Banks struggling with the question of whether – and how – to work with marijuana-related businesses can look to Colorado and Washington for ideas, but will do so at their own risk if the ongoing dialogue between FinCEN and the Co-Chairs of the United States Senate Caucus on International Narcotics Control is any indication of the national climate on banking marijuana-related businesses.

Both states legalized the sale, use, and possession of recreational marijuana last year. This month, Colorado became the first state to pass a bill establishing a financial system for marijuana-related businesses.

The Marijuana Financial Services Cooperatives Act “sets up a new type of financial structure to the gap we’re seeing between banking and the marijuana industry,” Rep. Jonathan Singer, who sponsored the legislation, told the Hartford Courant. Specifically, the law would establish “cannabis credit co-ops” akin to credit unions without deposit insurance.

The law requires co-op incorporators to provide written evidence of approval by the Federal Reserve system and would subject the co-ops to exams by the state’s Division of Financial Services every six months. A total of 10 licensed co-ops are allowed.

Although Governor John Hickenlooper is expected to sign the bill, federal support in this area is lacking.

The Financial Crimes Enforcement Network (FinCEN) released guidance earlier this year on how banks can work with marijuana-related businesses. In response to that release, United States Senators Dianne Feinstein and Charles Grassley, Co-Chairs of the Senate Caucus on International Narcotics Control, asked FinCEN to explain how its guidance does not actually assist businesses that are attempting to inject the proceeds of criminal activity into the nation’s financial system, and openly challenged FinCEN to respond to the question of whether or not its guidance actually may expose financial institutions to civil or criminal liability.

While Colorado has been taking the legislative route to tackle the issue of financial services for marijuana-related businesses, a bank in Washington has publicly stated that it intends to work with some companies.

In an interview with SNL Financial, Spokane, Washington-based Numerica Credit Union’s executive vice president and general counsel Lynn Ciani said the institution will only work with local producers or processors and not retail stores. Numerica’s announcement yielded 100 inquiries, she said, although only two were deemed appropriate to actually receive information about opening an account.

The FinCEN guidance was the “precipitating event” triggering serious consideration of the issue, Ciani told SNL, and the institution began discussions with various regulators, none of which expressed concerns “as long as it was well thought-out and we mitigated our risk.”

New processes and policies were required to mitigate the risk, Ciani said, and Numerica determined that it would be too risky to accept deposits from licensed retailers, sticking with the safer alternatives of producers and processors.

To set up an account, a business must submit an application requesting information, followed by an underwriting process and review by the state board governing marijuana licenses. A Numerica committee governing I-502 accounts (the voter referendum legalizing marijuana) will then issue a final approval or denial for an account.

Ciani’s response to the FinCEN guidance drives to the heart of the concerns of Senators Grassley and Feinstein. In addition, the national regulator that governs credit unions (the NCUA) has yet to substantively weigh in on this complicated web of what kind of support, if any, financial institutions can supply for marijuana-related businesses. “We’ve taken a lot of actions to mitigate our risk,” Ciani added. “And what risk is left over, we believe is outweighed by the risk to our communities, so we’re willing to take that mitigated risk.”

To read the Marijuana Financial Services Cooperatives Act, click here.

Why it matters: The intersection of financial institutions under federal regulation and states with legal marijuana-related businesses poses real challenges. Until federal law provides additional clarity for financial institutions that wish to bank marijuana-related businesses, financial institutions dipping their toe into this unclear area of law do so at their own risk.