Pubdate: Wed, 23 Dec 2015
Source: Sun-Sentinel (Fort Lauderdale, FL)
Copyright: 2015 Sun-Sentinel Company
Contact: http://www.sun-sentinel.com/sfl-letters-to-the-editor-htmlstory.html
Website: http://www.sun-sentinel.com/
Details: http://www.mapinc.org/media/159
Author: David Kelly, Special to Tribune Newspapers

WEED A RISKY BUSINESS FOR BANKS

Legal Sellers Also Face Difficulties As Marijuana Remains Federally Outlawed

DENVER - The Fourth Corner Credit Union occupies a prime spot in 
downtown Denver, not far from the state Capitol. It has a big safe, 
four teller windows, drive-up service and a banner out front that 
says, "The Fourth Corner Credit Union Coming Soon." But there's a 
problem. The Federal Reserve Bank of Kansas City in Missouri, which 
oversees Denver, has refused Fourth Corner's request for a "master 
account," essentially a bank account allowing it to do business.

"You can't have a bank chartered by the state of Colorado and then 
nullified by the federal government," said Mark Mason, an attorney 
for the credit union.

Unless the Fed simply doesn't like the customers.

And, in this case, the customers work in the cannabis trade.

Fourth Corner hopes to be the first financial institution in the 
nation catering exclusively to the marijuana business.

But, although pot is legal here, it remains a Schedule I controlled 
substance along with LSD and heroin in the eyes of the federal government.

That means any bank working with the weed business faces prosecution.

"Banks face a number of risks if they choose to serve the industry, 
up to and including closure of their institutions," said Amanda 
Averch, director of communications for the Colorado Bankers 
Association. "Regulators can impose civil money penalties, 
ceaseand-desist orders, fines and can ban bankers from their careers for life."

Political remedies are being considered, but major roadblocks remain, 
leaving the $700 million-a-year cannabis industry running almost 
entirely on cash. Bags of it are taken to grocery stores to buy money 
orders to pay staff. Houses are rented and filled with safes full of 
cash. Phony bank accounts are created and then shut down when the 
money arrives reeking of pot.

Nearly everyone in the marijuana business has had bank accounts closed.

"So far we have lost 25 bank accounts," said Kristi Kelly, owner of 
the Good Meds medical marijuana dispensaries near Denver. "Our 
biggest area of exposure is what we do with our cash. Then how do we 
pay our bills? We are not talking about $20 but five- and six-figure bills."

Those who can have hired armed private security to guard the product 
and ferry cash around Colorado in armored vans.

The guards are often former military personnel with combat experience 
in Iraq and Afghanistan.

Criminals have targeted dozens of pot businesses.

Earlier this year, shots were fired during two robberies. In another 
incident, a man crashed a pickup through a grow house and chopped 
down $15,000 worth of plants. And then there was a gang preying on 
couriers moving cash around the city.

No one has been killed, but many believe it's just a matter of time.

And that's what got 26year-old Alex Mason thinking.

He had a lot of friends in the marijuana industry and was appalled at 
the obstacles they faced conducting a legitimate business. So he and 
his father, Mark Mason, came up with the idea of a credit union 
servicing the cannabis business. They assembled a staff, a chief 
executive and a board of directors, and last year they received a 
state charter.

"Forget whether you are for or against cannabis, there is no rational 
argument to keep it an all-cash economy," said credit union Executive 
Vice President Mark Goldfogel. "There is no scenario where black 
marketing cash from a legal business is sustainable."

According to Mark Mason, the situation pushes the cannabis industry 
to the margins of legality.

"Most have figured out a workaround to get money to the state and 
others through friends or under management companies," he said. "But 
it all comes very close to the textbook definition of money laundering."

Mason has filed suit against the Fed for denying the credit union a 
master account, and a hearing is set for Monday in federal court here.

A Fed spokesman declined comment.

Last year, the Obama administration issued new guidelines for banks 
wishing to do business with marijuana dealers that lessened the 
threat of prosecution but didn't offer immunity.

According to the Colorado Bankers Association, 12 small banks are now 
working with the cannabis industry on a limited basis, but they have 
been warned by federal regulators not to expand those accounts, which 
are being closely monitored.

Blue Line Protection Group, a security firm, is doing compliance 
checks for such banks to ensure their cannabis clients are obeying the law.

"We know the dispensary owners, what questions to ask and how much 
cash and product they produce," said Blue Line Vice President Michael 
Jerome. "We do on-site compliance for the banks, and they provide 
accounts for the businesses."

Blue Line is also opening a 12,000-square-foot fortified "vaulting 
and cash processing facility" to safeguard their clients' money.

Kelly, the dispensary owner, recently opened an account with a bank 
that asked not to be identified. She knows it could be shut at any time.

"When my first account was closed, I felt indignant," she said, "like 
I was being discriminated against."

It reminded Kelly of her grandmother, who had moved from China to 
Washington and stuffed her mattress with money because no one would 
give her a bank account.

"So these Chinese immigrants got together and opened their own credit 
union," she said. "I think there are some interesting parallels here. 
History has shown we can get through this, that we can remedy 
historical inequities."

The best solution may be an act of Congress.

Lawmakers, including Colorado Sens. Michael Bennet, a Democrat, and 
Cory Gardner, a Republican, have introduced legislation giving 
marijuana businesses access to banking while barring regulators from 
punishing banks who legally work with them.

It's supported by the Colorado banking industry and Gov. John 
Hickenlooper, a Democrat who opposed marijuana legalization.

But, until something changes, dispensary owners and growers will 
continue to play hide-and-seek with criminals and rely on guards to 
protect their crops and cash.
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MAP posted-by: Jay Bergstrom