A district judge dismissed the Fourth Corner Credit Union’s lawsuit against the U.S. Federal Reserve Bank of Kansas City earlier in January. The decision stopped the credit union, which was authorized by Colorado in 2014, from obtaining a “master account” that would’ve allowed them to serve the legal cannabis industry.
Although Judge R. Brooke Jackson decided against TFCCU, his order does cite issues with the current state of the law, referencing recent guidelines from the Financial Crimes Enforcement Network (FinCEN) and the Cole memorandum. According to him, the documents makes changes in priorities for enforcement decisions, but do not change the law. That leaves cannabis businesses only able to work with banks if “prosecutors and bank regulators might ‘look the other way’ if financial institutions don’t mind violating the law,” he writes.
“I regard the situation as untenable and hope that it will soon be addressed and resolved by Congress,” Jackson concludes in the order.
TFCCU had originally been given clearance to bank the legal cannabis industry late in 2014 by Colorado, and applied for a “master account” through the Federal Reserve, which would allow TFCCU to establish a routing number for the bank. The Federal Reserve denied the application, and TFCCU set the lawsuit in motion.
Cannabis Business Times caught up with Mark Goldfogel, executive vice president of industry relations at 4CCU, to talk about the decision and next steps.
How did the case go the way it did?
The Fourth Corner Credit Union understands Judge Jackson’s decision, which called out the inconsistencies of the FinCEN guidance and the Cole Memorandum for providing banking to marijuana-related businesses (MRBs). We believe the judge’s decision isn’t an ending, but a beginning to a dialog that has needed to take place for some time. This industry needs clarification on the banking issue and as our charter mandates, the Fourth Corner Credit Union will continue to advocate for federal clarity.
What can we take away from it?
We’ll have to see — because you must keep in mind the guidance provided was always a doubled-edged sword that threatened prosecution. The judge was very clear that FinCEN guidance and Cole Memos are “hypocritical” and do not provide permission for any financial institution to serve MRBs unless they choose to violate federal law. He ends his decision with what I believe is essentially a challenge to Congress to clarify this confusion. TFCCU’s goal has always been to help the industry and right now that help comes in the form of clarifying the law for all depository institutions so that the industry can be banked under clear rules.
What does this mean for TFCCU? What’s the next step?
The credit union was founded on the principle that we would be a compliance-based financial institution that would be regulatory partner to Federal and State agencies, while providing comprehensive banking solutions to businesses, some of whom will be licensed cannabis and hemp businesses, and supporters of this social movement. Not only do these businesses and consumers deserve a financial institution that will work to help them accomplish their financial goals, but The Fourth Corner Credit Union was also founded on the belief that we need to help solve this important public safety issue. The more funds we can funnel away from illegal operations into legitimate areas, like funding for schools or tax revenue to states, we can help to positively change our communities.
Our board and leadership are working to determine next steps, but whatever the decision, TFCCU is an advocate for the industry and will work tirelessly to solve this important public safety issue.
What does it mean for the larger cannabis industry?
We believe the judge was sympathetic to our cause and wants to see these issues properly resolved. His ruling made it clear that Congress needs to act and this needs to happen quickly before someone is injured or murdered conducting state licensed businesses in millions in cash.
