DENVER – A Colorado credit union is hoping a federal judge will intervene to let the booming marijuana industry move its finances from cash-stuffed suitcases to the regulated banking system.
A pair of lawsuits filed in Denver this week challenge recent decisions by the U.S. Federal Reserve and the National Credit Union Administration to deny applications from Fourth Corner Credit Union.
The credit union was set up last year to serve Colorado’s marijuana industry, but it needed permission from federal insurers and regulators before opening for business.
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The Federal Reserve rejected Fourth Corner’s application earlier this month.
The decision means many pot businesses still use elaborate banking workarounds — from paying the power bill with money orders to spritzing skunky cash with Febreze to avoid scrutiny.
The U.S. Treasury Department issued guidelines last year for how banks could accept pot money. But many large banks considered the guidelines onerous and still won’t take deposits related to marijuana businesses, prompting Colorado banking regulators to set up a proposed credit union to comply with those guidelines.
Fourth Corner would have allowed pot shops and growers to access not just basic checking but also lines of credit and other financial products the expanding industry wants.
“We thought it was a good model,” said Andrew Freedman, marijuana adviser to Gov. John Hickenlooper.
“It’s an underbanked industry, and that’s a problem not just for them but for the people of Colorado” because of the security risks of doing business in cash, he said.
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The marijuana industry isn’t completely without banking services. Some 400 financial institutions have filed thousands of marijuana-related reports with federal banking regulators in compliance with last year’s guidance.
But many in the marijuana industry say they face significant hurdles, even fielding offers from shady entrepreneurs offering to fly their cash to another country to set up offshore accounts. When a pot business wants to expand — perhaps by building a new warehouse or renovating a storefront — it typically has to find a cash investor willing …Read More