Pubdate: Mon, 28 Oct 2013
Source: Herald, The (Everett, WA)
Copyright: 2013 The Daily Herald Co.
Contact:  http://www.heraldnet.com/
Details: http://www.mapinc.org/media/190
Author: Jerry Cornfield
Page: A1

FINANCIAL CENTERS READY TO SERVE POT INDUSTRY

But Banks and Credit Unions Are Leery About Money From Marijuana
Because Pot's Still Illegal Under Federal Law.

OLYMPIA - Community banks and credit unions are ready and willing to
provide financial services to entrepreneurs in the state's new legal
pot industry.

But they aren't able to, at least not yet.

Marijuana businesses, even ones that will soon be legally licensed in
this state, are considered criminal enterprises under federal law,
which makes handling their money a crime in the eyes of the Department
of Justice.

Until the agency changes its outlook or Congress changes the law - and
efforts are under way to do both - those getting into the pot business
can't open a bank account, secure a line of credit or obtain a loan
from a federally insured financial institution in their
neighborhood.

For those who make a living doing those things, it's
frustrating.

"We survive in our community and we prosper in our community by
providing banking services," said Denny Eliason, lobbyist for the
Washington Bankers Association, which represents nearly all of the
state's 93 banks. "It is not a matter of do we want to offer these
services. We're eager to but we're not willing because there is too
much at stake."

The landscape is the same for credit unions.

"Our hands are tied," said David Curtis, director of compliance
services for the Northwest Credit Union Association, which has 104
members in Washington. "Until we can get some official guidance,
everybody is in a holding pattern."

Under the federal Controlled Substances Act, marijuana is deemed a
dangerous drug and it's illegal to grow, distribute and sell it.

In August, U.S. Attorney General Eric Holder said his department would
not upend efforts of Washington and Colorado to implement regulated
marijuana industries approved by their voters. The agency will steer
clear as long as the states run their systems in a way that prevents
distribution to minors, keeps money from sales out of the coffers of
gangs and prevents diversion of marijuana to other states where
recreational use by adults remains illegal.

But the feds didn't greenlight banking and financial services. The
last time the department looked at the money side came in 2011 when it
put out guidelines for how it would deal with medical marijuana
businesses. The message to banks was clear: don't do it.

"Those who engage in transactions involving the proceeds of such
activity may also be in violation of federal money laundering statutes
and other federal financial laws," Deputy Attorney General James Cole
wrote in the 2011 memo.

A lack of banking options won't impede those who apply for a producer,
processor or retailer license in Washington starting Nov. 18.

"We don't require an applicant to have a business bank account," said
Brian Smith, communications director for the state Liquor Control
Board. "During the investigation phase of their application, we may
ask that they provide personal or business bank statements to verify
source of funds."

Without banking services, it's not farfetched to imagine retailers
keeping large sums of money in safes and paying taxes with suitcases
of cash.

Gov. Jay Inslee and Colorado Gov. John Hickenlooper pointed out such
concerns in an Oct. 2 letter to federal financial officials urging
them to find a way to permit normal banking transactions, credit card
services and other activities.

"Our states will soon be licensing hundreds of retail stores, each of
which will, without a normal banking relationship, be forced to
conduct business on an all-cash basis," the governors wrote in their
Oct. 2 letter. "This creates an unnecessary inviting target for
criminal activity."

Access to banking services and credit card processing is "a necessary
component in ensuring a highly regulated marijuana system that will
accurately track funds, prevent criminal involvement, and promote
public safety," they wrote.

Among those receiving the letter were heads of the Treasury
Department, Federal Deposit Insurance Corp. (FDIC), National Credit
Union Association and the Comptroller of the Currency.

"We're all talking. So much is in the hands of our federal
counterparts," said Scott Jarvis, director of the state's Department
of Financial Institutions. "Having all that cash running around
doesn't really provide the kind of safe environment the Attorney
General has said he wants to see."

If Jarvis gets asked his advice from a banker, he can't provide much
guidance.

"We're not telling them 'no.' We're not telling them 'yes'. We're
telling them you have to make your own decision," he said. "As a
result I think everybody is sitting back and waiting."

Representatives of banks and credit unions said any rule changes must
be crystal clear on what will, and will not, be allowed.

"We are going to be cautious," Eliason said. "It is an emerging
industry. It is going to be a lucrative one. We want an ironclad
assurance that we would not be putting charters at risk by banking
this industry."
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MAP posted-by: Matt