Michigan Cracks Down on Cannabis Banking Through Credit Unions

In the U.S., banks and credit unions are reluctant to work with cannabis businesses because of the federal illegality of cannabis.
Michigan Cracks Down on Cannabis Banking Through Credit Unions

A Michigan credit union just got penalized for working with cannabis businesses, despite the fact that this is a gray area for financial institutions. 

This is notable because it is thought to be the first time US regulators have publicly called out a financial institution for compliance issues connected to the cannabis industry.

Live Life Federal Credit Union, based in Fraser, Michigan, is being asked to stop opening cannabis related-accounts and file reports for suspicious activity, which the National Credit Union Administration claims are missing. The credit union also has to start using automatic transaction monitoring. 

The credit union, which is valued at $69 million in assets, was one of the first financial institutions to start working with cannabis companies within the state. 

Cannabis and Banking

All over the U.S., banks and credit unions are reluctant to work with cannabis businesses because of concerns surrounding the federal illegality of cannabis. The gray area of cannabis being legal in certain states, but not the U.S., often scares away financial institutions, forcing the cannabis industry to either be sneaky about how they do their banking or deal mostly in dangerous amounts of cash. 

“I’m going to win the war and not this battle,” said Karla Haglund, CEO of Live Life Federal Credit Union, about this recent blow. “Somebody has to go through this. I guess it’s me.”

This serves as a warning to the banks and credit unions who do already work with the cannabis industry. While technically, companies that adhere to the legal guidance on mitigating risks could avoid legal trouble, there is a lot to keep track of when it comes to cannabis banking law. 

“I think all regulators like to signal their priorities through enforcement actions,” said John Geiringer of Barack Ferrazzano, a money-laundering lawyer. “So from time to time, you will get an enforcement action that is different from the others. It gets everyone’s attention, and it focuses the mind of everyone in the industry who is thinking about engaging those types of customers to go back to the regulatory road map for how it should be done.”

Haglund says that, while Live Life may have missed filing suspicious activity reports, or submitted them late, this is not because of intentionally being duplicitous, but because of being overworked. Since so many institutions will not work with the cannabis industry, Live Life now has 150 cannabis banking clients. Although they have actively slowed down on accepting new clients due to being at capacity, they are still very much in demand. 

“The cannabis atmosphere is very fast-paced. You have to be on your toes all the time,” she said. “It can be very draining for staff. You have to work a lot of hours, so we had slowed the program down anyway.”

Sundie Siefried, CEO of Partner Colorado Credit Union, another entity that works with cannabis businesses, understands the overwhelm Haglund is feeling. Siefried stresses the importance of putting resources into compliance. 

“Even at $300 million in asset size when we started, I was first to say we were not large enough to shoulder all the compliance costs. But we didn’t know what we didn’t know about the industry at that time.”

As long as cannabis remains federally illegal, there will be limits to banking access for cannabis businesses, and those who do provide access will have their work cut out for them. 

1 comment
  1. It’s way past time to get cannabis banking out of the prohibition dark ages. The simple fact that this is an issue in 2021 just shows the lack of America’s ability to allow “We the people” a voice. Prohibition doesn’t work and the CSA is based on racism and not reality.

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