Association spearheads DFS guidance on marijuana banking


The state Department of Financial Services has issued guidance for state-chartered financial institutions that wish to serve the legal marijuana and hemp industries in New York. Notably, the guidance encourages state-chartered financial institutions to establish banking relationships with properly run marijuana businesses, and it explains that the DFS will not take regulatory action against institutions that provide financial services to fully compliant marijuana-related businesses.

The New York Credit Union Association worked closely with Gov. Andrew Cuomo’s administration and the DFS to ensure credit union questions and concerns were addressed in the guidance.

Marijuana, which remains on the federal government’s list of the most tightly controlled substances under the Controlled Substances Act, is legal for certain medical uses in New York. The guidance was issued because of the “unsettled legal environment at the federal level” that has caused some credit unions and banks to avoid doing business with the cannabis industry.

The DFS guidance states:

The Department encourages New York State chartered banks and credit unions to consider establishing banking relationships with medical marijuana-related businesses that are operating in New York in full compliance with all applicable New York State laws and regulations, including the New York Compassionate Care Act, and the applicable regulations and requirements of NYDOH. The Department further provides guidance that it will not impose any regulatory action on any New York State chartered bank or credit union solely for establishing a banking relationship with a medical marijuana-related business that operates a compliant business in New York, as long as the New York State chartered bank or credit union complies with the requirements of the 2014 Fincen guidance, the guidance and priorities set forth in the Cole Memo, and subject to the institution’s own evaluation of the risks associated with offering products and services and its ability and systems to effectively manage those risks – as our institutions do with regard to all their banking relationships.

Industrial hemp is derived from a cannabis variety. Both federal and state law authorize the growth, cultivation, marketing and sale of industrial hemp, and products derived from industrial hemp, for research purposes under a licensing system.

In the guidance, the DFS clarifies that financial institutions should “assess and verify the eligibility and authority of the entity for participation in a research program, as authorized under the New York Agriculture and Markets Law. As with any other lending activity, banking institutions should establish and conduct appropriate underwriting and customer due diligence, including verification of eligibility of a research program and other requirements of Section 7606 and New York State law.”

To view the guidance, click here.

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