Feds Need Not Help|Marijuana Credit Union

DENVER (CN) - The Federal Reserve has no obligation to approve a master account for Colorado's first marijuana credit union, a federal judge ruled Tuesday.

The Colorado-based Fourth Corner Credit Union sued the Federal Reserve in July 2015 after it was refused a master account number, without which Fourth Corner cannot legally function. Fourth Corner wanted to provide services to Colorado marijuana businesses.

The Federal Reserve said that because marijuana is still illegal under federal law, states that have legalized it, such as Colorado and Washington, cannot legally have access to the electronic banking system that all banks and credit unions use.

U.S. District Judge Brooke Jackson dismissed the lawsuit with prejudice Wednesday.

The judge described the Fourth Corner's legal battle as an attempt to persuade courts to "'look the other way' if financial institutions don't mind violating the law."

"Plaintiff attempts to give me comfort that, notwithstanding the oath I took to uphold the laws of the United States, I can grant the relief it seeks," Jackson wrote.

"Plaintiff amended its complaint to specify that it intends to provide banking services 'in strict accordance with state and federal laws, regulations and guidance'... but that is the point - this Court may not ignore Congress's present judgment that distribution of marijuana, and aiding and abetting such distribution, is illegal."

Marijuana businesses operate almost entirely by cash, and pay employees without direct deposits or electronic payroll services.

The Fourth Corner Credit Union said its business plan would give marijuana dispensaries access to such services, creating a safer and more secure means to deposit and transfer money. It would charge its members fees to ensure that did its due diligence under the Cole memorandum, which regulates financial crimes related to the sale of marijuana, and the Financial Crimes Enforcement Network.

"But therein lies the rub," Jackson wrote. "Plaintiff contends that the FinCEN guidance and Cole memorandum already provide federal authorization to financial institutions to serve MRBs [marijuana-related businesses]. Therefore, offering to serve MRBs only if authorized by federal law is something of a sleight of hand. The problem is, the FinCEN guidance and Cole memorandum do nothing of the sort. On the contrary, the Cole memorandum emphatically reiterates that the manufacture and distribution of marijuana violates the Controlled Substances Act, and that the Department of Justice is committed to enforcement of that Act. It directs federal prosecutors to apply certain priorities in making enforcement decisions, but it does not change the law."

But Jackson did not allow the federal guidelines to emerge unscathed. His ruling continues: "The FinCEN guidance acknowledges that financial transactions involving MRBs generally involve funds derived from illegal activity, and that banks must report such transactions as 'suspicious activity.' It then, hypocritically in my view, simplifies the reporting requirements."

The credit union's attorney Mark Mason did not immediately respond to a request for comment Wednesday.

Fourth Corner CEO Deirdre O'Gorman told Colorado news outlets that she has not yet decided whether to appeal.

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