Got bank? Election could create flood of
marijuana cash with no place to go
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[October 31, 2016]
By Lisa Lambert
October 31 (Reuters) - Although the sale of
marijuana is a federal crime, the number of U.S. banks working with pot
businesses, now sanctioned in many states, is growing, up 45 percent in
the last year alone.
Still, marijuana merchants say there are not nearly enough banks willing
to take their cash. So many dispensaries resort to stashing cash in
storage units, back offices and armored vans.
Proponents believe the Nov. 8 election could tip the balance in favor of
liberalizing federal marijuana laws, a move seen as key to getting
risk-averse banks off the sidelines.
Measures on ballots in California, Florida and seven other states would
bring to 34 the number of states sanctioning pot for medical or
recreational use, or both. That could push annual sales, by one
estimate, to $23 billion.
The prospect for a market of such scale is adding urgency to calls for a
national approach to marijuana that expands banking options. Law
enforcement and Federal Reserve officials have expressed concern about
the fraud and crime associated with un-bankable cash.
Nearly 600 dispensary robberies have been reported in Denver since
recreational pot was legalized in Colorado three years ago.
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"There's not a single human being who thinks there is any benefit at all
in forcing marijuana business to be conducted on an all-cash basis,"
said Rep. Earl Blumenauer, a Democrat from Oregon who has called for the
decriminalization of marijuana since coming to Congress in 1996.
MONEY LAUNDERING
The U.S. Justice Department said in 2014 it would not prosecute banks
for serving state-sanctioned marijuana businesses. At the same time, the
Treasury Department requires banks to report suspected drug crimes.
At last count, 301 banks were serving marijuana businesses, according to
the Treasury Department. Many more have avoided the sector out of fear
that making the wrong call could put them at risk, said Robert Rowe, a
vice president at the American Bankers Association.
The National Cannabis Association is pressing Congress for a law that
would hold banks harmless for handling pot cash, said Michael Correia, a
lobbyist for the trade group. If California legalizes recreational use
next week, the nation's biggest Congressional delegation will have a big
stake in the issue.
In lieu of federal action, some states have tried their own fixes.
Colorado created a credit union system for state-sanctioned marijuana
businesses. But it fell apart when the Kansas City Federal Reserve
denied a Colorado pot credit union access to the national payments
system, which distributes currency and clears checks and electronic
payments.
California has no such plans, said Tom Dresslar, spokesman for the
state’s Department of Business Oversight.
“This was a problem created by federal law,” Dresslar said, “and it
needs a federal solution.”
In northern California, where growers serve state-sanctioned medical
dispensaries as well as the black market, the Community Credit Union of
Southern Humboldt stopped opening pot business accounts because of the
red tape and uncertainty, said senior vice president Janet Sanchez.
“We’re not being asked to go over to the gun dealer and ask them if
they’re making appropriate background checks,” she said.
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![](../images/103116pics/news_e10.jpg)
A variety of medicinal marijuana buds in jars are pictured at Los
Angeles Patients & Caregivers Group dispensary in West Hollywood,
California U.S., October 18, 2016. REUTERS/Mario Anzuoni
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Dispensary operators unable to find willing banks tell tales of
subterfuge, recordkeeping nightmares and armies of security guards.
Many open bank accounts and submit credit card charges in ways that
obscure their true enterprise, such as “spa services.”
Susana de la Rionda has run a Los Angeles medical marijuana
dispensary for 12 years and has had to find a new bank about once a
year and submit to tax audits twice as often.
“I feel like a gangster,” she said.
Denver Relief dispensary founder Ean Seeb said operators always are
trying workarounds to get cash into banks, including washing bills
in fabric softener to hide the odor of pot. For a time, he said, one
automated teller machine near a Denver mall drew lines every night
of marijuana merchants, each depositing the maximum $500 in cash.
WEEDING OUT RISK
Partner Colorado Credit Union began working with state-sanctioned
dispensaries two years ago and has developed elaborate protocols to
minimize risk, including an initial vetting that can take three
weeks. It uses armored trucks to take cash deposits directly from
dispensaries to the Denver branch of the Federal Reserve Bank.
When the credit union spots a red flag, Chief Executive Sundie
Seefried dispatches employees to pay the dispensary a visit, and she
has closed two accounts for compliance problems. Seefried encourages
operators to visit by keeping fine cigars in her office, and she
stays in touch with regulators.
“Our program is designed with eyes on the business, eyes on the
owner, eyes on the money,” she said.
With 95 dispensary members, Seefried said the credit union is at
capacity, and she hopes more bankers will get involved. She fields
calls for advice, speaks to industry groups and, earlier this year,
shared what she’s learned in a book.
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Despite the safeguards, Seefried said she takes nothing for granted.
Every few months, she said she drills her staff to make sure they
know what to do in the event of her arrest.
“What calls are you going to make?” she said she asks them.
“If you don’t have a little fear going into this because of the
illegality at the federal level, you’re probably not the person to
do this job,” she said.
(Reporting by Lisa Lambert; editing by Linda Stern and Lisa Girion)
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