The Federal Reserve of Kansas City has given approval for system access account for Colorado’s Fourth Corner Credit Union. Organizers will move ahead to acquire deposit insurance, further refine their business plans to serve the non-cannabis-touching side of the marijuana industry, and finalize service plans for also serving non-cannabis related businesses.

Still unclear is how 4CCU might interface with state governments exploring state bank charter status to address a bank access shortfall. Currently, more than 300 banks and CUs are thought to be serving the marijuana business in 28 RMJ/MMJ states, but recent Cole Memo reverberations may lower that count.

Even as the good news for 4CCU —which spent huge legal amounts to sue the Federal Reserve after an adverse Jan. 2015 judge’s ruling which denied the first round of account approval—sets in, planning for a state-backed cannabis bank (and other under-served depositors) accelerated in California as state treasurer John Chiang and attorney general Xavier Becerra re-committed their resources to finding a solution.

“This Federal Reserve action is a strong positive,” said 4CCU executive vice president Mark Goldfogel, along with South Carolina attorney Mark Mason, have been the drivers behind the three-and-a-half-year struggle. Goldfogel hopes major cannabis professionals—accountants, lawyers, consultants—will commit to bringing their accounts to the CU startup. 4CCU is expected to offer full banking services (checking, credit card processing, various compliance tools and reports), but no loans or other financing services.

Plans for a 4CCU Colorado location, monthly fees for Bank Secrecy and FinCen compliance, and commencement of service now hinge on gaining banking deposit insurance from the National Credit Union Association. Goldfogel was optimistic that the Federal Reserve action would likely gain NCUA participation, however, he and Mason are also planning on how to “privately insure” if there is an adverse reaction from NCUA. “It’s important that 4CCU not make any mistakes as we roll this out,” noted Goldfogel, who sees much of how the industry will be judged by the larger banking community.

The state charter granted by Colorado regulators was the first one issued in 12 years, but other state-backed banking entities will also need to consider creating a special charter, and perhaps adding “safe harbor” and banking board liability protections to state law. And at the federal level, no one in the banking side can tell for sure how AG Jeff Sessions’ retraction of the Cole Memo might negatively the related Treasury department guidance from “FinCen” (Financial Crimes Enforcement Network).

Back in Colorado, infighting among executives at Partner Colorado Credit Union—naming Safe Harbor expert and leader in opening more than 100 touching business accounts—threatened to derail the work of Partner CEO Sundee Seefried and her work to expand credit union access across the western US. As of Fall 2017, Partner reported cannabis deposits exceeding $3.6Mil daily, more than $100Mil. per month, and reporting the filing of over 6400 reports, usually related to required money laundering reports (Bank Secrecy Act) for all transactions over $10,000.

California state treasurer John Chiang (now running for Golden State governor) recommended the state should quickly move to create a local/state database through an online portal, “aggregating data on cannabis businesses” from all 11 state agencies with cannabis oversight/data and the local interface, and deliver on “know-your-customer responsibilities”. This data would include data on key personnel, product sources of supply, and ongoing regulatory activities, including violations, adverse comments, and suspicious or illegal activities.

For public institutions backed by California, the State Treasurers Nov. 2017 report on legal banking said a cannabis bank would “probably not qualify for FDIC” … which would require the state to self-insure and probably require “years of subsidy’. Other issues from the report repeatedly hint at “asset forfeiture” actions which might impact committed collateral held by the bank to secure cannabis depositor activities. In California’s case, both Chiang and Becerra continue to seek support for all “plant-touching” businesses in setting options. Another plan for financial transactions might be to fund a “banker’s bank”, a smaller unit which provides qualified credit card, payroll, and other non-loan offerings.

Access the full report PDF here.

California, like other all-cash states, urgently seeks a banking solution to get the millions of cash dollars off the streets and out of the potentially-targeted large dispensary operations. California has the “most to lose in not providing financial support for the 6th largest economy in the world,” Goldfogel said. “I would say the leaders of the California government I have met with have a much more realistic understanding of the industry and the banking problem than does the federal government,” he added.

Back at Partners, a wrongful termination lawsuit filed by a recently fired employee, COO Matt Cochran alleges that Seefried used cocaine on several occasions outside the credit union. The bank ordered an investigation of the charges by independent Spectrum Legal Group, which concluded in a Jan. 11th report that the allegations against Seefried “were fabricated,” with the credit union attorney adding “the former employee’s lawsuit is frivolous, groundless, and vexatious.” Cochran was hired at Partners in July 2017 and Cochran’s wife, Mindy Ganze, also worked in the cannabis safe harbor program as Seefried’s assistant.

Chiang restates the issue facing California, noting “institutions prepared to accept cannabis customers is woefully short of demand, which makes it vital to expanding the industry’s bridgehead into banking rapidly.”

More analysis from Dorsey on FinCen cannabis prospects here.