Banks Say No To Marijuana Money, Legal or Not

posted in: Cannabis News 0

In his second-floor office above a hair salon in north Seattle, Ryan Kunkel is seated on a couch placing $1,000 bricks of cash — dozens of them — in a rumpled brown paper bag. When he finishes, he stashes the money in the trunk of his BMW and sets off on an adrenalized drive downtown, darting through traffic and nervously checking to see if anyone is following him.

Despite the air of criminality, there is nothing illicit in what Mr. Kunkel is doing. He co-owns five legal medical marijuana dispensaries, and on this day he is heading to the Washington State Department of Revenue to commit the ultimate in law-abiding acts: paying taxes. After about 25 minutes at the agency, Mr. Kunkel emerges with a receipt for $51,321.

“Carrying such large amounts of cash is a terrible risk that freaks me out a bit because there is the fear in my mind that the next car pulling up beside me could be the crew that hijacks us,” he said. “So, we have to play this never-ending shell game of different cars, different routes, different dates and different times.”

Legal marijuana merchants like Mr. Kunkel — mainly medical marijuana dispensaries but also, starting this year, shops that sell recreational marijuana in Colorado and Washington — are grappling with a pressing predicament: Their businesses are conducted almost entirely in cash because it is exceedingly difficult for them to open and maintain bank accounts, and thus accept credit cards.

The problem underscores the patchwork nature of federal and state laws that have evolved fitfully as states have legalized some form of marijuana commerce. Though 20 states and the District of Columbia allow either medical or recreational marijuana use — with more likely to follow suit — the drug remains illegal under federal law. The Controlled Substances Act, enacted in 1970 classifies marijuana as a Schedule I drug, the most dangerous category, which also includes heroin, LSD and ecstasy.

As a result, banks, including state-chartered ones, are reluctant to provide traditional services to marijuana businesses. They fear that federal regulators and law enforcement authorities might punish them, with measures like large fines, for violating prohibitions on money-laundering, among other federal laws and regulations.

“Banking is the most urgent issue facing the legal cannabis industry today,” said Aaron Smith, executive director of the National Cannabis Industry Association in Washington, D.C. Saying legal marijuana sales in the United States could reach $3 billion this year, Mr. Smith added: “So much money floating around outside the banking system is not safe, and it is not in anyone’s interest. Federal law needs to be harmonized with state laws.”

The limitations have created unique burdens for legal marijuana business owners. They pay employees with envelopes of cash. They haul Chipotle and Nordstrom bags containing thousands of dollars in $10 and $20 bills to supermarkets to buy money orders. When they are able to open bank accounts — often under false pretenses — many have taken to storing money in Tupperware containers filled with air fresheners to mask the smell of marijuana.

The all-cash nature of the business has also created huge security concerns for business owners. Many have installed panic buttons for workers in the event of a robbery and have set up a constellation of security cameras at their facilities beyond what is required, as well as floor sensors to detect break-ins. In Colorado, Blue Line Protection Group was formed a few months ago, specializing in protecting dispensaries and facilities that grow marijuana, and in providing transportation security. The firm largely uses military veterans who have Special Operations experience.

Marijuana business owners have devised strategies to avoid the suspicions of bankers. A number of legal operations have opened accounts by establishing holding companies with names that obscure the nature of their business. Some owners simply use personal bank accounts. Others have relied on local bank managers willing to take chances and bring them on as clients, or even offer tips on how to choose nondescript company names.

But the financial institutions eventually shut down many of these accounts after managers conclude the businesses are too much of a risk. It is not unusual for a legitimate marijuana business to go through a half-dozen bank accounts in a few years. While they are active, however, these accounts may have informal restrictions placed on them — some self-imposed — so they do not draw the scrutiny of bankers who may file suspicious-activity reports or would be required to report deposits over $10,000 in cash. The account holders may make only small deposits, and only at night and at certain branches. Mr. Kunkel of Seattle has such an account.

At the largest credit union in Washington State, BECU, about 20 accounts have been shut down in the last three years after it was discovered they were for businesses in the legal marijuana trade, Todd Pietzsch, a spokesman for the credit union, said.

Kristi Kelly, 36, who owns two dispensaries and several marijuana growing operations in the Denver area, said six bank accounts of hers had been canceled in the last 18 months. “Opening the account is not necessarily the problem,” she said. “Our cash deposit levels flag a bank’s compliance division.”

