The legal cannabis industry took another financial blow this week after the U.S. Federal Reserve announced that chartering a bank specifically for funds from cannabis businesses is “criminal."
This announcement came as a result of a lawsuit from the Denver-based Fourth Corner Credit Union. The credit union, which catered exclusively to marijuana businesses and associated companies, applied for an account in late 2014 after receiving a state charter, but the Federal Reserve Bank of Kansas City denied their application for a master account. They were also denied deposit insurance by the National Credit Union Association, which may have influenced the decision of the Federal Reserve.
Fourth Corner Credit Union filed lawsuits against both government agencies in the U.S. District Court of Denver, alleging that “The NCUA and FRB-KC acted in concert to unlawfully block [Fourth Corner Credit Union] from gaining access to the Federal Reserve payments system.”
Unfortunately, Fourth Corner Credit Union got their response from the Federal Reserve – a resounding rebuff, which may result in the dismissal of the case.
“Even transporting or transmitting funds known to have been derived from the distribution of marijuana is illegal,” said a motion filed by the Federal Reserve. “The court would not entertain other such attempts – such as if Colorado enacted a scheme to allow trade in endangered species or trade with North Korea in derogation of federal laws, and then chartered a credit union to handle the finances for companies conducting such illegal trade.”
It seems a fairly extreme example to compare the legalized cannabis industry to treason or animal abuse, but all federal law violations are apparently equal in the eyes of the U.S. government.
Last year, the Treasury Department issued new rules to allow banks to do business with cannabis companies. The department had the blessing of the Obama administration but not the cooperation of the Federal Reserve. Unfortunately, the new rules are not applicable, and cannabis companies must once again look for banking alternatives to keep their businesses running. Once again, it’s back to the drawing board for cannabis banking.
Lisa is a former associate editor at Leafly, where she specialized in legislative cannabis policy and industry topics.
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