Until cannabis is removed from Schedule 1 of the Controlled Substances Act, access to the banking system for the cannabis industry is extremely limited.
It’s an issue not just for plant-touching and ancillary businesses but for financial institutions as well.
NJ Cannabis Media sat down with Credit Union of New Jersey’s president and CEO Andrew Jaeger and senior vice president and CFO Robert Vuocolo for their perspective.
Jaeger told us that CUNJ is exploring engaging with businesses in the cannabis industry.
“We hired someone who has regulatory knowledge based on the state and federal to understand the ramifications and complexities of entering into this business. Because the biggest issue is banks and credit unions are subject to the Banks Secrecy Act and anti-money laundering rules,“ Jaeger said. “We do see an opportunity but we’re in the early stages of due diligence.”
The key issue: Is it legal?
“We believe it’s legal,” Jaeger said, “We just don’t know if we can handle the complexities or the burden of what’s needed to adhere to the compliance requirements. And that’s why banks and credit unions make the business decision right up front – look at what’s required under FinCEN – the financial enforcement arm of the US Treasury.”
Those requirements include classifying businesses as low, medium or high risk. FinCEN requires all cannabis businesses to automatically be classified as a high risk which triggers extreme compliance requirements.
Any check from a marijuana company results in the institution filing a Suspicious Activity Report (SAR) with FinCEN, according to Vuocolo.
“It’s mandated. If we were to offer accounts to the cannabis industry, every transaction they would do with us, we would have to file a suspicious activity report,” Jaeger said. “Are they going to do anything about it?”
That means if CUNJ does decide to do business with cannabis businesses, it will result in a high level of compliance requirements.
“The owners will need to be open to scrutiny because their backgrounds will need to be checked, their processes will need to be checked,” he added. “There’s a lot they need to do on their part.”
And the result will be accounts that are priced at higher fees than standard accounts.
“We’d have to dedicate a good chunk of time from our compliance team – because the monitoring of these accounts needs to be very diligent, thorough and consistent,” Jaeger said.
“You also have to be prepared to close accounts quickly. If something is not right with the dispensary and/or they’re not meeting the federal or state requirements.”
There are credit unions that are handling cannabis money including Numerica Credit Union in Washington state and Maps Credit Union in Oregon.
The decision for CUNJ will most likely come down to “risk assessment and a business decision. Is it worth it?” Jaeger said.