) that can be adjusted to your needs. You may need to incorporate references to specific Montana features such as the Department of Revenue Cannabis Control Division and their helpful FAQ.