Thursday, February 8, 2018

Marijuana Related Business Bank Accounts Remain Problematic

Medical marijuana dispensaries, called Marijuana Related Businesses ("MRB's" )are legal in Massachusetts, but under federal law Massachusetts banking institutions violate the federal Controlled substances Act if they do business with such dispensaries.

There are a host of reasons why it does not make business sense for a banking institution to do business with MRB's, even if doing so was expressly permitted by the federal government: increased government scrutiny due to risks of money-laundering and higher due diligence by the banks to deal with enhanced scrutiny by examiners.

The recent developments in a dispute between Fourth Corner Credit Union and the Kansas City Federal Reserve bring the issues into sharp relief. Fourth Corner was formed to serve marijuana businesses but was refused a federal master account a major payment system that banks and credit unions use to move money around. Recently the Kansas City Federal Reserve relented and allowed Fourth Corner to obtain  a master account, but said Fourth Corner could only serve individuals not the MRB's themselves, and Fourth Corner had to obtain deposit insurance from the NCUA, a federal agency, whose willingness to insure Fourth Corner's accounts is far from assured. The limitations on Fourth Corner relegate it to the same status as any other banking institution, removing the market advantage (if any) of being considered a marijuana specific banking institution. At present there appears  to be little incentive for banking institutions to extend themselves to serve MRB's.

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