Pubdate: Wed, 07 Jan 2015
Source: Virgin Islands Daily News, The (VI)
Copyright: 2015 Virgin Islands Daily News
Author: Jeffrey Stinson,


WASHINGTON - The nation's rapidly expanding legal marijuana industry, 
which operates in 23 states and the District of Columbia, enters a 
new year facing a multibillion-dollar question: What to do with all 
the millions in cash it collects each week?

Nearly all of the nation's banks refuse to take money from marijuana 
sales or offer basic checking or credit card services to the industry 
for fear they'll be shut down by federal authorities, for whom 
marijuana remains an illegal narcotic. The banks won't do business 
with growers, processors, retail shops and medical dispensaries, or 
with their employees and contractors.

"It's the biggest problem we have," said Taylor West, deputy director 
of the National Cannabis Industry Association, many of whose 800 
members are awash in $5, $10 and $20 bills and change with no bank to 
put them in.

The abundance of cash makes the country's 2,000 retail shops and 
medical dispensaries tantalizing targets for criminals. Without bank 
accounts, legal marijuana businesses have a hard time paying their 
employees and vendors. Relying solely on cash leads to a lack of 
transparency in accounting and auditing, and it complicates paying 
the taxes that states impose on cannabis.

The problems caused by a cash-and-carry retail business likely will 
grow as more states move to legalize pot for medical or recreational 
use, unless Congress steps in and changes federal drug and 
drug-trafficking laws.

Voters in Alaska and Oregon approved legal marijuana sales for 
recreational use on Nov. 4, joining Colorado and Washington state, 
which opened retail recreational sales last year. Residents of the 
District of Columbia also voted to legalize possession and transfer 
of small amounts of marijuana, and city officials think they can get 
around a congressional effort to block the new law.

Pro-pot organizers are eyeing the 2016 ballots in Arizona, 
California, Massachusetts, Maine and Nevada for initiatives to 
legalize recreational use.

Meanwhile, medical marijuana use continues to expand. Although 
Florida voters fell just shy of approving medical marijuana in 
November, it is allowed it 23 states and D.C. Eleven other states, 
including Florida, have approved legislation for cannabis research 
and treatment of disorders that can cause seizures, according to the 
National Conference of State Legislatures (NCSL).

Because the legal marijuana industry is expanding so rapidly, it is 
difficult to get firm figures on how big it is. West estimates it at 
between a $2 billion and $3 billion annually, and she and others 
expect the legalization trend to continue, which means significantly 
more growth.

"I think this horse is out of the barn," said Scott Jarvis, director 
of the Department of Financial Institutions for Washington state, 
where medical and recreational marijuana is legal.

What's needed now, Jarvis said, is for banks and credit unions to be 
freed from the prospect that federal bank regulators will shut them 
down for doing business with legitimate marijuana enterprises.

If that happens, he said, retailers won't have to worry so much about 
being robbed, and businesses won't have to show up at the Washington 
State Department of Revenue with "boxes and suitcases" stuffed with 
bills to pay their taxes.

Under federal law, marijuana remains a federal Schedule I drug, in 
the same class as harder drugs such as heroin. That has been the case 
since 1970, when Congress passed the Controlled Substances Act, 
making it illegal to manufacture, possess or distribute it. The law 
also makes it illegal for financial institutions that depend on the 
Federal Reserve System's money transfer system to take any proceeds 
from marijuana sales.

At an NCSL conference last month, Megan Michiels, senior counsel with 
the American Bankers Association, said most banks don't want to put 
themselves in jeopardy by opening accounts or receiving any money - 
even indirectly - from the sale of marijuana for fear of violating 
drug laundering laws and being shut down.

"There's just too many risks," she said.

States had hoped new rules issued last year by the U.S. Department of 
the Treasury would reassure banks that they can do business with the 
industry. The rules required banks to report their state-licensed 
marijuana customers and ensure they are following state law and don't 
violate Justice Department guidelines, such not selling to minors. In 
a separate memo, the Justice Department directed U.S. attorneys not 
to pursue banks as long as they adhere to guidelines.

That didn't allay bankers' fears, however. Nor has a provision of the 
broad spending bill passed by Congress last month, which said that 
the Justice Department cannot spend any money to prosecute medical 
marijuana patients or dispensaries if they're acting in accordance 
with state laws.

A bill by Rep. Ed Perlmutter, DColo., would explicitly allow banks 
and credit unions to provide banking services to legal marijuana 
businesses. But it died in the last session of Congress.

Others say nothing short of Congress removing marijuana from the 
controlled substances list or providing states a safe haven from the 
Controlled Substances Act will remove bankers' fears.

"Until federal law is changed, we just don't see any way to go 
forward," Michiels of the bankers association said.

In the absence of congressional action, some states, along with 
businesses, banks and credit unions, are trying to solve the problem 
on their own.

Jennifer Calvery, director of the Treasury's Financial Crimes 
Enforcement Network, said in August that only 105 banks and credit 
unions - a tiny fraction of the more than 100,000 in the U.S. - take 
money from legal marijuana businesses.

The Salal Credit Union in Washington state is one. Bob Schweigert, 
Salal's senior vice president and chief lending officer, said the 
credit union began a pilot program in the spring when the state began 
licensing producers and retail sellers to open accounts for them.

Working with the industry requires more due diligence to ensure the 
businesses meet state law and federal guidelines, which includes 
monitoring of the accounts for anomalies, he said. It also includes 
armored car pickups of the cash from retail outlets because, he said, 
"we don't want large amounts of cashing coming into our branches; we 
don't want to put our staff at risk."

The program is working well and the credit union plans to expand its 
customers up to 25 in coming weeks and then venture into loans for 
them, Schweigert said. "It really comes down to knowing your 
customers," he said. "Many of them are established business people."
- ---
MAP posted-by: Jay Bergstrom