California’s North Bay Credit Union has collaborated with Austin Capital Trust Company and Silicon Valley FinTech MRBD to form the credit union service organization (CUSO) HigherGrowth, the Credit Union Times reported.
The new CUSO, in development for more than two years, will enable credit unions and community banks to offer financial services to cannabis companies without these firms having to meet the strict federal and state compliance mandates to have a business bank account, according to the report.
“We’ve been doing cannabis banking since 2017 and developed quite a robust infrastructure of compliance with personnel and technology,” North Bay President and CEO Chris Call said in the report. “We’ve got the capacity to really expand what we’re doing beyond our geographical footprint. And it’s just a matter of having the right vehicle to be able to offer those services to other institutions that are looking to bring on cannabis deposits. And that’s why we formed HigherGrowth to offer the infrastructure and the expertise that we’ve developed over the past four years.”
Austin Capital’s platform will be used for digital onboarding and custody, and MRBD’s application programming interface (API) technology will include anti-money laundering (AML), know your customer (KYC) and Financial Crimes Enforcement Network (FinCEN) compliance modules, the report stated. MRBD will also provide automated workflows, payments, regulator integrations and ongoing monitoring of operations. North Bay’s 18-member compliance staff will work to make sure state and federal compliance requirements are followed.
See also: MRB Direct Talks Cannabis Banking Compliance
Because marijuana is still illegal under federal law, just a small number of credit unions (CUs) and banks serve the industry, according to the report. Most states have legalized marijuana use, however, either medicinally, recreationally, or both.
Call said that in states where cannabis is legal, the federal government has stepped back from oversight, although it can draw greater scrutiny for the CU’s operations from the National Credit Union Administration (NCUA), the report stated.
“That’s why we’re forming the CUSO — to relieve other credit unions of that scrutiny because all that scrutiny would be directed to the CUSO,” Call said in the report. “[The NCUA] just want to know that the CUSO is profitable and is conducting business in a safe and sound manner, but they don’t have the same regulatory authority over the affairs of the CUSO as they do over credit unions.”
Read also: House Passes Cannabis Banking Initiative
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