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With an estimated projection of over $6 billion in revenue, there has been little to no access to marijuana banking. Currently, California’s marijuana industry stands as a cash-only market.

State officials are wrestling with how to move the industry’s money out of bags and into something more secure and stable as California leans toward a recreational marijuana marketplace next year when cannabis will be available for sale to adults without medical marijuana cards.

The obvious plan would be to have a bank account, yet that’s unlikely to be happening anytime in the near future, Deputy Treasurer Tim Schaefer stated in an interview this week. Shaefer and California State Treasurer John Chiang are talking about banking and its alternatives for the marijuana industry at a 9 a.m. public meeting that occurred this past Thursday at the Glaser Center in downtown Santa Rosa.

“If you have those kinds of bags of currency rolling around the state, you can see why it’s so important to solve the banking problem,” Schaefer said.

The event is part of Chiang’s statewide “Cannabis Banking Working Group” originally convened in December to get experts on banking and its options with professionals in the marijuana industry to discuss the issue in meetings throughout the state.

This past Thursday in Santa Rosa, representatives from Summit State Bank and Santa Rosa-based cannabis manufacturer CannaCraft will meet with experts on banking regulations, cash collection and payments systems.

A cash-only market comes with risks, from safety concerns for employees working with large quantities of cash to staff time required to handle all aspects of the business involving money.

There are other concerns, too. When CannaCraft was raided by Santa Rosa police back in July while the city’s rules on cannabis manufacturing were in flux, it was payday and the company had $500,000 in cash sorted into envelopes for staff. Police confiscated the money and still have it, even though the case has stalled and prosecutors have not charged any of the operators with a crime.

“It’s the most serious issue facing the industry,” stated Kirk Anderson, CannaCraft’s chief operations officer. Anderson’s brother is Darius Anderson, a principal in Sonoma Media Investments, which owns The Press Democrat.

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As marijuana shops start to sprout and grow within states that have legalized the drug, they face a critical stumbling road block – lack of access to the kind of routine banking services other businesses take for granted. U.S. Sen. Elizabeth Warren, a Massachusetts Democrat, is making a solid attempt at making an effort to ensure vendors working with legal marijuana businesses, from chemists who test marijuana for harmful substances to firms that provide security, don’t have their banking services taken away.

It’s part of a much bigger plan as well as an effort by Warren and others to bring the burgeoning $7 billion marijuana industry in from a fiscal limbo she said which forces many shops to rely solely on cash, making them tempting targets for criminals. After voters in Warren’s home state approved a November ballot question surfaced in regards to legalize the recreational use of pot, she joined nine other senators in sending a letter to a key federal regulator, the Financial Crimes Enforcement Network, calling on it to issue additional guidance to help banks provide services to marijuana shop vendors.

Twenty-eight states currently to date have legalized marijuana for medicinal or recreational use. Warren, a member of the Senate Banking Committee, said there are benefits to letting marijuana-based businesses move away from a cash-only model.

“You make sure that people are really paying their taxes. You know that the money is not being diverted to some kind of criminal enterprise,” Warren said recently.

“And it’s just a plain old safety issue. You don’t want people walking in with guns and masks and saying, ‘Give me all your cash.'” A spokesman for the Financial Crimes Enforcement Network said the agency is reviewing the letter.

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Marijuana merchants continue to face difficulty in depositing their cash with banks fearful of possible repercussions enforced by the federal government. The numbers are increasing however with a 45% increase in banks working with marijuana businesses in the last year. Still merchants face the difficulty of an all-cash business by stashing cash in storage units, back offices, and armored vans. Since marijuana was legalized in Colorado three years ago, almost 600 dispensary robberies have been reported in Denver.

Those in favor of marijuana legalization believe the November 8th election could have a major impact on the federal laws thus giving fearful banks a reason to get involved. Nine states including Florida and California are scheduled to vote, an outcome that could result in 34 states sanctioning marijuana for medical and/or recreational use, an estimated $23B in annual sales. An industry that large must be able to engage in business with banks as that is a lot of cash floating around, prompting a federal decision to be made.