Ms. Kelly, who had just paid $10,000 in cash to the City of Denver for licensing and application fees to expand her business, said that several times a week she carried around tens of thousands of dollars in a bag. “I never felt as illegitimate as the day I had to buy a cash counter,” she said, adding that she spends three hours or so a day just managing the cash from her business’s multiple locations.

A.T.M.s are common in marijuana outlets, but the business owners often have to use their own cash in the machines in case law enforcement authorities conduct a raid and seize the money.

Those marijuana operations that do have bank accounts or use the personal ones of their owners can use a cashless A.T.M. service in which a debit card is swiped at a dispensary and the money is transferred into the recipient’s account.

“It is operating over the A.T.M. network and not the credit card network,” said Lance Ott, whose company, Guardian Data Systems, provides this service. “The A.T.M. networks are not as regulated. This is the loophole.”

Since legal marijuana operations, for the most part, cannot get bank loans, these small businesses have to rely on short-term loans from individuals, usually with higher interest rates.

To help, High Times magazine is starting a private equity fund to invest in marijuana businesses. But many investors may feel uneasy about marijuana businesses that do not have bank accounts. And without bank references, entrepreneurs say, it is much tougher to get lines of credit from vendors.

Leaders in the marijuana trade point out that giving accounts to businesses would allow for more transparency and meticulous regulation and would help ensure that jurisdictions receive the taxes they are entitled to.

Marijuana entrepreneurs and banks both would like clear guidelines from the government on how financial institutions can serve the industry. On Friday, six members of Colorado’s congressional delegation sent a letter to the Treasury and the Justice Department requesting that they “expedite” that guidance.

In August, the Justice Department issued a memo indicating that it would not crack down on legal marijuana as long as eight regulatory requirements were met, like preventing revenue from the sale of marijuana from going to criminal enterprises and preventing the distribution of marijuana to minors. The memo did not address banking.

The Treasury Department’s Financial Crimes Enforcement Network hopes to circulate recommendations by the end of this month to officials at the Treasury and the Justice Department for their opinions, an official briefed on the situation said. There is no timetable for formal guidelines.

Richard Riese, senior vice president for regulatory compliance at the American Bankers Association, said banks wanted clear and comprehensive guidelines on how to do business with the legal marijuana industry.

Mr. Riese said, for instance, that banks would want to know that they were not “aiding and abetting” a criminal enterprise if they provided services to marijuana businesses. “Banks will need a lot of detail from regulators to get the satisfaction and comfort they are looking for,” he said.

Sheelagh McNeill contributed research.

Source: New York Times (NY)
Author: Serge F. Kovaleskijan
Published: January 11, 2014
Copyright: 2014 The New York Times Company
Contact: [email protected]
Website: http://www.nytimes.com/

Cannabis Sales are Months Away

posted in: Cannabis News 0

Regulations for the medical use of marijuana in Massachusetts are scheduled to be adopted next month, but even then, many key details will remain unresolved, making it likely that dispensaries will not open for many months, a top state health official said Wednesday.

Dr. Lauren Smith, the interim public health commissioner, said in an interview after a meeting of the state Public Health Council that her agency has “a lot of operational challenges” to confront before dispensaries could open, including the development of an interactive, online database that will allow police to check whether patients have been authorized by their physicians to use marijuana.

Physicians would also be required to enter information about the amount of marijuana recommended for each patient.

“We are having to develop from scratch regulatory oversight at the same time an industry is developing from scratch,” Smith said.

“We need a thorough, thoughtful review process,” she said. “To do it right, it’s going to take time.”

For more than two hours Wednesday, Public Health Department staff members detailed the agency’s 45 pages of draft regulations to the Public Health Council, an appointed body of academics and health advocates that is slated to vote on the rules May 8. That would clear the way for the rules to go into effect by the end of May.

Iyah Romm, special advisor to the health commissioner, told the council that the answers to many of their questions had not been worked out and that the agency will address the concerns through a “subregulation” process after the panel’s May vote.

Among concerns is the plan to require medical marijuana dispensaries to test their products for contamination, including heavy metals and pesticides, even though specialists say it is easier to mandate testing than to do it reliably.

Another issue is whether dispensaries will be required to set aside money to compensate any patients harmed by a product. Federal regulations against medical marijuana could make it difficult for companies to obtain liability insurance.

