Pubdate: Mon, 10 Nov 2014
Source: Herald, The (Everett, WA)
Copyright: 2014 The Daily Herald Co.
Author: Jim Davis, Herald Business Journal
Page: A8


Ambiguous Federal and State Laws Are Making New Marijuana Retailers' 
Work Inefficient and Inconvenient.

LAKE STEVENS - Reed Evans called several banks looking to open an 
account for Cannablyss, his family's recreational marijuana business 
and the only pot retail store in Lake Stevens.

He had no luck. He got his name on a waiting list at a credit union 
in Seattle, but most financial institutions are shying away from 
doing business with the still-young industry.

"We pay most bills in cash, we literally drive to the PUD and give 
them a couple of hundred dollars and we drive to our landlord to pay 
the rent," Evans said.

His family makes sure to drop money into a safe so they don't have a 
large amount of cash on hand. And they've installed an ATM machine 
for their customers at the store at 2705 Hartford Ave.

It's inconvenient and inefficient. But that's the situation with 
marijuana, which is legal in the state but illegal federally.

The Justice Department has made clear it won't interfere with 
businesses in states where marijuana's sale has been legalized, so 
long as everybody adheres to state law and the industry is taxed and 
regulated. And the Treasury and Justice departments earlier this year 
announced formal guidance for banks.

There's enough uncertainty, though, that most bankers are unwilling 
to expose themselves and their shareholders to the risk if anything goes wrong.

Federal lawmakers and regulators need to create language, without 
equivocation, that banks can do business with the industry, said Mark 
MacDonald, president and CEO of Community Bankers of Washington, a 
group that represents independent community banks in the state.

Otherwise, his members would worry about a rogue regulator coming 
after them for failing to abide by the letter of the law.

"I've been told by some of the regulators that they would never do 
that," MacDonald said. "Well, I say, 'put it in writing, give my guys 
and gals something to put their hat on.' "

Still, some banks and credit unions are working with marijuana 
business owners - usually charging a premium to open and keep an account.

"I've got seven banks that are banking the marijuana industry but 
they don't want me to go out and publicize their names," MacDonald said.

He said all of the banks that he knows are doing business with 
growers and processors. He said that he knows of no banks that are 
acknowledging doing business with retailers.

Bankers are required to know their customers and, in some cases, know 
their customer's customers.

Some bankers feel they can trust a grower or a processor, because 
they can do due diligence on the business and the retail shops 
they're working with. They can't do due diligence on every person who 
walks through the door of a shop.

That's a concern for Mark Duffy, president and CEO of Mountain 
Pacific Bank in Everett.

"When it comes to the retailer, we don't know who their customer is 
necessarily nor do we want to take the risk," Duffy said.

He said his bank has been turning away everybody in the marijuana 
industry - even people Duffy knows in the community.

"We're very small and we're taking a wait-and-see attitude," Duffy 
said. "We don't want to be a first one."

Heritage Bank, which merged with Whidbey Island Bank, also has turned 
away business from the marijuana industry.

Heritage CEO Brian Vance said he understands the quandry these 
business owners face.

"We're not saying we're for or against the marijuana industry," he 
said, but there's just too much confusion about the potential 
consequences for banking with the industry.

Duffy thinks the situation will likely come to a head soon.

"When I say it will sort itself out, I think the possibility is that 
more states will pass marijuana laws so the federal government will 
have to deal with this more specifically."

Some of the pot businesses may already be using banks or credit 
unions without the financial institutions fully understanding what's going on.

That's the understanding of Evans, whose family owns Cannablyss. 
While some pot retailers are taking debit cards, Evans said he's 
heard that they're using cashless ATMs and depositing money into 
their personal accounts without telling the banks.

"I've heard of people just using personal bank accounts and hoping 
they don't get flagged just so they have some place to put their 
money," he said.

His family has attempted to be on the up-and-up with their business. 
Whenever he approached banks, he was always told them that they were 
opening a retail marijuana shop.

His parents, Bob and Denise Evans, were the ones to get the license. 
Reed Evans and his wife, Karn, work at the store along with his 
sister, Jaeda Evans.

His parents were against marijuana use until Bob Evans suffered from 
cancer. Denise Evans went out to get medicinal marijuana for her husband.

"When she saw that people can use it medically she got excited about 
it," Reed Evans said.

When voters made recreational marijuana legal with Initiative 502, 
his mom suggested that the family apply for one of the retail businesses.

The family, who all live near each other in Lake Stevens, did the 
research and applied on the last day possible to get a license. They 
understood that the industry would evolve.

"We pretty much assumed it would be a cash business in the 
beginning," Evans said. "We're OK with that. We're going to plug away 
until the rules change."
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MAP posted-by: Jay Bergstrom