Lending opportunities

At O Bee Credit Union in Lacey, Wash., MRBs pay a $500 application fee and about $200 monthly to offset the costs of compliance, says James Collins, president/CEO at the $445 million asset credit union, which gives preferred pricing for those using armored car services.

Like North Bay, O Bee also provides services to MRB employees on the same basis as other members. This includes loans­—especially auto loans.

“Usually if you say your employment is in marijuana, most financial institutions will turn you down,” Collins says. “We take those members and they get the same rates as everybody else. But we don’t do anything that’s open-ended in case they want to divert the funds to their business.”

North Bay approaches MRB employees as they would those of any other legal business, Call says. “They’re pulling a paycheck and their income is sustainable and ongoing. We found them to be very good borrowers.”

O Bee also offers loan services to cannabis-related entities that have a degree of separation. Two years ago, for example, the credit union started making loans to landlords who are not involved with the industry but may have tenants who are.

“Most of our businesses are producers or processors,” Collins says. “So, if a landlord wants to build or renovate a warehouse and has a cannabis tenant, we’ll finance that. Most people hate tying up their own capital for that.”

The ‘Emerald Triangle’

Vocality Community Credit Union lies in the Emerald Triangle in Northern California, an area named for its prolific production of high-quality marijuana. It offers a full range of depository services and, like other area credit unions, has beefed up its compliance efforts, says Pat Neighbors, CEO at the $160 million asset credit union in Garberville, Calif.

“We have a sophisticated, software-based fraud and anti-money-laundering system because we’re required to provide the Financial Crimes Enforcement Network and the U.S. Department of the Treasury with suspicious activity reports and currency transaction reports,” she says. “We who choose to bank cannabis recognize it’s part of our daily activity.”

Despite its small size, Vocality Community has eight full-time compliance staffers. “My compliance department is at least twice as big as it should be for a credit union our size, if not three times,” Neighbors says.

Numerica Credit Union in Spokane Valley, Wash., uses six to seven full-time staffers in two departments to monitor compliance for its cannabis banking services. In addition to using anti-money-laundering software, it conducts site visits, is in regular contact with the state Liquor and Cannabis Board, and routinely compares deposits to sales at MRBs, says Lynn Ciani, chief risk officer at the $3.2 billion asset credit union.

“You have to understand the industry top to bottom and take the time to know the cannabis regulators, as well as your state and federal regulators, so you can develop policies and procedures that protect your credit union and your cannabis business members,” she says.

Numerica started slowly, initially serving just county-based businesses before expanding when it was satisfied its controls worked.

For credit unions considering whether to serve MRBs, Neighbors and other credit union leaders warn the costs can be substantial.

“There are additional insurance expenses, alarm and camera systems, and dual custody every time a large amount of money comes in or goes out,” Neighbors says. “We have some of the fastest currency counters you can buy other than those at the Federal Reserve Board. It’s an expensive venture.”

Those cash counters require maintenance contracts because much of the cash that flows in is dirty, smelly, and sometimes moldy.

Vocality Community’s fee structure is designed to cover costs and generate a small profit without subsidy from other resources.

“We’re doing it for the benefit of our members, but it needs to add something to the bottom line,” Neighbors says.

NEXT: SAFE Banking Act