Voters ­approved a ballot referendum in November legalizing marijuana for medical use in the state, and that measure required the Department of Public Health to issue regulations to implement the law.

Smith said the Public Health Department has no staff to oversee the medical marijuana program and would depend on money raised from dispensary licensing fees, which have not yet been set, to hire personnel.

Lack of staff was a concern raised by council member Helen Caulton-Harris, Springfield’s health and human services director. The draft regulations say the Public Health Department will inspect the facilities, including those that produce and sell edible marijuana products, such as candies and cookies.

Typically, local boards of health inspect food establishments in their communities. Harris said that in her experience, when a local business, such as a massage parlor or a barber shop, falls under state jurisdiction for routine inspections, things fall through the cracks.

“A lot of times, because of staffing shortages, those inspections don’t happen in a timely manner,” Harris said.

The state’s draft rules allow communities to pass local regulations for the dispensaries and assess local fees, as long as they do not conflict with state laws.

Among the provisions not included in the draft rules is reciprocity with other states, so patients certified for medical marijuana use in Massachusetts may not be protected from prosecution elsewhere.

A few states, such as Michigan and Arizona, allow out-of-state patients with proper registration cards to possess marijuana in their states, but most do not, and that has caused some problems, said Steph Sherer, executive director of Americans for Safe Access, a nonprofit that advocates for ­research and medical use of marijuana.

“It’s a question we get a lot from patients: ‘I am traveling and can I take my medicine?’ ” Sherer said. “Unfortunately, the answer often is, at your own risk.”

Source: Boston Globe (MA)
Author: Kay Lazar, Globe Staff
Published: April 11, 2013
Copyright: 2013 Globe Newspaper Company
Contact: [email protected]
Website: http://www.boston.com/globe/

Legal Marijuana Sales Set To Quadruple By 2018

posted in: Cannabis News 0

U.S. legal marijuana sales are projected to hit $1.5 billion this year, and that could look like nothing in just a few years. Data from Medical Marijuana Business Daily shows that total sales could quadruple to $6 billion by 2018 on the back of legalization efforts in Washington and Colorado, as well as the growing medical marijuana industry.

The two states both legalized the recreational use of weed in November. Elsewhere, 18 states and Washington, D.C. have made medical marijuana legal, while 10 others have formal measures pending to legalize medical marijuana, according to the National Cannabis Industry Association.

That’s reflective of a wider acceptance of the drug. A recent Pew Research Center poll discovered a majority of Americans support pot legalization for the first time in more than four decades. As many as 52 percent of Americans support legalizing weed — 45 percent do not — and nearly three-fourths say the amount of money spent enforcing marijuana usage laws is not worth the cost.

Such growing support has led marijuana-tied businesses to pitch their companies to Wall Street investors, the Los Angeles Times reported in March. Take Vincent Mehdizadeh, founder of MedBox, an automated weed dispensing machine company. He’s seeking $20 million from investors in anticipation of potential expansion.

“Everybody’s loosening up a lot because they realize the momentum has shifted and the financial world is going to have to make room for this industry,” Mehdizadeh told the LAT. “Wall Street and investment banks are going to have to come along for the ride, eventually.”

Thinking about investing in the marijuana industry yourself? Be sure to keep the risks in mind. It was reported last year that 500 of the estimated 3,000 U.S. marijuana dispensaries either had been closed by the government or shut down in the past year.

Source: Huffington Post (NY)
Author: Caroline Fairchild
Published: April 8, 2013
Copyright: 2013 HuffingtonPost.com, LLC
Contact: [email protected]
Website: http://www.huffingtonpost.com/

Cannabis Sales are Months Away

posted in: Cannabis News 0

Regulations for the medical use of marijuana in Massachusetts are scheduled to be adopted next month, but even then, many key details will remain unresolved, making it likely that dispensaries will not open for many months, a top state health official said Wednesday.

Dr. Lauren Smith, the interim public health commissioner, said in an interview after a meeting of the state Public Health Council that her agency has “a lot of operational challenges” to confront before dispensaries could open, including the development of an interactive, online database that will allow police to check whether patients have been authorized by their physicians to use marijuana.

Physicians would also be required to enter information about the amount of marijuana recommended for each patient.

“We are having to develop from scratch regulatory oversight at the same time an industry is developing from scratch,” Smith said.

“We need a thorough, thoughtful review process,” she said. “To do it right, it’s going to take time.”

