Pubdate: Sun, 24 Apr 2016
Source: Columbian, The (WA)
Copyright: 2016 Associated Press
Contact:  http://www.columbian.com/
Details: http://www.mapinc.org/media/92
Authors: Kristena Hansen and Gene Johnson, Associated Press

BANK WOES EASING FOR LEGAL POT BUSINESSES

Number of Financial Institutions Willing to Handle Pot Money Rise

SALEM, Ore. (AP) - In a once-empty office in Oregon's Department of 
Revenue headquarters, officials have created a mini-fortress.

Recently hired workers sit behind bulletproof glass at a window 
inaccessible to the public. Police officers brought out of retirement 
roam the building with handguns on their hips. Security cameras 
monitor the hallways.

The changes, paid for with a $3.5 million budget and prompted by the 
state's newly legal marijuana industry, are similar to those that 
Colorado and Washington made for accepting huge cash payments of pot 
taxes from businesses historically blocked from banking.

Such security arrangements are a necessity for safety reasons, but 
new statistics suggest that could be starting to change.

Federal data show that the number of banks and credit unions across 
the country willing to handle pot money under Treasury Department 
guidelines issued two years ago has jumped from 51 in March 2014 to 
301 last month.

More than three years into Washington's legal pot experiment, a large 
majority of businesses are paying taxes electronically, a sign of 
better access to bank accounts. The state is even poised to require 
electronic payments unless the shops can show a good reason to pay in cash.

"People don't call me anymore and say, 'I'm opening a new business 
and I can't find a bank account,' " said Robert McVay, a Seattle 
marijuana business attorney.

Marijuana's prohibition under federal law still presents a serious 
hurdle for pot-related businesses, which generally can't accept 
credit or debit cards due to card companies' fears about liability 
for money laundering or other offenses.

Many legal pot shops in Washington, Colorado and Oregon - the only 
states with legal recreational sales so far - and dispensaries in 
medical marijuana states keep ATMs on site to facilitate cash transactions.

Most banking access has been through local credit unions, which 
limits options for the businesses. It's still difficult to get loans, 
too, though some have been able to by putting up real property, 
rather than inventory, as collateral.

OK, with conditions

Two years ago, the Treasury Department gave banks permission to do 
business with legal marijuana entities with conditions, including 
trying to make sure the customers are complying with regulations.

Under the guidance, banks must review state license applications for 
marijuana customers, request information about the business, develop 
an understanding of the types of products to be sold and monitor 
publicly available sources for any negative information about the business.

With that in mind, Washington officials began posting the sales 
activity of licensed marijuana growers, sellers and processors online 
- - along with any warnings or fines issued to businesses caught out of 
compliance.

The idea was to make it easier for banks or credit unions to discover 
red flags that might indicate illegal activity; such information is 
not posted online in Oregon or Colorado, where state officials 
refused to provide a breakdown of how many pot businesses pay their 
taxes in cash.

Only two credit unions serviced Washington's legal marijuana industry 
early on - Seattle-based Salal and Spokane-based Numerica - but now 
several others have followed suit, and even big banks seem more 
tolerant of pot-related accounts, McVay said.

In December, only 10 percent of sales and business tax payments from 
pot firms were in cash. Three-quarters of businesses paying special 
pot taxes to Washington's Liquor and Cannabis Board in the first two 
months of 2016 did so electronically or by check, according to the state.

No one is suggesting that states do away with their beefed-up 
security arrangements or new cash-counting machines just yet.

Oregon, for instance, has collected $6.84 million from the pot tax's 
first two months this year - exceeding expectations for the entire 
year - and more than half of the state's pot dealers paid that in 
cash. Of the $15 million-plus Washington collected from marijuana 
sales in February, roughly a quarter, or nearly $4 million, was cash 
carried through the lobby of the liquor board's headquarters in Olympia.

Oregon isn't set up yet to accept electronic payments, and the 
Department of Revenue is even planning to build out a bigger, 
permanent site on its main floor to accept larger volumes of pot 
cash. Washington, however, is moving in a different direction.

Language tucked into a budget deal Washington lawmakers reached last 
month allows the liquor board to require tax payments in electronic 
form, though it's unclear how soon it might do that.

Calling it a "public safety concern," board spokesman Brian Smith 
said the agency wants to reduce the amount of cash coming through the lobby.

The marijuana industry remains eager for a federal solution to their 
banking problem, and many hope that if California legalizes the 
recreational use of marijuana in November it might put enough 
pressure on Congress to change laws.

"Some sanity has to be brought into this banking issue," said Beau 
Whitney, an industry economist in Portland who handles government 
affairs for a local dispensary. "At some point in time, this is going 
to be an industry that's going to be too big to ignore."
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MAP posted-by: Jay Bergstrom