A labor-intensive business

Credit union leadership teams should be under no illusions about the effort that goes into serving cannabis businesses.

“Some people see dollar signs, but many of them haven’t thought through the cost, manpower, and due diligence required for full compliance,” warns Empol.

Pross recommends a ratio of one full-time employee for every 15 accounts in the early stages, when onboarding due diligence is particularly heavy and staff is still building expertise and efficiencies.

Maps also requires “BSA 101” training for new accounts to head off surprises and hiccups.

The good news is these credit unions have priced their services to reflect the additional costs. Maps prices its service to be self-funding with an “appropriate” margin, Pross says.

“Our goal is to provide services to these businesses,” she says. “We have no interest in pricing them out of the market.”

Plus, serving cannabis businesses delivers additional credit union benefits by driving more robust risk and BSA programs.

Pross, a 10-year credit union veteran, joined Maps with a mandate to build out a holistic risk and compliance function. The credit union had less than 40 cannabis-related accounts when she joined; now there are more than 500—and it’s safe to say this wouldn’t be possible without a solid risk and compliance backbone.

“Make sure you have robust anti-money laundering and BSA procedures, following to a T the FinCEN guidance documents,” says Jared Ihrig, CUNA’s chief compliance officer. “Certainly, the examiners are looking at that as they come into shops, recognizing, again, that ‘federal vs. state’ tension.

‘Make sure you have robust anti-money laundering and BSA procedures.’

Jared Ihrig

“We recognize credit unions are trying to serve the needs of their communities in this space,” he continues. “But I do expect this to evolve. It’s nothing to enter into lightly. Go into it with eyes wide open with respect to the regulatory expectations and requirements.”

With so few banks and credit unions in the mix, market share has not been a concern for any of these players to date. Although they are beginning to see a bit more competition, market demand will likely grow rapidly enough for the foreseeable future to alleviate any concerns.

Numerica and Maps have each revamped and reduced their pricing multiple times, reflecting a commitment to share economies of scale with members while maintaining fair margins.

Pross wants to dispel any notion that cannabis can be a panacea for liquidity issues. “It’s a fallacy,” she says.

Maps does not include funds from cannabis accounts in its liquidity strategy because doing so would create exposure should the credit union need to shut down the product line.

All parties agree there are no shortcuts. Credit unions must keep third parties such as armored car services and insurers well-informed to avoid disconnects, Collins says.

O’Gorman raises a warning flag about “companies coming in on the payment side promising credit card solutions by recycling bank identification numbers or routing offshore.”

Even these early movers with robust compliance programs confine their offerings to basic account services for a reason: It’s easy to take a misstep.

“If one credit union makes a mistake,” Pross says, “it’s going to reflect poorly on all of us.”

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