The federal National Credit Union Administration (NCUA) Board last month issued its first-ever administrative order against a financial institution for non-compliance with Financial Crimes Enforcement Network’s (FinCEN) rules for serving the cannabis industry.
The order against Michigan’s Live Life Federal Credit Union includes a consent to a cease-and-desist in which the credit union – without admitting to any wrongdoing – must “implement an automated system to effectively monitor and identify all transaction for suspicious activity” which must “include functions to support compliance with FinCEN requirements for Marijuana-Related Businesses (“MRB”).”
The system must include “reconciliation of MRB Point of Sale, METRC, or accounting system data relative to member deposits, ongoing monitoring of adverse public information affecting MRBs, timely verification of changes in licensure status, including notification of a lapse in an MRB’s state licensure, systematic monitoring of unusual Automated Clearing House or wire activity for MRB accounts, monitoring of FinCEN ‘Red Flags.’
Live Life must also engage a third-party to validate its automated compliance and suspicious activity monitoring system simultaneously with the implementation of this system, immediately files its Suspicious Activity Reports and develop a plan to ensure they are filed accurately by March 31, and allow a third-party to perform a retrospective analysis of its cannabis accounts.
The order also prohibits the credit union from opening new accounts for cannabusinesses.
After a drop in financial institutions that served the industry that began in November 2019, FinCEN’s most recent report on banks and credit unions serving the industry showed an equalization as of November 2020 and that there were 515 banks and 169 credit unions serving the space.
Due to federal cannabis prohibition, financial institutions still take risks by serving the industry and while the House of Representatives last year approved the SAFE Banking Act – which would allow banks to serve the industry in a more normal fashion – it was never considered by the, then Republican-controlled, Senate.
The measure was reintroduced last week in the House. Just yesterday, Sens. Jeff Merkley (D-Ore.) and Steve Daines (R-MT) introduced the legislation in the Senate, which is now narrowly controlled by Democrats as Vice President Kamala Harris (D) serves as the tie-breaking vote.
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