Up until very recently, it looked like the first recreational marijuana dispensary in Massachusetts would open without a financial institution to bank it. But a few weeks ago, Gardner-based GFA Credit Union came to the rescue, making the explosive announcement that it would become the first in the Bay State to bank this burgeoning sector of the industry. 

While the decision seemingly came out of nowhere, it was made through a meticulous process that involved a dedicated board of directors, lots of education and preparation and a serious work ethic. 

“It’s something we did very thoughtfully. We did not just wake up one day and say, ‘Hey, let’s get into this space,’” Tina Sbrega, CEO of GFA Credit Union, told Banker & Tradesman. “I really applaud our board of directors for having the vision and taking the time to really understand what legalization of cannabis means for the state of Massachusetts and New Hampshire, where we also have branch locations.” 

Financial institutions have been leery of touching deposits related to recreational or even medical marijuana in states in which it is legal, primarily due to concerns that they might run afoul of federal anti-money laundering and bank secrecy laws. 

Before GFA stepped up, Century Bank was the only known institution in Massachusetts that provided typical banking services to Massachusetts medical marijuana facilities. But the Medford-based institution made no indication it would offer those same services to recreational marijuana businesses. 

Earlier this year, Steve Hoffman, chairman of the state’s Cannabis Control Commission, seemed so certain that no financial institutions would step forward, he floated the idea of a state-run pot bank – a concept that never gained any traction. 

Massachusetts officials and stakeholders have been concerned that leaving the state’s marijuana industry – which is projected to bring in $1 billion in revenue by 2020 – as an all-cash business might be an open invitation for crime and lead to public safety issues. 

Bram Berkowitz

The Journey 

Upper management at GFA and the board of directors began looking at the idea of banking recreational marijuana about a year before it pulled the trigger, according to Sbrega, who said the idea really stemmed from the credit union’s mission statement, which includes helping the underbanked. 

“We looked at Colorado and started reading stories about employees being paid in cash and not being able to bank it,” she said. “That clearly to us became a real public safety issue for our communities.” 

A few months later, in the beginning of 2018, things didn’t get any easier when U.S. Attorney General Jeff Sessions rescinded the Cole Memo, Obama-era guidance that essentially said the federal government would not interfere with marijuana programs in states in which they are legal. 

“The rescission of the Cole Memo certainly caused us to pause, but we still understood that we had the FinCEN (Financial Crimes Enforcement Network) guidelines to follow, the Cole Memo and BSA (Bank Secrecy Act) guidance,” said Sbrega. “We still felt we had a road map to follow to stay out of harm’s way.”  

Shortly after, Sbrega stumbled onto Partner Colorado Credit Union and its wholly owned credit union service provider Safe Harbor Services, which is when things really started to kick into gear. 

Safe Harbor’s platform works with both the financial institutions and the marijuana businesses to make sure all operations comply with all local rules and federal regulation. 

“They are troopers,” said Katrina Skinner, general counsel and interim president at Safe Harbor. “You need not just senior management, but a board that is very forward-thinking. It’s not for everyone. Some boards have zero interest in it.” 

Skinner said it will take any financial institution interested in banking recreational marijuana and requires a minimum of six months to conduct its own due diligence.  

And when GFA begins banking marijuana clients, each one will take at least three or four weeks to vet. Sbrega said they need know the people running the business and everyone involved in the LLC, as well as conduct audits and collect loads of other information and documentation on clients. 

This rigorous process was one of the major concerns Sbrega had during preparation: How to implement all the procedures and policies while ensuring compliance with all regulations. 

That is why she said GFA took the time it needed before making the announcement – it wanted to have full confidence that it could safely provide its services to the recreational marijuana industry and be in full compliance. 

“There is no room for error,” she said.