One conflict of interest banks face is the requirement from the Treasury Dept. to report suspected drug crimes, while in 2014 the Justice Department said it would not prosecute banks for serving state-sanctioned pot businesses. According to the Treasury Department, 301 banks were serving marijuana businesses.
That National Cannabis Association has been lobbying for a law that would ensure banks face no consequences for handling marijuana cash.

Some states have tried their own remedies to the problem, for example: Colorado created a credit union system for state-sanctioned marijuana businesses that fell apart when the Kansas City Federal Reserve denied a Colorado pot credit union access to the national payments system. According to Tom Dresslar spokesman for California’s Department of Business Oversight, California has no plans to develop such

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There has not been a bit of cannabis sold in Alaska, however, some bank accounts connected to people in the growing marijuana industry are already being taken away. Referencing strict federal laws around marijuana, Alaska USA Federal Credit Union has ceased to keep the accounts of multiple customers open. Credit Union 1 has also closed down someone’s account, according to company officials. Cole Hollister, one of the owners of Fairbanks-based cultivation facility Pakalolo Supply Co. Inc. received a letter informing him that his account with Alaska USA was shut down.

“It recently came to our attention that you are an affiliate of the marijuana cultivation facility, Pakalolo,” the letter states, citing the company’s state cannabis license number. As the first company licensed by the state, Hollister just started growing commercial marijuana in late July. He states that this move was entirely uncalled for.

“Nothing’s happened yet,” he responded. “There’s no business, there’s no income, there’s no illegal activity going on.”

The letter gives Hollister thirty days to close the account.

“It’s just standard practice for us,” Dan McCue, senior vice president of corporate administration at Alaska USA, said. “If it’s an account related to the cannabis industry, it’s an account that we can’t maintain.”

McCue did not want to confirm how many accounts were shut down, but the Fairbanks Daily-News Miner reported ten personal accounts linked to cannabis-related businesses had been taken away.

“It’s not just sales,” McCue added. “That’s the distinction. It’s related to the business, so there’s all kinds of things you can do to get your business started. We established a policy, we have the right to do that.”

Hollister stated that he kept the account for over three decades and that it is merely a savings accounts. He claims that the account has never been used for anything related to cannabis.

“They have no reason and really no justification to assume guilt,” Hollister said.

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Years after Colorado completely legalized the offer of cannabis, most banks there still don’t offer administrations to the organizations related. Budgetary establishments are stuck between state law that has legalized pot and government law that bans it. Banks’ government controllers don’t completely perceive such organizations and force onerous reporting prerequisites on banks that manage them. This has been a great burden to the cannabis industry, but it looks like that is going to change soon.

Last week, the United States Senate Appropriations Committee approved an addition to the Financial Services and General Government Appropriations bill that is going to make it easier for banks to provide services to the cannabis industry. At the moment, many banks are scared to open up accounts for cannabis businesses because of federal penalties. As a result, many marijuana businesses have been operating simply on cash.

“More than half of the U.S. population lives in jurisdictions where marijuana is legal for adult or medical use,” Robert Capecchi, director of federal policies for the Marijuana Policy Project, stated. “Millions of marijuana consumers are relying on licensed and regulated businesses to provide them with safe and legal access to marijuana.”

“Current federal policy all but ensures marijuana businesses operate on a cash-only basis, which raises safety concerns for their employees and the surrounding communities,” Capecchi added. “This measure should ease financial institutions’ concerns about opening accounts for these state-legal businesses.”

For this bill to become law, the entire Senate would need to pass the appropriations bill. In addition to that, the House must then take on similar lexicon in its Financial Services and General Government Appropriations bill. Finally, the final step would be the approval of the president. The Senate Appropriations Committee passed a similar amendment last year, however, it was not included in the last spending bill.

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Cannabis has been legalized in some form in 23 states now. However, marijuana businesses are not allowed to deposit their earnings in a bank because of federal banking laws. The issue has been a huge burden to Congress, but a solution may be on its way. A change in the new financial services spending bill would prohibit the federal government from squandering money on punishing banks that accept money from legal marijuana businesses. This would lower the ability of federal agencies to penalize the financial institutions.

