Legal Weed Is Now a Legitimate Business, But Banks Are Still Acting Cagey About Handling the Money
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Retailers in Colorado began selling marijuana to any adult 21 or older New Year's Day, but most still lack the basic banking services used by every other legal business in the state. Industry experts fear this leaves the burgeoning marijuana industry vulnerable to the potential robberies, tax-evasion, wage theft, and money laundering that plague some cash-only businesses.
At issue are federal regulations that strongly prohibit financial transaction tied to illegal drug dealing, which in the eyes of the federal government, applies to every state-legal pot shop and medical marijuana dispensary.
As Don Childears, president and CEO of the Colorado Bankers Association, told the Denver Post, “[F]ederal law says any entity that holds deposits from another person, transfers funds between parties as in checks, debit cards, wire transfers, or otherwise is connected to the payments system — the movement of money from one financial entity to another party — must abide by federal law. That means you can't bank marijuana businesses now per federal law. Without the payment system, such an entity would amount to a big vault — cash in, cash out.”
Betty Aldworth, deputy director of the National Cannabis Industries Association and the advocacy director for the campaign that legalized marijuana in Colorado, said in a statement that owners and operators in the legal cannabis industry struggle daily with operational and safety challenges presented by the lack of access to basic banking services like checking and savings accounts.
“A lack of access to banking services is, quite frankly, the single most dangerous thing about the legal sale of marijuana for medical or social use,” she said.
There have been numerous cases just last year where criminals have taken advantage of these cash-only marijuana outlets. In November, two masked men held up a Boulder dispensary and in August, four people were charged with the armed robbery of a Denver dispensary. The shop named Seattle’s Best Dispensary by Seattle Weekly was robbed in November by two armed and masked subjects. Robberies in California include a shootout with a security guard in Palmdale, employees forced to strip naked by robbers in San Diego, and two shooting deaths during a robbery in Bakersfield.
Toni Fox, owner of 3-D Cannabis Center in Denver (where Iraq war vet Sean Azzariti made the nation’s first legal weed purchase, to combat his PTSD), said, “The widespread perception that cannabis retailers hold large amounts of cash, despite top-notch security and monitoring, creates an inherent danger for businesses owners, employees and communities alike.”
Legislators at the state level have little recourse to assist their state’s newly legal businesses in finding banking services. Washington State Sen. Bob Hasegawa of Seattle has proposed a state-owned banking system, similar to the Bank of North Dakota, which is the only state-owned bank in the nation. But that system still leaves such a bank in the lurch when it comes to processing the money a marijuana business might deposit. Fred Joseph, Colorado's commissioner of banking noted that all non-cash banking transactions, such as ATMs, electronic funds transfers, credit card processing and checking, must clear the Federal Reserve System. The bank could take a pot shop’s cash, he explained, but then couldn’t do anything with it.
At the federal level, several legislators have banded together to propose bills that would ease the anti-drug-money-laundering regulations for banks in legal marijuana states. Representatives Ed Perlmutter (CO-07) and Denny Heck (WA-10), along with a bipartisan group of 24 other representatives, introduced HR 2652: The Marijuana Business Access to Banking Act of 2013, but it languished in the House Judiciary Subcommittee on Crime, Terrorism, Homeland Security, and Investigations back in September.