Inside the Front Lines: Numerica Credit Union Reflects on Five Years of Service to Legal Cannabis Industry
Key takeaways for Congress as it considers the Secure And Fair Enforcement (SAFE) Banking Act.
In May of 2014, Spokane-based Numerica Credit Union opened its inaugural account serving a legal cannabis business — the first financial institution in the region to do so. Today Numerica serves approximately 300 canna businesses.
While cannabis is a legal industry in Washington and in 32 other states, the federal government still considers it a narcotic. The massive compliance burden associated with banking the industry scares most financial institutions away, making it difficult for growers, retailers, and their employees to open financial accounts, and forces them to conduct transactions with cash.
The team at Numerica is successfully navigating the complicated landscape, but not without costs. A committee meets regularly to review all applications prior to approval. It takes a team of six employees to perform due diligence, open and service accounts, and file the heaps of Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs) required by the federal government.
The 116th Congress is considering the SAFE Banking Act, which could clear many of the arduous compliance hurdles for credit unions.
“No matter how you feel about cannabis, it is so important to take the cash off the street and protect our communities,” said Lynn Ciani, Numerica’s Chief Risk Officer and General Counsel. “The threat of crime is very real. Having financial institutions be able to provide a safe place for all that cash is critical.”
If financial institutions could more easily serve the fast-growing industry, there would be transparency and that would help law enforcement document and prosecute any businesses not complying, Ciani notes. She also hopes Congress understands the difficulty that even ancillary businesses have finding financial services – businesses such as fertilizer stores, software companies, or those providing electricity to growers or retailers and being paid with cash.
“We’ve actually been contacted by ancillary businesses serving growers or retailers who’ve had their accounts closed by other financial institutions,” Ciani said.
Even credit unions that don’t serve canna-related businesses are at risk of running afoul of federal regulation.
“They have the same issues with respect to canna businesses as we do regarding employees, owners, investors, and ancillary businesses,” Ciani said, adding they might have to revise their member due diligence questions so they know if they are accepting deposits or loan applications from members employed in or serving the canna industry.
“They have to determine how they are going to accept deposits and look at their lending policies to determine what, if any, restrictions they are going to place on those businesses,” Ciani said.
If the SAFE Banking Act passes, Ciani said, canna business operators and employees will more easily be able to get loans and make deposits. Customers of the business may be able to pay for their products with credit or debit cards, instead of cash.
For credit unions that have pioneered serving the canna industry, compliance requirements will still exist, but, “It would reduce the compliance risks tremendously,” Ciani said. “We would not have to be constantly fearful of being prosecuted by the Department of Justice and could lend to canna businesses and employees without fear of federal government seizure of the assets.”