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(The New York Times)   Banks blunt pot investments   (nytimes.com) divider line 110
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7386 clicks; posted to Main » on 12 Jan 2014 at 5:36 AM (27 weeks ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2014-01-11 10:54:48 PM
Silly potheads, you need to set up a phony corporation first, then they'll happily take your money.
 
2014-01-11 11:25:12 PM
So the stoners never thought their clever plan all the way through?

That's a shame.
 
2014-01-11 11:29:25 PM
Please.  There will be bankers lining up at their doors soon.  They cant stay away from money and since when has anything about the law kept them from making a buck off the common man?  They know they'd never go to jail its not our way.  We punish those at the bottom for the crimes of those at the top.
 
2014-01-11 11:39:58 PM
I'm about to roll over an old 401k its only 8k so I'm going to take some risk. I'm going to invest it in the next Budweiser an hope I come out like the dell millionaires of the 90s.
 
2014-01-11 11:46:21 PM
Leaders in the marijuana trade point out that giving accounts to businesses would allow for more transparency and meticulous regulation and would help ensure that jurisdictions receive the taxes they are entitled to.

This is really the only bright spot in this story.


me texan: Please.  There will be bankers lining up at their doors soon.  They cant stay away from money and since when has anything about the law kept them from making a buck off the common man?  They know they'd never go to jail its not our way.  We punish those at the bottom for the crimes of those at the top.


The feds can fine banks up to $500,000 PER TRANSACTION. I think that's going to get their attention.
 
2014-01-12 12:08:25 AM
Good to know Big Paper still has its stranglehold on the industry....
 
2014-01-12 12:14:06 AM
VISA: It's everywhere you want it to be.
 
2014-01-12 12:16:36 AM

fusillade762: The feds can fine banks up to $500,000 PER TRANSACTION. I think that's going to get their attention


The Federal government is the fundamental problem.  This will open a market for state level actors using credit union corporate structures to make a killing.

Anyone want to start a Colorado bank?  All we need is about $5 million in guaranteed liquidity.
 
2014-01-12 12:24:07 AM

Marcus Aurelius: Anyone want to start a Colorado bank?  All we need is about $5 million in guaranteed liquidity.


Time to get together and open a 1st State Marijuana Credit Union, Nest Egg, and Fronted Coin.
 
2014-01-12 12:31:43 AM
They're still cool with laundering billions in cartel money, though. Right?

http://www.bloomberg.com/news/2013-03-31/money-laundering-banks-stil l- get-a-pass-from-u-s-.html
 
2014-01-12 12:34:38 AM

violentsalvation: Marcus Aurelius: Anyone want to start a Colorado bank?  All we need is about $5 million in guaranteed liquidity.

Time to get together and open a 1st State Marijuana Credit Union, Nest Egg, and Fronted Coin.


It wouldn't be the first.
 
2014-01-12 12:35:56 AM

fusillade762: The feds can fine banks up to $500,000 PER TRANSACTION. I think that's going to get their attention.


Yep.  And they'll pass those costs right on to their customers and shareholders.
 
2014-01-12 12:37:45 AM

violentsalvation: Marcus Aurelius: Anyone want to start a Colorado bank?  All we need is about $5 million in guaranteed liquidity.

Time to get together and open a 1st State Marijuana Credit Union, Nest Egg, and Fronted Coin.


It'll be like "A Wonderful Life", Uncle Billy will be high as a kite, Martini's will be a hookah bar, and no one will remember where the hell Zsu Zsu's petals are.

/"Hee Haw! That was my skull!"
 
2014-01-12 12:44:19 AM

NewportBarGuy: They're still cool with laundering billions in cartel money, though. Right?

http://www.bloomberg.com/news/2013-03-31/money-laundering-banks-stil l- get-a-pass-from-u-s-.html


This. As the old Stalin quote goes "The death of one man is a tragedy, the death of millions is a statistic"
 
2014-01-12 12:53:33 AM

fusillade762: NewportBarGuy: They're still cool with laundering billions in cartel money, though. Right?

http://www.bloomberg.com/news/2013-03-31/money-laundering-banks-stil l- get-a-pass-from-u-s-.html

This. As the old Stalin quote goes "The death of one man is a tragedy, the death of millions is a statistic"


Stalin spoke English? Crafty bugger, that one.
 
2014-01-12 01:05:04 AM

miss diminutive: fusillade762: NewportBarGuy: They're still cool with laundering billions in cartel money, though. Right?

http://www.bloomberg.com/news/2013-03-31/money-laundering-banks-stil l- get-a-pass-from-u-s-.html

This. As the old Stalin quote goes "The death of one man is a tragedy, the death of millions is a statistic"

Stalin spoke English? Crafty bugger, that one.


Confucius did too, apparently.

Weird.
 
2014-01-12 01:13:41 AM
Fark you. I'm not going to log in, NY Times. You're a single site, not a news aggregate full of drunks.
 
2014-01-12 01:47:07 AM
apparently it's a pretty good article.

