Pubdate: Thu, 14 Jul 2016
Source: SF Weekly (CA)
Column: Chem Tales
Copyright: 2016 Village Voice Media
Author: John Geluardiis


As the California campaign for the Adult Use of Marijuana Act gains 
momentum and state economists forecast an industry that could grow to 
$15 billion annually by 2020, creating thousands of jobs and 
generating millions in tax revenue, there's a dark cloud hanging over 
potential victory celebrations on Nov. 8: The multibillion industry 
will have no legal baking options.

If approved by voters, new cannabis businesses in California will 
have to overcome an obstacle that has dogged the industry in 25 
medical marijuana states and four recreational-use states - Colorado, 
Oregon, Washington, and Alaska. There simply is no safe, efficient, 
and legal banking. The Attorney General's Office made that very clear 
with the now infamous 2011 "Cole Memo," which warned bankers not to 
open cannabis-related accounts or they could face money-laundering 
charges or possibly lose their FDIC insurance, which would be ruinous.

Oregon Sen. Jeff Merkley said the current cannabis banking laws are 
not only outdated, but they also inhibit reliable tax collection and 
create a business environment prone to crime and violence. Oregon's 
estimated legal cannabis market is expected to bring in a 
half-billion dollars during its first 14 months, and Merkley said he 
is worried about the negative impact that poorly thought out federal 
banking regulations will have on cannabis employees and the community 
in general. "The federal government should not be forcing Oregon's 
legal marijuana businesses to carry gym bags full of cash to pay 
their taxes, employees and bills," Merkley says. "This is an 
invitation to robberies, money laundering, and organized crime."

Merkley joined Washington Sen. Patty Murray to amend the financial 
services bill that would allow the cannabis industry reliable and 
legal access to banking. The Senate Appropriations Committee narrowly 
approved the amendment by a 16-14 vote. The amendment has yet to pass 
the full Senate, which will be a difficult battle.

There are some banking options for cannabis businesses, though they 
are all technically illegal according to federal regulations, and 
there is always a chance cannabis accounts will be closed and even 
confiscated. One option for cannabis entrepreneurs is from holding 
companies or open accounts using disguised or misleading names, such 
as Highland Organics, Mildred's Notions and Potions, or Deduca Bros. 

Such accounts are highly uncertain because the Justice Department and 
the U.S. Treasury have issued warnings to banks to be on the lookout 
for cash that smells like marijuana (American paper currency absorbs 
strong odors) and to be aware of what the IRS calls "structured" 
deposits. Dispensaries sometimes bring in large sums of cash, and 
anyone making a deposit of more than $10,000 is required to fill out 
IRS forms. To avoid attracting attention, dispensary owners will make 
several deposits in lesser amounts say, three deposits of $5,000. But 
even that attracts attention and creates an additional hardship on 
dispensaries as far as time, accounting, and exposure to robbery, 
according to Nate Bradley of the California Cannabis Industry Association.

"It's an issue," Bradley says. "The large amounts of cash cannabis 
businesses are forced to keep on hand makes them a target, and it's 
no joke. Just last month, a security guard was shot and killed in a 
suburban area of Denver. It's a very serious security issue and a 
public safety nightmare."

Bradley says that banks will also close the accounts of businesses 
indirectly associated with the cannabis industry. "If say a security 
company or an accounting firm tries to deposit a check from a 
business called 'Green Tree Marijuana Remedies,' they can suddenly 
find themselves without banking services."

California Rep. Jared Huffman, who has endorsed the Adult Use of 
Marijuana Act, co-sponsored a bill in Congress that would allow 
cannabis businesses access to banking, but the bill has yet to gain 
traction. Federal support for the cannabis industry will likely come 
incrementally as more states legalize medical and recreational 
cannabis. Huffman says besides banking, the federal government needs 
to seriously consider lifting other burdens on the burgeoning 
industry, such as restrictions on using the U.S. Postal Service and 
amending punitive IRS tax codes that don't allow cannabis businesses 
to write off typical business expenses.

"Right now there's deadlock because of a chicken-and-egg situation. 
Politically, Congress is not going to step up and enact meaningful 
legislation until more than half of states have legalized marijuana," 
Huffman says. "There is widespread public support for the industry, 
but if you're a senator or congressman from Georgia or Texas, there's 
a different sensibility."

Despite the banking hardship on the cannabis industry, there is a 
general sense among cannabis entrepreneurs and advocates that change 
is coming. They are confident, according to Bradley, that it will 
just take time to bridge the gulf between a federal government still 
clinging to outdated, overreaching drug laws from the early 1970s, 
and the present-day reality of predominant public support for a safe 
drug that is generating billions of dollars and creating thousands of jobs.

"We are very confident that banking policy is going to change," 
Bradley says. "And we believe the passage of the Adult Use of 
Marijuana Act will be the straw, a very important and large straw, 
that very well may break the camel's back."

John Geluardiis the author of Cannabiz: The Explosive Rise of the 
Medical Marijuana Industry.
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