Pubdate: Tue, 22 Apr 2014
Source: Wall Street Journal (US)
Copyright: 2014 Dow Jones & Company, Inc.
Contact:  http://www.wsj.com/
Details: http://www.mapinc.org/media/487
Authors: Dan Frosch and Robin Sidel

FOR POT SHOPS, FINDING A BANK IS STILL A PIPE DREAM

Businesses Say Government Guidance Has Made Things Worse

DENVER--Two months after the U.S. government tried to smooth the way 
for sellers of legalized marijuana to get banking services, many pot 
entrepreneurs still can't open a basic checking account.

The Treasury Department and Justice Department in February issued 
guidance that was meant to reassure banks that they wouldn't run 
afoul of federal law--under which marijuana remains illegal--by 
working with pot businesses in states that have legalized the drug.

But lenders have taken little comfort in the guidelines, saying they 
don't go far enough to guarantee that banks won't face legal 
repercussions, and add burdensome new requirements that they screen 
customers for marijuana ties.

As a result, banks have become even more uneasy about accepting 
marijuana money, pushing state-licensed pot businesses deeper into a 
financial netherworld.

"Most banks are trying to avoid this and mitigate it if they 
inadvertently find a customer with a marijuana-related business," 
said Chuck Johnston, president of North Valley Bank in Thornton, 
Colo., which won't accept customers with marijuana ties.

Bank of America Corp. and J.P. Morgan Chase & Co. are among the large 
banks continuing to steer clear of the issue, bank representatives 
said. The security company Brink's won't provide armored transport 
for the marijuana industry because the drug remains illegal under 
federal law, a spokesman said.

Pot stores increasingly find themselves in situations other 
businesses couldn't fathom, such as hiring armed escorts to help 
deliver sales taxes to government offices in wads of cash.

"What I find most frustrating is that I pay an enormous amount of 
taxes and licensing and other fees," said Morgan Carr, co-owner of 
the Wellspring Collective pot shop in Denver. Mr. Carr said he 
recently lost his bank account for the seventh time because the bank 
he was using became uncomfortable with his cash deposits.

This month, Mr. Carr hired a private security firm to haul his cash 
to a vault in a discreet location because he still can't get a bank 
to take his business. "The money I am using to pay those taxes is the 
exact same money that I can't even deposit into my own account," he added.

Federal officials declined to discuss the impact of the guidance. In 
a March speech, Jennifer Shasky Calvery, director of the Treasury 
Department's Financial Crimes Enforcement Network, said she was 
"encouraged" the agency had received "dozens" of suspicious-activity 
reports from institutions banking with marijuana businesses.

"From our perspective, the guidance is having the intended effect. It 
is facilitating access to financial services for marijuana-related 
businesses, while ensuring that their activity is transparent," she said.

Twenty-one states and the District of Columbia have legalized medical 
marijuana, while Colorado and Washington state also allow pot sales 
for recreational purposes to anyone 21 or older. Colorado, which 
began allowing recreational marijuana sales in January and has nearly 
500 medical and recreational pot shops, collected more than $6.1 
million in marijuana taxes the first two months of this year. 
Business was expected to see a significant bump this month because of 
Sunday's annual homage to pot smoking known as "4/20 Day" and related events.

Colorado officials say the situation not only raises safety 
concerns--marijuana stores handle large sums of cash, making them 
vulnerable to robberies--but makes tracking tax payments 
extraordinarily burdensome.

"We're incredibly concerned," said Andrew Freedman, Colorado's 
director of marijuana coordination. "As long as it is a cash 
industry, we can't sufficiently regulate their money."

Even after the guidelines, Colorado Springs State Bank turns away 
prospective customers nearly every day because they are tied to 
marijuana activities, said John Whitten, the bank's market president. 
"There are legitimate marijuana businesses out there that could be 
good bank customers, but unfortunately, we have to decline," he said.

With most banking options still closed, Colorado store owners are 
scrambling for new ways to secure their cash. One Denver-area company 
operated by military and law-enforcement veterans, Blue Line 
Protection Group, now specializes in shipping cash from pot stores to 
several vaults around Colorado by armored trucks. The company also 
transports marijuana.

"For many of us who were in law enforcement, it's very surreal now 
that it's legal," said Dan Sullivan, Blue Line's vice president of 
marketing. Mr. Sullivan previously worked for Colorado's Jefferson 
County Sheriff's Office.

Unsure if the guidelines will be clarified soon, others continue to 
devise their own methods, sometimes surreptitiously.

At Good Chemistry, a sleek marijuana shop near downtown Denver, owner 
Matthew Huron stocks an ATM with cash. Whenever a customer makes a 
withdrawal, the machine transfers money from the customer's account 
into Mr. Huron's account.

Having already lost 10 bank accounts, Mr. Huron also uses cash to pay 
every conceivable bill. He even paid a contractor $1 million in cash 
to build a warehouse for his business.

"What really bothers me is that we are working so hard to be good 
corporate citizens," he said. "And yet they stop everything at the 
bank. It's irrational."
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MAP posted-by: Jay Bergstrom