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Wed February 19, 2014
Feds Consider How Colo. Pot Shops Can Get Bank Accounts
Originally published on Wed February 19, 2014 5:37 am
STEVE INSKEEP, HOST:
The Treasury and Justice Departments issued guidelines, last week, allowing marijuana stores to do their banking like any other small business. The new rules assures banks there will be no retribution if they provide financial services to state licensed firms that provide medical or recreational marijuana. Banks are still not so eager to play since the drug is still against federal law, which leaves legit pot businesses dealing mostly in cash.
Ben Markus reports from Colorado Public Radio.
BEN MARKUS, BYLINE: When investor Andy Telsey was ready to move on from his part ownership in a medical marijuana store, he asked his partners to buy him out. When they came to give him his money, it was not in the form of a check.
ANDY TELSEY: No. They gave me a shopping bag filled with cash.
MARKUS: Telsey says their bank account had been shut down because an employee tried to deposit money that reeked of marijuana. Looking at the bag of cash, Telsey, who is a securities attorney by trade, was incredulous.
TELSEY: It wasn't like in a suitcase like you see on TV, that's wrapped up with $100 bills, you know, wrapped up nicely. These were, you know, fives, 10s and 20s - even singles. I'm going really, you gave me singles.
MARKUS: Tracking all the cash is an accounting nightmare. That's why Jamie Lewis hired a full-time employee to manage it. Lewis co-owns a marijuana store in Denver. She sells both medical and recreational pot. She says gave up after seven different bank accounts were shut down in the last few years.
JAMIE LEWIS: Setting up accounts and then having them for up to 30 to 60 days, and then having to shut them down, is almost a tease. So, you know, just rip the Band-Aid off and we go cash all the way.
MARKUS: Lewis says one account was shut down after her monthly electric bill raised flags: It was $30,000. Those grow lights use a lot of power. Now her dispensary is forced to pay its bills in cash and money orders. She says it's probably what doing business was like before checking accounts became widespread in the 19th century.
LEWIS: I have to physically see you in order to pay you. That's prehistoric.
MARKUS: And dangerous, Lewis points out that many of Colorado's 500 pot stores hire private security and employees vary travel times and routes, as they move cash around.
LEWIS: We're fortunate that nothing really bad has happened. But I mean it's just a matter of time.
ELLIOTT KLUG: It is concerning when you go to turn to someone, and you're asked - you're going to ask somebody to go make a payment. And they're like: Do I want to give you $13,000 to drive across town with. Are you OK with that?
MARKUS: Elliot Klug runs the Pink House dispensary chain. He says he has one small checking account left. He uses it for part of his payroll. He says his bank doesn't know - or doesn't want to know - that it's a marijuana account. But if newly legalized recreational pot in Colorado is as lucrative as he's hoping, it could bring bigger problems.
KLUG: Scale starts to crush you. You know, you can hide at a smaller size. But once you get bigger, then there's nobody that's going to look the other way.
MARKUS: Some dispensaries say they funnel money into bank accounts through holding companies to mask the origin. That's money laundering just to get a checking account. But Jenifer Waller, with the Colorado Bankers Association, says if banks knowingly opened the accounts, they'd get in a lot of trouble.
JENIFER WALLER: Not only would we facilitate money laundering, we become an active participant in money laundering by accepting the deposit, if we knowingly know it's a marijuana industry.
MARKUS: Despite the Treasury and Justice Department guidelines, Waller and dispensaries say the best solution is for Congress to change the law to explicitly allow these accounts.
In the meantime investors like Andy Telsey, who we met earlier in the story, say they'll stay out of the marijuana business.
TELSEY: Unfortunately, and I'm hoping that this isn't the case. I'm hoping that somebody doesn't have to get hurt in order for somebody to actually do something.
MARKUS: The word that these dispensaries are cash businesses is already out. Armed robbers hit about half-dozen stores in the Denver area last year.
For NPR News, I'm Ben Markus in Denver.
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INSKEEP: This is NPR News.
(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.