An Alaska credit union’s pilot program to provide checking and savings accounts to marijuana-related businesses will soon end.
Credit Union 1 announced the launch of the program in November, to establish financial services for an industry that largely operates in cash. In July, the credit union made the decision to discontinue the program because a critical insurance coverage for it is no longer available, CEO James Wileman said. The program will end Aug. 30.
Without that liability coverage, the marijuana-related businesses program can’t continue beyond a pilot phase, Wileman said.
Cannabis businesses often operate in cash because most banks and credit unions are wary of taking on clients working with a product that is still federally illegal.
Four marijuana-related businesses had participated in the pilot program. Credit Union 1 was told by its insurance broker that the coverage in question wouldn’t be renewed because the credit union had a cannabis banking program, Wileman said in an email.
“While the purpose of our pilot program was to determine feasibility of a larger MRB (marijuana-related business) project, we understand that this decision may be disappointing news,” he said. “Should the federal perspective on MRBs change in the future and allow us to reduce our insurance risk, we will certainly consider exploration of another pilot."
The program also didn’t perform as the credit union expected it to, Wileman said. If the burden of compliance wasn’t so high, he said, it might have been a “more reasonable prospect” for all parties.
“I don’t know if it’s a factor of, the businesses have had to do without banking for so long so they’re used to it, or if it’s a new service that adds an expense, that’s a factor too,” he said in a phone interview.
As more states have legalized cannabis, some financial institutions have started serving marijuana businesses. But doing so is not simple, given conflicting federal and state laws. In May, attorneys general for dozens of states — including Alaska — signed a letter urging Congress to allow financial institutions to serve such businesses, NPR reported.