Credit unions that serve the marijuana industry are not pressing the panic button yet in reaction to U.S. Attorney General Jeff Sessions decision to reverse former President Barack Obama’s policy that shielded legalized pot businesses from federal prosecution.
While credit union executives, who have a lot of money riding on Sessions’ decision, are saying publicly that they are waiting to hear more from federal agencies before responding, at least one CEO, who wrote the book on pot banking, may be already considering an exit strategy that would shut down the credit union’s lucrative marijuana business.
In a 2017 interview, Sundie Seefried, president/CEO of the $352 million Partner Colorado Credit Union in Arvada, Colo., and its division, Safe Harbor Private Banking, which processes $70 million a month for marijuana business clients, expressed great concern about what would happen under the Trump administration and whether banks and financial institutions are in “harm’s way” by continuing to bank the marijuana industry where it has been legalized in 29 states either for recreational or medicinal uses.
“So the biggest issue we talk about is, unfortunately, what’s your exit strategy,” Seefried said in a podcast interview with Cannainsider, a Colorado-based news organization that covers the marijuana industry. “If there is one thing that comes out of the federal government, say the revocation of the Cole Memo, we’re all going to have to jump into action. Not just one of us, we’re all going to have to jump into action because they’re taking protective measures away. The other thing we’re talking about is the amendments are driven toward medicinal and not recreational or adult use as well, and you can’t bank half a business. So if they don’t straighten out the fact that all cannabis is the same for banking purposes, we are going to have to deal with that issue as well. It’s impossible for me to bank half a business.”
The Cole Memo stated it may not be appropriate to prosecute financial institutions servicing marijuana companies that operate legally under state law as long as those businesses did not violate eight priorities. Those priorities included preventing the revenue from marijuana sales from going to criminal enterprises, gangs and cartels, and preventing state-authorized marijuana activity from being used as a cover for trafficking of other illegal drugs or other illegal activity. Sessions decision Thursday rescinded the Cole Memo.
In 2016, Seefried authored “Navigating Safe Harbor: Cannabis Banking in a Time of Uncertainty,” which is a comprehensive guide on how financial institutions can serve the marijuana industry. In the book, Seefried describes in detail how Partner Colorado CU set up its successful business model, including best practices, lessons learned and other resources.
In her book, Seefried wrote that an important part of risk mitigation is a “graceful exit strategy,” and that it should be built into the business plan in case something goes wrong.
“We established Safe Harbor Private Banking as a DBA, so that any problems confronting this separate entity — even a shutdown — need not affect Partner Colorado,” Seefried wrote. “What is more, our contracts with account holders provided an exit strategy as well.”
Nevertheless, in the Cannainsider podcast interview, Seefried also expressed a bigger concern about pulling the trigger on an exit strategy.
“I think my bigger concern is if anything comes out of D.C. that would cause our regulators such discomfort that we would have to enact an exit strategy, putting $70 million back on the streets in Colorado, inside of a month or two really should concern everybody,” Seefried said. “It definitely concerns me. How does that happen without disrupting an entire community and disrupting the lives of all those employees that are working for the industry. I think many times in D.C. they think a lot about just the business, and they forget how many employees would be forced back into a cash paycheck if not banked.”
When reached by CU Times Thursday for reaction comments, a Safe Harbor Private Banking spokesperson said: “Although it’s “business as usual” for Safe Harbor, they are waiting to hear more from federal agencies before responding.”
The $523 million Salal Credit Union in Seattle, Wash., which was one of the first financial institutions in the country to serve the cannabis industry starting in 2014, said in a prepared statement that it is “monitoring the situation as it develops and evaluating potential impacts as we gain a fuller understanding of the situation.”
“We will be working closely with our state and federal regulators to determine impacts, if any, to banking the cannabis industry by this recent news,” the credit union said. “Until then we continue to serve our members’ banking needs.”
The $266 million O Bee Credit Union in Tumwater, Wash., which also serves marijuana businesses, declined to comment when reached by CU Times Thursday.
Whether pot companies and the businesses that serve them, including financial institutions, are in danger of facing a federal or regulatory crackdown, remains an open question.
In his memo released Thursday that rescinded the Obama-era policy, Sessions wrote that prosecutors, considering their finite resources, should follow well-established principles that govern all federal prosecutors.
“These principles require federal prosecutors deciding which cases to prosecute to weigh all relevant considerations, including federal law enforcement priorities set by the Attorney General, the seriousness of the crime, the deterrent effect of criminal prosecution and the cumulative impact of particular crimes on the community,” Sessions wrote in his memo.