I wouldn't know though since it's asking me for a log-in.
 
2014-01-12 02:13:21 AM

ajgeek: Fark you. I'm not going to log in, NY Times. You're a single site, not a news aggregate full of drunks.


You tells thems!!!!!
 
2014-01-12 02:24:26 AM
SEATTLE - In his second-floor office above a hair salon in north Seattle, Ryan Kunkel is seated on a couch placing $1,000 bricks of cash - dozens of them - in a rumpled brown paper bag. When he finishes, he stashes the money in the trunk of his BMW and sets off on an adrenalized drive downtown, darting through traffic and nervously checking to see if anyone is following him.

Despite the air of criminality, there is nothing illicit in what Mr. Kunkel is doing. He co-owns five medical marijuana dispensaries, and on this day he is heading to the Washington State Department of Revenue to commit the ultimate in law-abiding acts: paying taxes. After about 25 minutes at the agency, Mr. Kunkel emerges with a receipt for $51,321.

"Carrying such large amounts of cash is a terrible risk that freaks me out a bit because there is the fear in my mind that the next car pulling up beside me could be the crew that hijacks us," he said. "So, we have to play this never-ending shell game of different cars, different routes, different dates and different times."


Legal marijuana merchants like Mr. Kunkel - mainly medical marijuana outlets but also, starting this year, shops that sell recreational marijuana in Colorado and Washington - are grappling with a pressing predicament: Their businesses are conducted almost entirely in cash because it is exceedingly difficult for them to open and maintain bank accounts, and thus accept credit cards.

The problem underscores the patchwork nature of federal and state laws that have evolved fitfully as states have legalized some form of marijuana commerce. Though 20 states and the District of Columbia allow either medical or recreational marijuana use - with more likely to follow suit - the drug remains illegal under federal law. The Controlled Substances Act, enacted in 1970 classifies marijuana as a Schedule I drug, the most dangerous category, which also includes heroin, LSD and ecstasy.

As a result, banks, including state-chartered ones, are reluctant to provide traditional services to marijuana businesses. They fear that federal regulators and law enforcement authorities might punish them, with measures like large fines, for violating prohibitions on money-laundering, among other federal laws and regulations.

"Banking is the most urgent issue facing the legal cannabis industry today," said Aaron Smith, executive director of the National Cannabis Industry Association in Washington, D.C. Saying legal marijuana sales in the United States could reach $3 billion this year, Mr. Smith added: "So much money floating around outside the banking system is not safe, and it is not in anyone's interest. Federal law needs to be harmonized with state laws."

The limitations have created unique burdens for legal marijuana business owners. They pay employees with envelopes of cash. They haul Chipotle and Nordstrom bags containing thousands of dollars in $10 and $20 bills to supermarkets to buy money orders. When they are able to open bank accounts - often under false pretenses - many have taken to storing money in Tupperware containers filled with air fresheners to mask the smell of marijuana.

The all-cash nature of the business has also created huge security concerns for business owners. Many have installed panic buttons for workers in the event of a robbery and have set up a constellation of security cameras at their facilities beyond what is required, as well as floor sensors to detect break-ins. In Colorado, Blue Line Protection Group was formed a few months ago, specializing in protecting dispensaries and facilities that grow marijuana, and in providing transportation security. The firm largely uses military veterans who have Special Operations experience.

Marijuana business owners have devised strategies to avoid the suspicions of bankers. A number of legal operations have opened accounts by establishing holding companies with names that obscure the nature of their business. Some owners simply use personal bank accounts. Others have relied on local bank managers willing to take chances and bring them on as clients, or even offer tips on how to choose nondescript company names.

But the financial institutions eventually shut down many of these accounts after managers conclude the businesses are too much of a risk. It is not unusual for a legitimate marijuana business to go through a half-dozen bank accounts in a few years. While they are active, however, these accounts may have informal restrictions placed on them - some self-imposed - so they do not draw the scrutiny of bankers who may file suspicious-activity reports or would be required to report deposits over $10,000 in cash. The account holders may make only small deposits, and only at night and at certain branches. Mr. Kunkel of Seattle has such an account.

At the largest credit union in Washington State, BECU, about 20 accounts have been shut down in the last three years after it was discovered they were for businesses in the legal marijuana trade, Todd Pietzsch, a spokesman for the credit union, said.

Kristi Kelly, 36, who owns two dispensaries and several marijuana growing operations in the Denver area, said six bank accounts of hers had been canceled in the last 18 months. "Opening the account is not necessarily the problem," she said. "Our cash deposit levels flag a bank's compliance division."

Ms. Kelly, who had just paid $10,000 in cash to the City of Denver for licensing and application fees to expand her business, said that several times a week she carried around tens of thousands of dollars in a bag. "I never felt as illegitimate as the day I had to buy a cash counter," she said, adding that she spends three hours or so a day just managing the cash from her business's multiple locations.

A.T.M.s are common in marijuana outlets, but the business owners often have to use their own cash in the machines in case law enforcement authorities conduct a raid and seize the money.

