Pubdate: Sun, 01 May 2016
Source: Alaska Dispatch News (AK)
Copyright: 2016 Alaska Dispatch Publishing
Note: Anchorage Daily News until July '14
Author: Annie Zak


Sara Williams just isn't that comfortable with handling $10 million in cash.

Williams is the CEO of Midnight Greenery, a retail store she and 
co-owner Tina Smith plan to open in Anchorage this year to sell 
cannabis flowers, concentrates, oils, edibles and other products.

But like most who are eager to get into Alaska's marijuana industry, 
Williams is worried about what to do with all the incoming cash that 
she can't keep in a bank -- especially if business goes well.

Most banks want nothing to do with marijuana businesses because 
cannabis is still illegal at the federal level. That means businesses 
like Midnight Greenery will have to deal almost entirely with cash.

"You can have a safe for daily purposes," Williams said, "but my 
business plan is saying I could be pushing $10 million annually, in 
cash. Millions of dollars needs an off-site storage backup plan, for sure."

Williams said she asked Wells Fargo, Northrim Bank and Matanuska 
Valley Federal Credit Union about opening an account and was denied 
by all three.

As a result, Midnight Greenery is planning to use a vault at an 
Anchorage security company to keep its cash safe.

But Williams and other entrepreneurs might have other options soon: 
Outside companies which could help ease cannabis-cash anxiety are now 
eyeing Alaska as one of their next stops.

A California company called PayQwick is looking at making a move north.

"We're very interested in Alaska and want to be there," said Ken 
Berke, PayQwick CEO. It's simply a matter of when.

PayQwick, which Berke likens to PayPal for pot, allows customers and 
businesses in the marijuana industry to use an app or PayQwick cards, 
which are linked to other bank accounts, to pay for marijuana 
products, getting around the problem of not being able to use an 
actual debit or credit card in a store. In addition to customers, 
retailers and processors can use the system to make payments to each 
other as well.

The company's system relies on seed-to-sale tracking systems for 
payments to work. Alaska recently chose Franwell, a tracking company 
that Oregon and Colorado also use, for that service. Berke said he 
wants to wait until that system takes off in Alaska to do business here.

PayQwick debuted in Washington state last year, where Berke said it's 
already hit $8 million in transactions. The company is also preparing 
to set up shop in Oregon and Colorado.

Arizona-based Hypur is another company that marijuana businesses 
might look to for some relief. Hypur develops software for financial 
institutions and helps cash-intensive industries -- including 
cannabis -- conduct cashless transactions.

[Highly Informed: Answers to your questions about marijuana in Alaska]

Though Hypur marketing director Jessica Lee wouldn't mention much 
about the company's plans in specific states, she said "Alaska is one 
that's ... been on our radar, and there's conversations going on in Alaska."

In 2014, the U.S. Department of Justice and the Treasury's Financial 
Crimes Enforcement Network spelled out new guidelines for 
prosecutors, and for banks that want to provide services for 
marijuana businesses. The guidelines explained law enforcement would 
focus on high-priority cases -- like marijuana ending up in the hands 
of minors, or cannabis revenue going to criminal organizations -- and 
said banks would have to monitor any marijuana clients' accounts very closely.

But the agencies also reiterated that taking cannabis money was still 
federally illegal and financial institutions could still be 
prosecuted -- not exactly comforting news for banks.

Some financial institutions in Washington state actually have opened 
up to marijuana, said Rick Riccobono, director of banks at 
Washington's Department of Financial Institutions. Those include 
Salal Credit Union, Numerica Credit Union and O Bee Credit Union, he said.

Salal has been banking the marijuana industry for about two years. 
Carmella Houston, vice president of business services there, said it 
was a challenge to work with cannabis businesses -- the credit union 
is state-chartered but still federally insured -- but it's 
"definitely been profitable." Salal has fielded about 2,000 inquiries 
and opened about 200 accounts.

"It's been crazy," she said. "The demand has been more than what we can do."

In Alaska, though, it appears that no one is warming to the idea.

"The DOJ came out and said, 'If you follow these things, maybe it'll 
be OK,' but it's just so unclear right now," said Keith Fernandez, 
vice president of corporate communications and development at Denali 
Federal Credit Union. Denali doesn't do business with marijuana 
companies. "I think all financial institutions are hoping at the 
federal level someone will step in and say, 'OK, it either is allowed 
or it isn't.' But right now it is such a gray area."

Others are more tight-lipped.

"Our board has decided not to serve those accounts," said Chrissy 
Bell, senior vice president of communications and culture at 
Anchorage-based Credit Union 1. "I think there's not much more we have to say."

Steve Lundgren is president and CEO of Denali State Bank and the 
president of the Alaska Bankers Association. He said despite those 
federal guidelines, the association has still decided not to support 
banking marijuana.

"Even though we could bank the business, it would require so much 
federal oversight on our part that most of the banks here in the 
state have decided not to do that," Lundgren said. "We're not 
advocating for anything, but it would help us if federal law was 
aligned with state law."

The state's banking agency is also watching how institutions will 
handle an influx of cash.

"We've been trying to figure out how best we can help," said Kevin 
Anselm, director of the state's Division of Banking and Securities. 
She said she's watched PayQwick from afar and that there's a big need 
in Alaska for companies that will help with the banking conundrum, 
especially because having all-cash businesses could present a public 
safety issue.

"The banks and institutions are very nervous about taking in 
marijuana deposits or dealing with clients, even existing clients, 
that might be doing any sort of marijuana business," she said. "We 
really need a federal law change."

And until that happens, or a new company crops up, Alaska's pot 
businesses are left to fend for themselves. Some are turning to 
private security firms, such as Valkyrie Security and Asset 
Protection, to protect their money and marijuana.

That's the company Williams said was the answer to Midnight 
Greenery's banking questions, and she might even store some cannabis 
with the firm in addition to cash.

Sutton-based Valkyrie, which was founded in 2015 specifically to 
address the needs of the marijuana industry, doesn't just provide 
secure storage vaults. It also arranges armed guards and armored 
transport across Alaska's road system, alarm systems and more.

The company has three locations: in Anchorage, Fairbanks and the 
Matanuska-Susitna Borough, which will also be protected by armed guards.

Larry Clark, Valkyrie CEO, said he's in talks with many companies 
that have applied for marijuana licenses from the state, reaching 
from Fairbanks to Anchorage. He's even received calls from Barrow and Sitka.

"We're trying to be the extra layer of security," he said.

But it won't be simple for Valkyrie to provide these services. For 
one thing, it's no small task to transport cash and pot some 350 
miles between Alaska's largest city and Fairbanks in an unassuming 
armored SUV. Clark said the company is constantly vigilant about 
someone trying to hijack its operations.

"Some of the costs the company is absorbing in the beginning to make 
this all happen, and show the state and municipal leaders that this 
is a very viable industry but it has to be handled very carefully ... 
We don't want to see an increase in crime," Clark said.

Wasilla-based Cheeky Monkey is hoping to become the "Starbucks 
franchise of cannabis dispensaries," said co-founder Joshua Furlong. 
But there are big challenges in the effort to go national and 
international, considering banks and even PayPal have put up roadblocks.

"The whole money side of things, that's the most difficult part of 
the business," Furlong said. "We still get turned down by the banks. 
It makes it difficult for security, transparency and legality."

Right now, though, there aren't many options, despite the want and need.

"We want our community to be served," Anselm said. "The state of 
Alaska is open for business."
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MAP posted-by: Jay Bergstrom