U.S. Eagle Federal Credit Union in Albuquerque, N.M., has a history of serving small businesses. With recreational cannabis sales in the state legal as of April 2022, the future for that line of business look bright.
The $1.5 billion asset credit union began offering banking services for New Mexico’s medical cannabis businesses in 2020. These businesses are heavily regulated, says Phil Forbert, director of cannabis business development at U.S. Eagle Federal.
Effectively serving this market requires “a combined effort by the industry, the financial institution, and the state,” he says. “It helps the economy and the community.”
Three years ago, U.S. Eagle created Aery Group, its cannabis banking division. The separation allowed the credit union to build an expert team focused on meeting the unique needs of cannabis-related businesses, and create the compliance infrastructure and processes needed to serve them, Forbert says.
“We took deliberate steps to make sure we were doing it right,” he says, adding that with hundreds of compliance processes involved, “we needed to ensure we could turn those into sustainable, repeatable processes.”
Every cannabis business member encounters rigorous, ongoing compliance checks, Forbert says. Members should expect a deep dive into the background, financial records, and criminal records of any principal owner.
Aery’s team also verifies suppliers and vendors to make sure all parties are in good standing with the State of New Mexico.
Aery Group performs daily and monthly monitoring of each cannabis-related business account. The team files currency transaction reports and suspicious activity reports regularly. They also monitor license renewals and news from industry sources for a real-time status of each cannabis member.
Each business is assigned a private Aery banker. “If members have questions or a need, they contact a specific person. It’s a helpful convenience. It also allows our private banker to understand the routine operations of the business and capture things that may not be routine,” Forbert says.
Cannabis businesses have access to business checking accounts, savings accounts, online and mobile banking, debit cards, and electronic transfers. Members can also pay bills online, wire money domestically, and have access to cash handling services—a critical service, Forbert notes.
“We help make cannabis businesses safer,” he says. “They don’t have to keep cash in a vault or do transactions in cash only.”
One important difference in cannabis banking is lending capacity, Forbert notes. Because cannabis remains illegal federally, the risk of potential collateral seizure is too high. “Credit unions as a whole have to be conservative in that type of business lending,” he says.
With strict regulations and a heavy need for compliance resources, Forbert encourages other credit unions to know what they’re getting into with cannabis banking.
“The resources you’re going to have to apply to this are significant,” he says. Still, Forbert gets great satisfaction from this work.
“We want to make sure we’re helping them do the best business they can,” he says. “U.S. Eagle is keeping the member safe, the employees safe, and New Mexicans safe by allowing those revenue streams to come into the state economy.”