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February 5, 2013
The passage of I-502 in Washington last November has prompted extensive discussion regarding how credit unions should handle requests to open a business account for a business in the newly legal “marijuana industry.”
“Unfortunately, because the law is still so new and there are some negative implications at the federal level, the guidance on this topic is as clear as mud,” said Northwest Credit Union Association (NWCUA) Director of Compliance Services David Curtis. “It is important to understand what the new Washington law permits while also understanding how federal laws could impact any account opened for a business that operates in the marijuana industry.”
Under the new law, it will be legal for licensed retailers to sell recreational marijuana to individuals. It stands to reason, then, that these new retailers will need to establish an account at a financial institution in order to properly run their business. However, according to Curtis, it is important to note that no licenses have yet been issued that allow anyone to grow or sell marijuana specifically for recreational use. The Washington State Liquor Control Board has stated that such licenses will begin being issued in mid-to-late 2013.
What is the big hype, you ask, if this is a legal business?
“The issue with marijuana retailers and growers opening accounts at credit unions boils down to this: marijuana is still illegal on a federal level, regardless of the purpose or state law,” Curtis said. “This means that there are some serious considerations to be made before deciding to jump on the bandwagon.”
The following are a few items credit unions should evaluate before deciding whether or not to bank these types of businesses:
It is no surprise that the Washington State Division of Credit Unions is also receiving numerous inquiries regarding if and how a credit union can bank a marijuana business. The DCU has stated that since this is still an illegal activity under federal law, it should still be viewed as such until there are any changes at a federal level.
Additionally, when the state examines a credit union, part of the safety and soundness of that credit union is determined by risk they engage in—including reputational risk. According to Curtis, the best advice that can currently be offered is for credit unions to hold tight until Washington State finalizes the remaining portions of the law or until the DOJ issues something in writing stating that they will not view this activity as criminal in states where use and sale of marijuana has been legalized.
It is also important to note that some acts will still be considered illegal under Washington law. The Washington State Liquor Control Board has issued a list of frequently asked questions pertaining to the new law. Most notably, a business that already operates a different practice, such as a convenience store, cannot legally sell marijuana. Marijuana retailers will only be able to sell marijuana, marijuana-infused products, and paraphernalia.
“So, if ABCMarket tells you that they are now also selling marijuana right next to their pastries,” Curtis said, “you might have to file a SAR.”
This will be an ongoing discussion for quite some time. Stay tuned for more information as it becomes available.
Questions? Contact the Compliance Hotline: 1.800.546.4465, firstname.lastname@example.org.
Posted on 02/05/2013View All Articles
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