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Publication Title | Underbanked: Cooperative Banking as a Potential Solution to the Marijuana-Banking Problem

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NOTE

Underbanked: Cooperative Banking as a Potential Solution to the Marijuana-Banking Problem

Patrick A. Tighe*

Numerous states have recently legalized recreational marijuana, which has created a burgeoning marijuana industry needing and demanding access to a variety of banking and financial services. Due, however, to the interplay between the federal criminalization of marijuana and federal anti-money laundering laws, U.S. financial institutions cannot handle legally the proceeds from marijuana activity. As a result, most financial institutions are unwilling to flout federal anti-money laundering laws, and so too few marijuana-related businesses can access banking services. This Note argues that the most viable policy option for resolving this “underbanking” problem is a financial cooper- ative approach such as a cannabis-only financial cooperative. Even in light of federal anti-money laundering laws, this Note contends that the Federal Re- serve is legally authorized to grant some cannabis-only financial cooperatives access to its payment system services under the Monetary Control Act of 1980.

Table of Contents

Introduction..................................................... 804

I. The Failure of Federal Efforts to Remedy the

Underbanking Problem ...................................806

A. A Robust and Growing Marijuana Industry ...............806

B. Federal Law Has Created the Underbanking Problem . . . . . . . 807

C. Federal Regulators Have Not Resolved the Problem . . . . . . . . . 812

II. Current Policy Proposals Miss the Mark................816

A. Instituting a Cooperative Federalism Approach . . . . . . . . . . . . . 816

B. Amending the CSA ......................................819

C. Using Decentralized Virtual Currency .....................822

III. Financial Cooperatives Provide a Viable Path

Forward ...................................................825

A. The Financial Cooperative Approach ......................826

B. The Federal Reserve’s Legal Authorization .................828

1. Interpretation of the Monetary Control Act of 1980 . . 829

2. Money Laundering Complicity ......................830

Conclusion ....................................................... 832

* J.D., May 2015, University of Michigan Law School. I would like to thank Professor Michael Barr for his invaluable insight and direction on this Note. I dedicate this Note in honor of my mother, Billie Ruth Tighe, and my uncle, Mike Faubion.

803

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