Being able to have access to banks would end up lowering the cash-only businesses’ risk of being robbed by letting consumers pay with debit and credit cards, the probability that the business could be used to launder money and resolve the issue of trying to pay taxes with cash.

“Forcing businessmen and businesswomen who are operating legally under Oregon state law to shuttle around gym bags full of cash are an invitation to crime and malfeasance,” Sen. Jeff Merkley, D-Ore, said. “It’s time to let banks serve these legal businesses without fearing devastating reprisals from the federal government.”

Merkley’s state has already legalized recreational and medical marijuana, so he is aware of the issues. In fact, the Senator introduced a bill that would make banks that accept marijuana businesses as clients immune from federal prosecution. Unfortunately, though, the bill has not been able to pass through the Senate Banking, Housing and Urban Affairs Committee for the last couple of months. Committee Chairman Richard Shelby, R-Ala., said on Tuesday that he is not planning on bringing the bill up for approval in his committee. Therefore, Merkley decided to find a way around it. By using the financial services appropriations bill, Merkley was able to allow banks to serve marijuana businesses. Spending bills are usually “must-pass” legislations.

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At the moment, four states have legalized recreational marijuana and that number will likely expand even if Ohio recently rejected the decision to legalize marijuana. Now that more and more states are legalizing marijuana, the marijuana industry is becoming much more profitable. Just in Colorado, recreational marijuana made $700 million and could even reach $1 billion in 2016, according to the Washington Post. Although the money is completely legal, most makes refuse to take the money accumulated from marijuana.

The reason that the banks will not take the money is because marijuana is still illegal under United States law, and banks are expected to comply to federal regulations. It would still be legal for the banks to take marijuana money without violating federal law, but many steps would need to be taken to make sure they are not breaking the law. Vice President of the American Bankers Association, Rob Rowe, stated that if banks do not accept funds from marijuana companies and something goes wrong, the bank may lose its charter.

For sundry banks throughout the United States, the extra steps are not worth it. Only 220 of America’s 7,600 banks and credit unions accept money from marijuana businesses according to Bloomberg in October. So this means that legal marijuana is a cash-only industry. This remains an issue for consumers because they must pat for marijuana in cash, but is an even bigger issue for growers and distributors.

“A lot of people hear ‘cash only’ and think that means they can’t accept credit cards,” Director of the National Cannabis Industry Association, Taylor West, said to ThinkProgress. “That’s true, but the real complications come on the backend. You’re paying your staff in cash, your utility bills, your mortgages, and your taxes. Not being able to handle these transactions electronically is just incredibly difficult.”

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Besides hollow gestures by the federal government that said they are willing to let the banking industry to work with business in the marijuana industry, not long ago a denial of a Colorado credit union by the nation’s centralized banking operation implies a different behavior altogether.

The Fourth Corner Credit Union in Denver applied this past year for a “master account” with the Federal Reserve that would have developed a go to banking location exclusively for the state’s marijuana industry.
Yet, after months of consideration, the feds eventually denied the credit union the ability to start conducting business like the rest of civilized America.

Not only would this first of a kind banking selection have provided cannabis business with a place keep millions of dollars in cash revenue, yet it would have also allowed cultivation operations and marijuana shops to be on the look out for loans and various other important financial solutions to promote proper growth. However, after submitting to months of grueling inquiries from the Fed, the credit union was denied.

Yet the result is not etched in stone for the credit union. According to the New York Times, Fourth Corner Credit Union, which has the backing of Colorado Governor John Hickenlooper, filed a federal lawsuit against the banking operation this past Thursday, insisting that the marijuana trade be given “equal access” to the centralized bank of the United States.

Attorney, Mark Mason states that throughout the whole application process, the Fed was looking for a smart way to deny their application. Currently, the organization is preparing to let a federal judge, well versed in “applying the law” make the choice.

“The Fourth Corner Credit Union (“TFCCU”) sued the Federal Reserve Bank of Kansas City and the National Credit Union Administration in federal court in Denver to get a fair and impartial hearing on its request for a master account,” Mason said in a statement.

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