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Michigan-Based Credit Union Receives Cease-And-Desist Order Over Cannabis Banking

April 7, 2021 3:35 pm
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Michigan-Based Credit Union Receives Cease-And-Desist Order Over Cannabis Banking

The U.S. National Credit Union Administration issued a cease-and-desist order in February to Live Life Federal Credit Union because it didn’t fulfill the required reporting policies in relation to its cannabis-related accounts, according to Crain's Detroit Business

Credit unions must submit suspicious activity reports every quarter for all cannabis-related accounts, the report said. 

What Happened: Karla Haglund, CEO of Fraser-based Live Life, confirmed the credit union failed to meet the reporting deadlines — “we screwed up," she told Crain's. 

Live Life joined the cannabis space at the end of 2018. Its total assets reached $69.2 million at the end of 2020 compared to $12.4 million at the end of 2017.

The growth in assets came from 254 new clients, of which 150 were cannabis-related businesses, leading to the assumption that cannabis-related clients accounted for most of the asset growth.

In this period, the credit union added only three new employees, making it impossible to keep up the pace with the paperwork.

"The reporting has been taxing on the credit union," Haglund reportedly said.

"[Marijuana business customers] can run, we can only walk. They do business at a pace we're not used to yet. They come in with such large sums of cash, we simply needed more people just to count down the money. I can't pull an employee from the window to do this because it would impact my other members."

Federal regulators have forbidden Live Life from opening new cannabis accounts until April 30 from undertaking “money services businesses" for cannabis clients.

The credit union can keep its current members.

Why It Matters: The letter marks the first federal targeting of cannabis banking, according to Crain's. 

In 2014, the Financial Crimes Enforcement Network set the rules for banks and credit unions that decide to work with cannabis enterprises.

Banks and credit unions must check cannabis business licenses, observe unusual changes in accounts and file monitoring paperwork. 

What’s Next: The credit union must incorporate an automated reporting system by the end of the month. 

To remain compliant, Live Life must submit around 600 Suspicious Activity Reports a year for its 150 cannabis business customers, Crain's said. 

Photo by Maksym Kaharlytskyi on Unsplash