Federal law makes it impossible for the legal marijuana industry to put its money in banks. The dangers this produces:
One benefit of banks is the security they offer. And with all the marijuana-related cash exchanging hands in Colorado these days, security is a pre-eminent concern. It doesn’t help that there seem to be fewer and fewer people around to help guard that cash. Last summer, the Drug Enforcement Administration reportedly began pressuring armored-car companies to stop working with marijuana companies. And last month, the Denver Police Department barred its off-duty officers from working security at marijuana operations, despite the fact that many moonlight as security guards at liquor stores and bars. That’s because department policy prohibits off-duty officers from working with any business that “constitutes a threat to the status of dignity of the police,” such as porn stores, strip clubs—and now, pot shops.
“They’re setting marijuana up to be a cash business that can’t protect itself,” says [Michael] Elliott [executive director of the Medical Marijuana Industry Group]. “The roles have switched. Now the marijuana industry is the one working to keep things safe.”
Update from a reader:
I’m a credit analyst for a small holding company with locations in Colorado. More and more over the last several years we’ve seen weed businesses on property rent rolls.
In previous years, if a customer wanted to purchase or refinance a building with a dispensary we would require removal of the tenant prior to closing. This was simply a matter a risk management. No one knew what would happen if the feds decided to shut it all down. Executives in most community banks have taken a ‘better safe than sorry’ approach.
I’m not a compliance expert, but right now it appears that Treasury is deciding how to handle the issue of suspicious activity reports required by law when large cash deposits are made. I am certain they understand that legalized cannabis is upon us and there’s no going back. Hell, even my most conservative friends in the industry have accepted as much. And I believe there is sincere concern among both bankers and regulators about the safety issues that arise from the transport and storage of huge piles of cash. They are just trying to figure out a way to solve the problem without a huge bureaucratic mess. When Treasury figures out how to finesse the issue, we will get some direction and can respond accordingly.
Once marijuana businesses can make deposits, they will quickly be considered legitimate in the eyes of their community banks. Instead of avoiding cannabis businesses, we will compete for them.
The Dish 