A medical model

Despite the locations of these early movers, “I definitely don’t see this as a West Coast issue,” says Pross, who also believes there is potential for a viable financial services business in states that have approved cannabis for medical use only.

VSECU in Montpelier, Vt., is evidence of this opportunity. The state’s legislation legalizing medical marijuana limits the issuance of licenses to five dispensaries.

Some of these businesses approached VSECU for services, prompting a due-diligence process.

“Federal banks wouldn’t touch it, and state-chartered institutions were leery as well,” says Greg Huysman, director of business services and lending at the $780 million asset credit union.

Before proceeding, VSECU consulted closely with Vermont authorities, who wanted to see an established entity facilitate the removal of cash from the streets.

Among the business benefits, VSECU’s enhanced compliance infrastructure positioned the credit union to serve the subsequently legalized hemp and CBD segments. Out of an abundance of caution, VSECU rolls these accounts under the same cannabis framework.

Like O Bee, the credit union has seen an inflow of individual accounts from employees of these companies, who ran into bureaucratic roadblocks elsewhere.

New York state took a similar approach to medical marijuana legalization, issuing a handful of licenses.

SEFCU in Albany, one of the state’s largest credit unions, conducted a “long and deliberate due diligence process” which led to account openings for two of these licensees, says Michael Castellana, president/CEO of the $3.8 billion asset credit union.

As the process neared completion, however, the Federal Reserve Bank of New York expressed reservations, leading SEFCU to reverse course rather than put its Fed account at risk.

SEFCU is now waiting for a federal solution or safe harbor legislation that would allow it to provide banking services to this large and complex industry.

“It’s an easily solved problem, but it begs for a federal solution,” Castellana says.

Even credit unions with no desire to pursue cannabis accounts are likely more involved than they realize.

“In states with both recreational and medical activity, it’s hard to keep those funds out of your institution,” O’Gorman says. “Invariably, there will be an electrician, attorney, or someone else providing services to those licensed businesses whether you like it or not.

“Some financial institutions enter the field because they’ll learn more and have information at their fingertips to intelligently assess the risk,” she continues. “It’s a situation that can’t be sustained,” Messick says. “It has to change.”

Fortunately, the credit union movement has some innovators to boost the learning curve.