Pubdate: Sun, 12 Jan 2014
Source: Honolulu Star-Advertiser (HI)
Copyright: 2014 Star Advertiser
Contact: 
http://www.staradvertiser.com/info/Star-Advertiser_Letter_to_the_Editor.html
Website: http://www.staradvertiser.com/
Details: http://www.mapinc.org/media/5154
Author: Serge F. Kovaleski, New York Times
Page: A8

FEDERAL LAWS FORCE LEGAL POT SHOPS INTO FURTIVE BANKING

SEATTLE - In his secondfloor office above a hair salon in northern
Seattle, Ryan Kunkel is seated on a couch placing $1,000 bricks of
cash - dozens of them - in a rumpled brown paper bag. When he
finishes, he stashes the money in the trunk of his BMW and sets off on
an adrenalized drive downtown, darting through traffic and nervously
checking to see if anyone is following him.

Despite the air of criminality, there is nothing illicit in what
Kunkel is doing. He co-owns five legal medical marijuana dispensaries,
and on this day he is heading to the Washington state Department of
Revenue to commit the ultimate in law-abiding acts: paying taxes.
After about 25 minutes at the agency, Kunkel emerges with a receipt
for $51,321.

"Carrying such large amounts of cash is a terrible risk that freaks me
out a bit because there is the fear in my mind that the next car
pulling up beside me could be the crew that hijacks us," he said. "So,
we have to play this never-ending shell game of different cars,
different routes, different dates and different times."

Legal pot merchants like Kunkel - mainly medical marijuana
dispensaries, but also, starting this year, shops that sell
recreational marijuana in Colorado and Washington - are grappling with
a tough predicament: Their business is conducted almost entirely in
cash because it is exceedingly difficult for them to open and maintain
bank accounts, and thus accept credit cards.

The problem underscores the patchwork nature of federal and state laws
that have evolved fitfully as states have legalized some form of
marijuana commerce. Though 20 states and the District of Columbia
allow either medical or recreational marijuana use - with more likely
to follow suit - the drug remains illegal under federal law.

As a result, banks, including state-chartered ones, are reluctant to
provide traditional services to marijuana businesses. They fear that
federal regulators and law enforcement authorities might punish them,
with measures like large fines, for violating prohibitions on
money-laundering, among other federal laws and regulations.

"Banking is the most urgent issue facing the legal cannabis industry
today," said Aaron Smith, executive director of the National Cannabis
Industry Association in Washington, D.C. Saying legal marijuana sales
in the United States could reach $3 billion this year, Smith added:
"So much money floating around outside the banking system is not safe,
and it is not in anyone's interest. Federal law needs to be harmonized
with state laws."

The limitations have created unique burdens for legal marijuana
business owners. They pay employees with envelopes of cash. They haul
Chipotle and Nordstrom bags containing thousands of dollars in $10 and
$20 bills to supermarkets to buy money orders. When they are able to
open bank accounts - often under false pretenses - many have taken to
storing money in Tupperware containers filled with air freshener to
mask the smell of marijuana.

The all-cash nature of the business has also created huge security
concerns for business owners. Many have installed panic buttons for
workers in the event of a robbery and have set up a constellation of
security cameras at their facilities beyond what is required, as well
as floor sensors to detect break-ins. In Colorado, Blue Line
Protection Group was formed a few months ago, specializing in
protecting dispensaries and facilities that grow marijuana, and in
providing transportation security.

Marijuana business owners have devised strategies to avoid the
suspicions of bankers. A number of legal operations have opened
accounts by establishing holding companies with names that obscure the
nature of their business. Some owners simply use personal bank
accounts. Others have relied on local bank managers willing to take
chances and bring them on as clients.

Richard Riese, senior vice president for regulatory compliance at the
American Bankers Association, said banks wanted clear and
comprehensive guidelines on how to do business with the legal
marijuana industry.
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