Pubdate: Fri, 24 Oct 2014
Source: Denver Post (CO)
Copyright: 2014 The Denver Post Corp
Contact:  http://www.denverpost.com/
Details: http://www.mapinc.org/media/122
Author: David Migoya

BANK PULLS ATMS' PLUGS

The Providers of the Pot Shop Units Were Warned of Federal Law.

Hundreds of ATMs located in medical marijuana dispensaries-the 
lifeblood of businesses otherwise forced to work in cash-were shut 
down Wednesday, just days after similar machines were unplugged from 
recreational shops.

The machines in Colorado and Washington were connected to a network 
served by South Dakota based Meta Bank, which in January warned ATM 
providers by email that machines located in marijuana shops violated 
federal banking rules.

But the machines, both cashless and the traditional cash-dispensing 
variety, continued to work until this week, according to owners of 
cannabis shops affected by the shutdown.

A spokesman for MetaBank and its parent company, Meta Financial 
Group, did not immediately respond to requests for comment Thursday. 
MetaBank's electronic arm, Meta Payment Systems, is the largest ATM 
sponsor in the country.

"Just like that, it was out of commission," said Andy Williams, who 
owns Medicine Man, a recreational and medicinal marijuana dispensary 
in Denver that has an on-site cash-dispensing ATM. "I got a warning 
the night before saying they'd lost their bank, and that was it."

Marijuana Industry Group executive director Michael Elliott said a 
number of the trade group's clients lost stand-alone machines that 
dispense bills, as well as key-padded devices that are found at 
checkout counters and don't spit out cash.

One industry insider said he learned that Meta Payment Systems found 
that a number of ATM providers that contracted with them had placed 
machines in dispensaries, and then attempted to sidestep Meta's 
earlier warnings by improperly identifying those businesses.

"There was no real way for anyone to know who had the machines or 
where they were," the insider said, refusing to be identified because 
banks' contracts are protected by federal law.

Deactivation of the machines comes just days after several Colorado 
bankers said they've gotten quiet approval from regulators to 
continue working with marijuana clients as long as they monitored 
those accounts.

"This isn't about bank accounts. It's about a merchant processor who 
simply decided to stop processing," said Ean Seeb, co-owner of Denver 
Relief, where a number of cashless ATMs were deactivated Wednesday.

Seeb said Denver Relief was warned by the merchant provider that the 
machines used for recreational sales would be taken off-line.

"Then we got word that they were all going down," he said Thursday.

The provider maintains its own bank account with MetaBank, which is 
its access point to the nation's financial system. The provider, Seeb 
said, was to have a new bank working with them late Thursday.

Cashless ATMs work differently from those that dispense currency, 
allowing customers to be charged for a transaction directly through a 
credit or debit card using a PIN rather than a signature. The 
transaction is recorded as a cash advance and does not route through 
the same system as when a user signs a receipt.

Not all shops were affected, although providers estimated it to be in 
the hundreds and perhaps impacting shops in more than just the two 
states where recreational sales of marijuana is legal. Those tied to 
a different bank networkwere able to process transactions Thursday.

MetaBank told providers in January that machines could not be located 
in marijuana businesses because the sale and consumption of pot and 
infused products remains illegal under federal laws.

"MetaBank, as a federally chartered bank subject to federal banking 
regulation, cannot sponsor ATM terminals that are deployed in any 
business establishment that distributes marijuana," according to the e-mail.

But the relationship remained quiet and unaffected, mostly because 
banks rely on ATM providers to monitor and track a machine's 
location. ATMs are unregulated in Colorado, so there is no one agency 
or bank that knows where they all are located.

Several dispensaries were able to avoid the prohibition by working 
with neighboring businesses - such as hair salons and bookstores-that 
installed ATMs that dispensed cash.

But cashless systems are preferred since they can be used at the point of sale.

"When a patient or customer is ready to complete a transaction, they 
swipe their debit card or credit card through the cashless ATM 
terminal and enter the transaction amount," said Lance Ott, co-owner 
of Guardian Data Systems, a Vancouver, Wash., company that provides 
payment processing for marijuana businesses. "They are prompted to 
enter their PIN number and accept a service charge."
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MAP posted-by: Jay Bergstrom