Banks don’t always welcome medical marijuana dollars

After two years of wild growth, the medical marijuana industry in the state is bogged down by troubles with banking and federal taxes. In some cases, dispensaries – unable to find a willing bank – are operating solely with cash. That complicates everything from payroll to tax preparation while heightening the risk of robbery. Some dispensary owners say they’ve resorted to euphemisms – such as a “holistic healing center” – when trying to open a bank account. That’s in part because federal authorities have warned banks that handling receipts from marijuana sales remains illegal under federal law and could violate ­money-laundering laws. The conflict is not isolated to Washington, one of 16 states – plus the District of Columbia – to allow therapeutic use of marijuana for certain patients. Aaron Smith, executive director of the Washington, D.C.-based National Cannabis Industry Association, estimates half of dispensaries nationwide lack a bank account, which he blames on pressure from federal banking regulators. “It is a widespread problem that threatens the entire industry,” he said. Advocacy groups are lobbying Congress for changes to banking law and the IRS code that acknowledge the legitimacy of an industry estimated at $1.7 billion. Voters approved medical marijuana in the state in 1998, but it has developed into an industry – from storefront dispensaries to mobile THC testing labs to ­cannabis-infused sodas – only in recent years. Industry advocates failed in the past two years in Olympia to get clear protection for dispensaries. Instead, most operate under a broad interpretation of state law that allows groups of up to 10 patients to grow 45 plants in a “collective garden,” and to share the costs. Dispensaries run those gardens, and patients join just long enough to obtain marijuana. The state does not license or regulate dispensaries – leaving that to cities – but does want them to pay taxes. The Department of Revenue collected $755,764 in sales and business taxes in 2011 from 50 dispensaries. With an estimated 135 or more dispensaries statewide, many medical marijuana providers aren’t paying, and the state has begun taking a closer look, auditing two dispensaries, said Revenue spokesman Mike Gowrylow.

Green Hope, a nonprofit patient network in Shoreline, has been without a bank account since last fall, when Walla Walla-based Banner Bank dropped them, co-founder Laura Healy said. She now pays employees in cash, and uses cashier’s checks or prepaid Visa cards to buy supplies. She said she’s tried “every bank in town” since then, but all refuse to open an account when she describes Green Hope. Other cash-only dispensaries opt to put ATMs in the lobby. “I have a business license and federal tax ID number, but not a bank account,” Healy said. “They on one hand treat me like a normal businesses, then on the other hand treat me like a criminal.” Aaron Jeffreys, owner of The Green Warehouse dispensary in Tacoma, said bigger banks turned him down but he quickly found a way around the problem. “After I got shut down by Wells Fargo and Bank of America, I went to a local bank and had no problem because local banks are not federally funded,” he said. Of the five banks contacted for this story, only BECU answered questions about medical marijuana accounts. Banner Bank, which dispensaries once saw as welcoming, did not respond to repeated inquiries. BECU spokesman Todd Pietzsch said those accounts often involve large cash deposits, which require heightened scrutiny and reporting under federal banking and money-laundering laws. “We took a look and found there’s a lot of unknown risk and uncertainty in this business,” he said. “At this point in time, it’s probably not in the best interests of our membership” to bank with medical marijuana businesses. Federal bank regulations do not specifically prohibit doing business with the medical marijuana industry, and U.S. Attorney General Eric Holder told Congress in December that the Justice Department would not make it a priority to go after bankers who did.

But in June, Holder deputy James Cole issued a memo warning that “those who engage in transactions involving the proceeds” of marijuana sales “may be in violation of federal money-­laundering statutes and other financial laws.” The U.S. Attorney’s Office in Seattle has not contacted banks regarding medical marijuana accounts, said Emily Langlie, spokeswoman for Seattle-based U.S. Attorney Jenny Durkan. The Cole memo sent a chill through the banking industry, said Sam Kamin, a University of Denver law professor who has written about marijuana regulation. “It’s a great threat because it allows the federal government to do what it wants without using scarce resources,” he said. Lance Ott, executive director of Guardian Data Systems, a Vancouver, Wash.-based financial consulting firm, said he knows of no financial institution in the state that openly banks the industry. Most of the major credit-card processors, as well as PayPal, also refuse medical marijuana accounts. “That doesn’t mean there aren’t people who don’t have a friend willing to work with them. A lot of it is behind the scenes,” Ott said. “The banks need to show liquidity on the balance sheets.” In Congress, several lawmakers, including Rep. Barney Frank, D-Mass., introduced bills to ease banking access and to amend an IRS provision that restricts business deductions for medical marijuana operations.

via : thenewstribune

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