The world’s first financial institution established specifically for the marijuana industry could be open in Colorado by Jan. 1.
The Colorado Division of Financial Services late Wednesday issued Fourth Corner Credit Union an unconditional charter to operate, the first state credit-union charter issued in nearly a decade.
The next hurdles will be obtaining insurance from the National Credit Union Administration, the federal regulator of credit unions, and getting a master account from the Federal Reserve System.
Gov. John Hickenlooper’s office called the charter “the end of the line” for the state’s efforts to solve the marijuana industry’s nagging problem: obtaining banking services.
Although the NCUA insurance is not guaranteed — sale and consumption of marijuana remain illegal under federal law — Fourth Corner can operate until NCUA makes its decision.
“A Colorado law of 1981 allows a credit union to open its doors while an application for share-deposit insurance is pending,” said attorney Mark Mason, one of Fourth Corner’s key organizers.
The NCUA review could take up to two years, Mason said.
“Now, the NCUA can come and look to see how it is functioning, and determine if they will issue the insurance, as they’ve issued to all the other 2,512 state-chartered credit unions in the nation,” Mason said.
Fourth Corner received a bank routing transit number from the American Bankers Association in July, after the state gave its charter conditional approval.
With the final charter issued, the master account should soon follow.
Federal regulators are sure to key in on the credit union’s business plan, insurance and a fidelity bond, as well as its focus on safety and soundness, Mason said.
“The cornerstone is the compliance department, with a world-renowned anti-money-laundering expert and former regulators helping to write the first manual of its kind in how to handle marijuana money,” Mason said. “That was critical.”
A spokesman for NCUA in Washington, D.C., could not be reached for comment late Thursday. Applications for insurance are typically confidential.
Fourth Corner will be open to any legal marijuana enterprise in Colorado, as well as anyone who is a member of a nonprofit that supports legalized cannabis, according to attorney Douglas Friednash, who incorporated the credit union shortly after the charter was approved.
“We are building a whole new structure to deal with an industry that still violates federal law,” Friednash said in describing the difficulty of creating the credit union. ” Federal law enforcement and bank regulators can punish the industry, and until that gets resolved, this industry will continue to have a cloud over it.”
But Fourth Corner is a step toward clearing that issue.
“In every other way, the industry has been a normal business, operating in every way other businesses do, but primarily in cash,” said Denver City Councilman Chris Nevitt, one of Fourth Corner’s nine founding board members. “The one missing piece in making it completely normal was banking, the one thing that wasn’t there. Now it will be.”
Nevitt described the board members as “a high-powered crew from different walks of life.” They include:
• Paige Figi, a Colorado Springs advocate for the medical uses of marijuana oil for children with epilepsy;
• John Bitzer, managing broker and owner of Bitzer Real Estate Partners in Denver;
• Brian Gliba, a disabled veteran with the nonprofit Project Wounded Ego;
• Joshua Hanfling, co-owner of public affairs consultancy Sewald Hanfling in Denver;
• Heather Jackson, executive director of Realm of Caring in Colorado Springs, a nonprofit that caters to patients with debilitating conditions such as epilepsy and cancer;
• Kristi Lee Kelly, co-founder and chief operating officer of Good Meds Network in Denver, a medical-marijuana business.
The two remaining board members have not been identified.
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Should NCUA deny the deposit insurance coverage, the credit union can liquidate, merge with another credit union or press for a state law that would allow a credit union to operate under private insurance.
The charter is separate from a legislative move in May that allowed for the creation of a marijuana cooperative, a financial institution similar to a credit union but one that would operate under as-yet-devised rules that required federal regulator approval.
“We wanted to keep all options open,” said Andrew Freedman, Hickenlooper’s director of marijuana coordination. “This is the end of the line from the state’s side. We’ve done all we can do.”
Fourth Corner organizers filed their application in April, plowing through the months of rules and documents required by Colorado Financial Services Commissioner Chris Myklebust.
“Yesterday, I issued a charter for a pot credit union,” Myklebust said Thursday. “That is a huge deal for Colorado and for these legitimate businesses.”
A location for the bank has been chosen, but organizers would not reveal it until real estate matters were finalized.
They also would not say publicly how many prospective depositors they expected to have — although they had to disclose the number in order to obtain the state charter — but described interest in the project as “very, very high.”
David Migoya: 303-954-1506, firstname.lastname@example.org or twitter.com/davidmigoya