Cannabis Credit Unions Curb Cash Carrying

American Legal News interviews John Vardaman, Hypur EVP and General Counsel, about credit unions providing banking services to cannabis businesses. His opinion is that credit unions have more regulatory certainty than banks because the National Credit Union Administration officially recognizes the FinCEN guidance as the criteria for assessing institutions providing banking for the marijuana industry.

A Safer Alternative to Carrying Giant Duffle Bags Full of Cash

The visibility that banks provide and the reports they’re required to file are two of the few windows the government has into cannabis business operations, says John Vardaman, a former Justice Department attorney under President Obama, who helped draft guidance for financial crimes due to cannabis state legalization.

Vardaman also helped draft the second of the famous Cole Memorandums under President Obama in 2014 that advised the Federal government to take a hands-off approach when dealing with cannabis in states where it’s legal.

Attorney General Jeff Sessions wasted no time rescinding the Cole Memo in January 2017, immediately following Donald Trump’s inauguration, throwing cannabis sellers into a frenzy for fear Sessions’ US Attorneys would prosecute state growers and sellers.

Although Sessions hasn’t destroyed the multi-billion dollar cannabis industry as he threatened to do, banks are loath to violate Sessions’ classification of cannabis as an illegal drug.

Vardaman said in a telephone interview, “if the Feds are concerned these businesses are susceptible to abuse, for example a cartel using a pot business as a way to sell other drugs or drugs to minors, the best way to ensure that doesn’t happen is to initiate bank oversight.”

Hypur: A Banking Compliance and Payment Company

Vardaman is now General Counsel of an Arizona-based cannabis banking compliance and payment software company, Hypur, which markets an electronic cannabis payment system.

“We helped one financial institution under a lot of regulatory pressure to automate. They brought us in and we overhauled their cash and transaction monitoring platform, so they’ve been able to significantly expand their portfolio,” Vardaman says.

“Our customer is the financial institution. Our clients are banks and credit unions that want to serve the cannabis industry.

Credit Unions Offer Regulatory Certainty

“I would say credit unions have more regulatory certainty [than banks], Vardaman says.

The National Credit Union Administration, which regulates credit unions is the only financial regulatory body to officially recognize Financial Crimes Enforcement Network (FinCEN) guidance as the criteria for assessing institutions that provide banking for the marijuana business,” Vardaman notes.

FinCEN is a bureau of the U.S. Department of the Treasury. It collects and analyzes financial transactions to combat domestic and international money laundering, terrorist financing and other financial crimes.

“The fact that no banking regulatory body has publicly done the same has given credit unions a comparative advantage. In the process, we showed this can be done profitably,” Vardaman says.

Companies Willing to Pay a Premium

Larger institutions are at least entertaining the possibility of giving cannabis sellers bank accounts, although most large banks such as J.P Morgan will not violate Federal law, Vardaman notes.

“Open and transparent marijuana banking has been going on for four years. No institution that has entered this market has faced any regulatory sanction.

The institutions that are doing this are making a significant amount of money as they offer a service–banking access–that is in considerable demand among cannabis sellers.

“Reducing a multibillion dollar industry to cash transactions is utterly unsustainable,” Vardaman concludes.

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