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States seek feds' banking guidance for cannabis businesses
WASHINGTON (5/29/14)--Colorado Gov. John Hickenlooper and Washington Gov. Jay Inslee have asked the federal financial institution regulators for guidance on marijuana business banking. The governors wrote a letter this week to the National Credit Union Administration, Federal Reserve, Office of the Controller of the Currency and the Federal Deposit Insurance Corp.

The letter follows one sent in October 2013 by the two governors with a similar request for guidance.

"Banks and credit unions in Colorado and Washington are waiting for the Federal Banking Agencies to furnish the instructions given to bank and credit union examiners before deciding whether and how to provide banking services to state-licensed recreational marijuana businesses," the letter reads. "In the meantime, product sales have begun in Colorado and will soon being in Washington, exposing all involved to the significant risks of criminal activity associated with accepting, storing and transporting large quantities of cash that can be ameliorated by access to the banking system."

According to May 27 report in The Denver Post, financial institutions in both states are more worried about penalties from financial regulators than from prosecutors, fearing the effects and penalties that regulators could impose.

The U.S. Department of the Treasury's Financial Crimes Enforcement Network issued guidance in February that advised anyone providing financial services to marijuana-related business to assess the risk with due diligence that includes:
  • Verifying with the appropriate state authorities whether the business is duly licensed and registered;
  • Reviewing the license application (and related documentation) submitted by the business for obtaining a state license to operate its marijuana-related business;
  • Requesting from state licensing and enforcement authorities available information about the business and related parties;
  • Developing an understanding of the normal and expected activity for the business, including the types of products to be sold and the type of customers to be served (e.g., medical vs. recreational customers);
  • Ongoing monitoring of publicly available sources for adverse information about the business and related parties;
  • Ongoing monitoring for suspicious activity, including for any of the red flags described in this guidance; and
  • Refreshing information obtained as part of customer due diligence on a periodic basis and commensurate with the risk.
News Now reported earlier this month that Spokane Valley, Wash.-based Numerica CU, with $1.3 billion in assets, would be the first financial institution in the country to accept marijuana-based business. Businesses that grow or process cannabis can manage finances there, but retailers cannot. (See News Now May 9: "Wash. CU sets standards for serving marijuana businesses.")

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