A small Massachusetts credit union is making national headlines after it announced last week that it would serve recreational marijuana businesses, making it the first financial institution in the Bay State to wade into what is expected to be an absolutely massive industry.
The $500 million asset Gardner-based GFA Credit Union told the Boston Globe it would provide banking services to marijuana businesses by Oct. 1, offering cash management, checking accounts, payroll, wire transfers and bill payments.
“We’re looking at a cannabis business as a legitimate business that wants to be recognized as such and that, without banking services, presents a tremendous public safety issue in our communities,” Tina Sbrega, CEO of GFA Credit Union, told the Globe. “Otherwise, you’re talking millions and millions of dollars of cash on the street.”
While GFA will start solely with traditional banking services, Sbrega said GFA will consider offering loans to marijuana businesses down the line, according to The Boston Business Journal. With nine branches, the credit union also has a presence in New Hampshire, where medical marijuana is currently legal.
Up until now, it looked like the marijuana industry was doomed to start as an all cash business, especially after U.S. Attorney General Jeff Sessions rescinded the Cole Memo earlier this year. Many considered this to be a huge issue because industry revenue is projected to hit $1 billion by 2020.
Steve Hoffman, chairman of the state’s Cannabis Control Commission, even floated the idea of a state-run pot bank earlier this year, citing the fact that no local banks or credit unions had committed to providing financial services to recreational marijuana shops.
Medford-based Century Bank, which began offering service to medical marijuana businesses in 2017, made no indication it would provide those same services to recreational businesses.
But recently, the environment for financial institutions and marijuana began to improve.
Sen. Elizabeth Warren in June introduced legislation that would let states choose how to regulate marijuana without having to worry about the federal government intervening. The bill, which garnered some bipartisan support, would also enable pot businesses to access federal banks and financial institutions.
“Your proposed legislation will help credit unions open the welcome door to both businesses and consumers as their volunteer boards of directors may determine to be appropriate to meet the financial services needs of those most in need,” Paul Gentile, president and CEO of The Cooperative Credit Union Association, wrote in a letter supporting the bill.
To develop the necessary infrastructure to service the marijuana industry, GFA partnered with credit union service provider Safe Harbor, which is based in Colorado and is a subsidiary of Partner Colorado Credit Union.
Safe Harbor’s platform works with both the financial institutions and the marijuana businesses to make sure all operations comply with the local rules and regulations of the Bank Secrecy Act, FinCen guidelines and anti-money laundering requirements.
It first assists the marijuana business with the onboarding process, which includes critical document collection and review, a full operational review, background checks, a business practice and, formerly, a Cole Memo compliance review.
The platform also does constant monitoring, compliance reporting and independent program reviews.
The company has been able to reduce the time it takes perform due diligence from months to weeks, and it has also been through numerous regulatory exams. It hopes to set the national standard for compliance when banking marijuana.
“It’s very labor intensive,” Katrina Skinner, general counsel at Safe Harbor, previously told Banker & Tradesman. “But I think it’s really helped the industry grow and consolidate some, and become more of a traditional enterprise as opposed to one that is cash-driven.”
