Credit Union Charges Cannabusinesses Higher Fees

There are some 105 financial institutions in the US providing banking services to marijuana dispensaries and other pot businesses, according to the Financial Crimes Enforcement Network also known as FINCEN. That’s less than one percent of all banks and credit unions nationwide.

“Although there’s guidance that banks aren’t categorically prohibited from doing business with cannabusiness, there’s no compulsion for them to step down that path until they are certain there won’t be repercussions coming from regulators,” said Al Foreman, former managing director with J.P. Morgan’s Highbridge Principal Strategies Salal Credit Union in Seattle, Washington is among the pioneers.

“We have about a dozen accounts for cannabis producers, processors and retailers that are licensed in Washington,” said Carmella Houston, vice president of business services with Salal.

The credit union began offering depository services to marijuana businesses in April 2014 in order to ensure the safety of surrounding communities. “By making banking services available to licensed marijuana businesses, we are giving them a way to operate in a non-cash environment, which provides an added benefit of security to the community and to these businesses by reducing the potential for crime,” Houston said.

The minimum monthly fee for marijuana businesses (which includes armored car cash delivery and pick up by Salal) is $350, depending on the number and type of transactions. “We have to do quite a bit of additional monitoring of the money that goes in and out so we’ve limited the number of accounts we will approve to 25 in 2014,” said Houston.

When Salal Credit Union had its annual review with state and federal examiners last month, the exam was more involved and thorough than before the state-chartered institution began accepting deposits from marijuana businesses. “We were expecting the additional scrutiny,” Houston said. “Our CEO and chief lending officer had talked to the examiners to let them know we were getting into the marijuana industry and that we wanted their feedback.”

Salal passed the audit.

“They wanted to understand the monitoring and ensure we were tracking the flow of funds, the background of the owners who opened these accounts and where the initial start up the funds came from to launch their companies,” Houston said. Industry experts say increased scrutiny is not surprising.

“Most bank executives feel as if the examinations are already onerous and pretty severe,” Foreman told High Times. “It will be a three to five year ramp up for banks to be fully comfortable.”

Salal’s business division currently employs four staffers to handle marijuana accounts and other small business accounts but Houston plans to hire a couple more workers. Out of the 200 inquiries for accounts from marijuana business owners, Houston has rejected a handful mostly because companies were not yet properly licensed.

“We’re currently servicing Western Washington and are planning to build out the department on a limited basis as our processes become more refined,” she said.

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