Pubdate: Sun, 22 Feb 2015
Source: Denver Post (CO)
Copyright: 2015 The Denver Post Corp
Contact:  http://www.denverpost.com/
Details: http://www.mapinc.org/media/122
Author: David Migoya

POT BANK DECISION APPEARS HEADED TO FED BOARD

Many Institutions Have Ousted the Marijuana Industry'S Attempts to 
Open Legal Financial Accounts.

The decision of whether a Colorado credit union created just for the 
marijuana industry can open its doors ultimately could come from the 
nation's top financial policymakers.

Although the board of governors of the Federal Reserve System in 
Washington, D.C., typically does not involve itself with local issues 
handled by the nation's 12 regional reserve banks, a bank solely for 
marijuana money appears to be a different matter.

Whether the state-chartered Fourth Corner Credit Union gains a 
critical master account to operate is a determination already removed 
from bureaucratic hands at the Federal Reserve Bank of Kansas City, 
the regional banking home of several states, including Colorado, 
according to several people familiar with the process.

"It would be no surprise to us that the Fed would thoroughly review 
this, because any decision it makes has national ramifications," said 
Jenifer Waller, vice president of the Colorado Bankers Association.

Where Fourth Corner's application rests precisely is unclear, and 
those involved with the process aren't saying. Spokesmen for the 
Federal Reserve similarly have refused to comment.

The credit union expected a decision on its application in early 
December, a matter some thought to be merely a formality because 
there's no precedent for a state-chartered bank to be refused the account.

But others say the matter is too big to be decided by a regional 
board. That it could end up before Fed Chair Janet Yellen and the 
four other members of the board of governors - two additional seats 
are vacant - is not an unreasonable outcome, several banking experts say.

"I can assure you that any decision the Kansas City board makes will 
be only after consultation with the board in Washington," said Bert 
Ely, a banking structure consultant in Alexandria, Va. "There will 
ultimately be some kind of discussion because of the national policy 
implications."

As supervisors of the nation's banking system, any decision to allow 
a bank specifically chartered to handle marijuana-derived cash 
logically would fall to the board, Ely said.

"Given the hot potato that marijuana is, I would say it would be a 
tough go," Ely said of access to the banking system, "but it's 
clearly an option."

The decision is different than previously issued federal directives 
for existing banks wanting to work with marijuana clients. In those 
cases, there is a buffer - the bank itself - between pot funds and 
its access to the money system. The presumption is the banks know 
their customers well.

The Federal Deposit Insurance Corp., which regulates banks, and the 
Financial Crimes Enforcement Network, an arm of the Department of 
Justice, each has offered guidance - and caution - to bankers wishing 
to work with marijuana businesses.

That's because marijuana remains illegal under federal law and banks 
could be complicit in money laundering simply by accepting those deposits.

As a result, far greater numbers of bankers have balked at the offer, 
and many others have stepped away entirely, closing client accounts 
at the mere concern they were marijuana-related.

"It's precisely where we assumed it would end up," said attorney Mark 
Mason, one of those behind the creation of Fourth Corner. "It's an 
excellent question whether it will be at the full board, and we're 
not for-sure it's there, but it makes sense that it would."

The outcome might not be so simple to predict, Ely said, despite the 
illegality of marijuana virtually guaranteeing a denial.

"There are serious public policy concerns raised here about the 
arbitrariness of certain kinds of businesses being denied access to 
the money system," Ely said. "Despite it all, I can't see the Fed 
giving Republicans yet another reason to beat up on them."

And the Fed has another easy way to offer a solution, he said, by 
doing nothing at all.

"They can just let it sit," Ely said. "It's been complained about for 
decades, with bankers not getting any response, and no action is 
effectively a no."
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MAP posted-by: Jay Bergstrom