RESOURCES | Marijuana Banking

Live Life FCU: One of 2021's Marijuana Banking Cautionary Tales
Published on January 5, 2022

2021 saw some significant, preventable gaffes in marijuana banking. Live Life Federal Credit Union’s apparent misjudgment of what they needed to procedurialize in support of their marijuana banking policies was one of the biggest.

In a move JD Supra qualified as “a warning to lenders,” Fraser, Michigan’s Live Life FCU ran afoul of the National Credit Union Administration Board (NCUA) by coupling weak and ineffective marijuana banking policies and procedures with stratospheric financial growth on the immediate heels of years of negative income.

The Credit Union Times reported: “After posting six-figure losses in 2016 and 2017, and a modest five-figure income in 2018, Live Life FCU recorded income of $426,540 in 2019, which soared to $2.8 million at the end of 2020, according to NCUA financial performance reports.”

That turn-around in another bank would have been paired with a substantial increase in compliance staff, reflected in another instance cited by the CU Times. The North Bay Credit Union in Santa Rosa, CA increased their “compliance workforce from one to 17 in just one year to ensure that cannabis business members were complying with state and federal regulations.” Live Life FCU, by contrast, added only two compliance employees over the course of its years of marijuana-driven growth.          

According to JD Supra, Live Life FCU wound up consenting to an NCUA enforcement action ordering them to “stop opening new marijuana-related accounts, immediately file all missing Suspicious Activity Reports (SARs), and develop and implement an automated system to effectively monitor and identify all transactions for suspicious activity.”

JD Supra goes on to say that "The NCUA’s enforcement action is widely considered to be the first example of a U.S. regulator publicly criticizing and penalizing a financial institution for compliance-related failures explicitly related to the cannabis industry." We can guarantee that it will not be the last.

Key take-away: when your bank’s income jumps from negative to multiple millions of dollars a year in the span of four years, you should absolutely expect someone to notice that and be ready for the scrutiny.

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