By Jacob Sullum for reason. More than a year ago, Fourth Corner Credit Union, a Colorado financial institution that was founded to serve the newly legal marijuana industry there, applied to the Federal Reserve Bank of Kansas City (FRB-KC) for the “master account” it needs to operate. Opening a master account, which is required to access the Federal Reserve’s payment system, is a routine process that ordinarily takes a week or less. But months went by with no reply from FRB-KC, which ultimately rejected Fourth Corner’s application last July. Yesterday a lawyer for the credit union told a federal judge in Denver that decision was illegal.
According to The Denver Post, U.S. District Judge R. Brooke Jackson was skeptical of Fourth Corner’s argument that FRB-KC has no discretion under federal law to turn away a credit union as long as it has a state charter and is eligible to apply for deposit insurance. But Jackson was sympathetic to the predicament of state-licensed cannabusinesses that are forced to deal entirely in cash because they cannot find financial institutions willing to serve them. In February 2014 the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and Deputy Attorney General James Cole issued guidelines that were supposed to address this problem by assuaging banks’ worries about the legal risks of accepting marijuana money. Jackson described those memos as “nothingburgers” because they did not change federal laws that treat marijuana as contraband. The continued federal prohibition of marijuana means financial institutions that handle cannabis cash are arguably committing multiple felonies and regulatory violations.