For more than two hours Wednesday, Public Health Department staff members detailed the agency’s 45 pages of draft regulations to the Public Health Council, an appointed body of academics and health advocates that is slated to vote on the rules May 8. That would clear the way for the rules to go into effect by the end of May.

Iyah Romm, special advisor to the health commissioner, told the council that the answers to many of their questions had not been worked out and that the agency will address the concerns through a “subregulation” process after the panel’s May vote.

Among concerns is the plan to require medical marijuana dispensaries to test their products for contamination, including heavy metals and pesticides, even though specialists say it is easier to mandate testing than to do it reliably.

Another issue is whether dispensaries will be required to set aside money to compensate any patients harmed by a product. Federal regulations against medical marijuana could make it difficult for companies to obtain liability insurance.

Voters ­approved a ballot referendum in November legalizing marijuana for medical use in the state, and that measure required the Department of Public Health to issue regulations to implement the law.

Smith said the Public Health Department has no staff to oversee the medical marijuana program and would depend on money raised from dispensary licensing fees, which have not yet been set, to hire personnel.

Lack of staff was a concern raised by council member Helen Caulton-Harris, Springfield’s health and human services director. The draft regulations say the Public Health Department will inspect the facilities, including those that produce and sell edible marijuana products, such as candies and cookies.

Typically, local boards of health inspect food establishments in their communities. Harris said that in her experience, when a local business, such as a massage parlor or a barber shop, falls under state jurisdiction for routine inspections, things fall through the cracks.

“A lot of times, because of staffing shortages, those inspections don’t happen in a timely manner,” Harris said.

The state’s draft rules allow communities to pass local regulations for the dispensaries and assess local fees, as long as they do not conflict with state laws.

Among the provisions not included in the draft rules is reciprocity with other states, so patients certified for medical marijuana use in Massachusetts may not be protected from prosecution elsewhere.

A few states, such as Michigan and Arizona, allow out-of-state patients with proper registration cards to possess marijuana in their states, but most do not, and that has caused some problems, said Steph Sherer, executive director of Americans for Safe Access, a nonprofit that advocates for ­research and medical use of marijuana.

“It’s a question we get a lot from patients: ‘I am traveling and can I take my medicine?’ ” Sherer said. “Unfortunately, the answer often is, at your own risk.”

Source: Boston Globe (MA)
Author: Kay Lazar, Globe Staff
Published: April 11, 2013
Copyright: 2013 Globe Newspaper Company
Contact: [email protected]
Website: http://www.boston.com/globe/

Legal Marijuana Sales Set To Quadruple By 2018

posted in: Cannabis News 0

U.S. legal marijuana sales are projected to hit $1.5 billion this year, and that could look like nothing in just a few years. Data from Medical Marijuana Business Daily shows that total sales could quadruple to $6 billion by 2018 on the back of legalization efforts in Washington and Colorado, as well as the growing medical marijuana industry.

The two states both legalized the recreational use of weed in November. Elsewhere, 18 states and Washington, D.C. have made medical marijuana legal, while 10 others have formal measures pending to legalize medical marijuana, according to the National Cannabis Industry Association.

That’s reflective of a wider acceptance of the drug. A recent Pew Research Center poll discovered a majority of Americans support pot legalization for the first time in more than four decades. As many as 52 percent of Americans support legalizing weed — 45 percent do not — and nearly three-fourths say the amount of money spent enforcing marijuana usage laws is not worth the cost.

Such growing support has led marijuana-tied businesses to pitch their companies to Wall Street investors, the Los Angeles Times reported in March. Take Vincent Mehdizadeh, founder of MedBox, an automated weed dispensing machine company. He’s seeking $20 million from investors in anticipation of potential expansion.

“Everybody’s loosening up a lot because they realize the momentum has shifted and the financial world is going to have to make room for this industry,” Mehdizadeh told the LAT. “Wall Street and investment banks are going to have to come along for the ride, eventually.”

Thinking about investing in the marijuana industry yourself? Be sure to keep the risks in mind. It was reported last year that 500 of the estimated 3,000 U.S. marijuana dispensaries either had been closed by the government or shut down in the past year.

Source: Huffington Post (NY)
Author: Caroline Fairchild
Published: April 8, 2013
Copyright: 2013 HuffingtonPost.com, LLC
Contact: [email protected]
Website: http://www.huffingtonpost.com/