Banks turn away stacks of cash from le­gal pot

The Washington Times Weekly - - National - BY VALERIE RICHARD­SON

DEN­VER | A week af­ter Colorado’s bal­ly­hooed re­tail mar­i­juana launch, the line at Ev­er­green Apothe­cary is still out the door. That comes as both good and bad news for co-owner Tim Cullen.

His busi­ness may be boom­ing, but his bank­ing sit­u­a­tion re­mains sketchy. Fed­eral rules pro­hibit banks from open­ing ac­counts for il­le­gal drug en­ter­prises, and re­cre­ational and med­i­cal mar­i­juana sales are still out­lawed un­der fed­eral law.

Mr. Cullen has a busi­ness bank ac­count, but only be­cause he be­longs to a busi­ness­man­age­ment ser­vice that has al­lowed him to open an ac­count un­der a dif­fer­ent name. Even so, be­cause of the mer­chan­dise on his shelves, he can’t get a small-busi­ness loan to keep up with his rapidly ex­pand­ing foot­print.

“We don’t like it, and the book­keep­ers hate us, but that’s the way it is,” Mr. Cullen said.

Colorado of­fi­cials and mar­i­juana ad­vo­cates are lob­by­ing hard for fed­eral au­thor­i­ties to grant mar­i­juana busi­nesses ac­cess to bank­ing, a gap­ing pit­fall ex­posed by the oth­er­wise ro­bust kick­off of Colorado’s firstin-the-na­tion re­cre­ational mar­i­juana mar­ket at the start of the year.

The roughly 30 pot shops that opened Jan. 1 are gen­er­at­ing a com­bined $1 mil­lion worth of busi­ness ev­ery day, much of it the re­sult of cash trans­ac­tions. Shops al­ready are strug­gling to keep up with de­mand: At the 3-D Cannabis Center, for ex­am­ple, man­agers closed their doors for two days to re­stock, then an­nounced that the line would be cut off at 5 p.m. or af­ter the first 300 cus­tomers.

The re­sult is that many stores are wind­ing up with piles of money at the end of the day and nowhere safe — or le­gal — to stash it.

“A lot of busi­ness own­ers are op­er­at­ing on a cash-only ba­sis, and you can imag­ine the se­cu­rity is­sues with that,” said Mike El­liott, ex­ec­u­tive di­rec­tor of the Med­i­cal Mar­i­juana In­dus­try Group, an in­dus­try ad­vo­cacy or­ga­ni­za­tion based in Den­ver.

“For ev­ery busi­ness with an ac­count, I’ve heard 20 sto­ries from peo­ple who have said, ‘We had a bank ac­count, and I don’t know why, but they kicked us out,’” said Mr. El­liott. “We’re talk­ing about a check­ing ac­count here. So you don’t have to show up at the Colorado Depart­ment of Rev­enue and pay your taxes in cash.”

The prob­lem is likely to in­ten­sify as more stores open and in­vestors dive into the mar­ket. Shares of pot-re­lated stocks are soar­ing even be­fore ma­jor Colorado cities such as Aurora and Boul­der fi­nal­ize their rules and grant li­censes.

Barred from the banks

Bank ac­cess has long been a prob­lem for the med­i­cal mar­i­juana in­dus­try, which now op­er­ates in 20 states. Two states — Colorado and Wash­ing­ton — al­low re­cre­ational mar­i­juana use for cus­tomers 21 and older, but more states are ex­pected to join them in the next few years.

In Colorado, state and busi­ness of­fi­cials are urg­ing of­fi­cials at the Jus­tice and Trea­sury de­part­ments to is­sue a guid­ance giv­ing lee­way to banks in states that have le­gal­ized mar­i­juana. The Jus­tice Depart­ment re­leased a memo in Au­gust that per­mits Colorado and Wash­ing­ton to pro­ceed with their reg­u­lated mar­kets.

Even if that hap­pens, a memo might not be enough to per­suade most banks to ac­cept mar­i­juana-re­lated clients, said Don Childears, pres­i­dent and CEO of the Colorado Bankers As­so­ci­a­tion.

“Banks have been told they should not be han­dling th­ese ac­counts, so they’re more than ner­vous,” said Mr. Childears. “You re­ally need a fed­eral statute. But po­lit­i­cally, I don’t think mem­bers of Congress in ei­ther party want to be per­ceived as be­ing soft on drugs.”

The piggy-bank ap­proach to mar­i­juana sales also cre­ates prob­lems for state and lo­cal agen­cies charged with col­lect­ing taxes.

“I don’t know how you reg­u­late or tax and in­dus­try where you can’t fol­low the money,” said Mr. Childears.

Bur­den of bounty

The Den­ver City Coun­cil ap­proved a res­o­lu­tion last week urg­ing fed­eral au­thor­i­ties to help re­solve the is­sue, while Rep. Ed Perl­mut­ter, Colorado Demo­crat, has in­tro­duced the Mar­i­juana Busi­nesses Ac­cess to Bank­ing Act of 2013.

Mr. El­liott said he wor­ries about safety, with thieves or crime syn­di­cates tar­get­ing Colorado’s cash-rich but bank­ing-poor pot shops.

“We’ve got mem­bers, in some cases they’re beau­ti­ful young women, who are forced to carry around a whole lot of cash,” said Mr. El­liott. “I’m hav­ing night­mares about it.”

Many store own­ers have hired se­cu­rity and in­stalled cam­eras to en­hance safety. The Den­ver Po­lice Depart­ment in­creased its pres­ence around the stores dur­ing the first week at the re­quest of busi­ness own­ers.

“That was an in­cred­i­ble thing, be­cause the po­lice com­mu­nity and the mar­i­juana com­mu­nity have had no com­mon ground for decades,” said Mr. El­liott. “And now I have their cell­phone num­bers, and when they come by, they’re greeted with a hand­shake.”

The lack of de­pend­able bank­ing aside, Mr. Cullen said, he “couldn’t be hap­pier” about his mar­i­juana busi­ness. He has hired five more peo­ple since Jan. 1 and is fin­ish­ing con­struc­tion on two ware­houses, which will re­quire another 20 em­ploy­ees.

He said his two Den­ver re­tail stores are av­er­ag­ing one sale per 90 sec­onds. His big­gest chal­lenge is “fig­ur­ing out how to give ev­ery­one a lunch break.”

“Ev­ery­thing from the cus­tomers to the staff who’ve stepped up to han­dle this is go­ing as smoothly as I could have hoped,” said Mr. Cullen. “It’s been fan­tas­tic, and aside from the vol­ume, I couldn’t ask for more.”

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