Those marijuana operations that do have bank accounts or use the personal ones of their owners can use a cashless A.T.M. service in which a debit card is swiped at a dispensary and the money is transferred into the recipient's account.

"It is operating over the A.T.M. network and not the credit card network," said Lance Ott, whose company, Guardian Data Systems, provides this service. "The A.T.M. networks are not as regulated. This is the loophole."

Since legal marijuana operations, for the most part, cannot get bank loans, these small businesses have to rely on short-term loans from individuals, usually with higher interest rates.

To help, High Times magazine is starting a private equity fund to invest in marijuana businesses. But many investors may feel uneasy about marijuana businesses that do not have bank accounts. And without bank references, entrepreneurs say, it is much tougher to get lines of credit from vendors.

Leaders in the marijuana trade point out that giving accounts to businesses would allow for more transparency and meticulous regulation and would help ensure that jurisdictions receive the taxes they are entitled to.

Marijuana entrepreneurs and banks both would like clear guidelines from the government on how financial institutions can serve the industry. On Friday, six members of Colorado's congressional delegation sent a letter to the Treasury and the Justice Department requesting that they "expedite" that guidance.

In August, the Justice Department issued a memo indicating that it would not crack down on legal marijuana as long as eight regulatory requirements were met, like preventing revenue from the sale of marijuana from going to criminal enterprises and preventing the distribution of marijuana to minors. The memo did not address banking.

The Treasury Department's Financial Crimes Enforcement Network hopes to circulate recommendations by the end of this month to officials at the Treasury and the Justice Department for their opinions, an official briefed on the situation said. There is no timetable for formal guidelines.

Richard Riese, senior vice president for regulatory compliance at the American Bankers Association, said banks wanted clear and comprehensive guidelines on how to do business with the legal marijuana industry.

Mr. Riese said, for instance, that banks would want to know that they were not "aiding and abetting" a criminal enterprise if they provided services to marijuana businesses. "Banks will need a lot of detail from regulators to get the satisfaction and comfort they are looking for," he said.
 
2014-01-12 02:36:07 AM

log_jammin: apparently it's a pretty good article.

I wouldn't know though since it's asking me for a log-in.


Salon version of pretty much the same article.

"Absurd on every single level": How the feds may be crippling the legal pot industry
 
2014-01-12 03:29:31 AM
ok, so from what I gather, this is just a slow system getting up to speed with a new situation.
 
2014-01-12 05:01:30 AM

Marcus Aurelius: miss diminutive: Stalin spoke English? Crafty bugger, that one.

Confucius did too, apparently.


So did Jesus.  This I know.  For the Bible tells me so.
 
2014-01-12 05:46:06 AM
You can easily get around this restriction by aligning yourself with a drug cartel.
 
2014-01-12 05:48:49 AM

fusillade762: me texan: Please.  There will be bankers lining up at their doors soon.  They cant stay away from money and since when has anything about the law kept them from making a buck off the common man?  They know they'd never go to jail its not our way.  We punish those at the bottom for the crimes of those at the top.

The feds can fine banks up to $500,000 PER TRANSACTION. I think that's going to get their attention.


On the other hand, banks have lots of lobbyists on staff that can work to rein in the feds and get laws changed. If Colorado proves there is a significant amount of money to be made in the marijuana industry, the banks and several other big businesses with something to gain from legal pot (like tobacco companies seeing their profits declining and looking for a new market to exploit) are likely going to start pushing for nationwide decriminalization if Colorado and Washington manage to even semi-successfuly roll out legalization on a state level. Just a whiff of a new, lucrative market is enough to start the dominos falling quickly in government.
 
2014-01-12 05:48:51 AM
Also: pastebin of article:  http://pastebin.com/kkY8gSe2
 
2014-01-12 05:57:24 AM
There's tons of money to be had with pot. I farking spend more on pot in a year than most people make in a year. My guy is local,grows his own, lives a few blocks away from me, has maybe 10 customers, and makes money hand over fist. Has for decades, all out of the same house. In monied, whitebread suburbia. I may even buy legal if it was as good in quality, but cheaper. Maybe not, since I'd rather give a guy tax-free money, but still.
 
2014-01-12 06:03:19 AM
One possible solution may be for a referendum to set up a state bank for pot dealers. As soon as the bankers get a whiff of the government cutting in on their action, they'll get their pet congressmen to change the banking law.
 
2014-01-12 06:17:45 AM

me texan: Please.  There will be bankers lining up at their doors soon.  They cant stay away from money and since when has anything about the law kept them from making a buck off the common man?  They know they'd never go to jail its not our way.  We punish those at the bottom for the crimes of those at the top.

 
2014-01-12 06:21:09 AM

uttertosh: me texan: Please.  There will be bankers lining up at their doors soon.  They cant stay away from money and since when has anything about the law kept them from making a buck off the common man?  They know they'd never go to jail its not our way.  We punish those at the bottom for the crimes of those at the top.


you're home uttertosh go drunk and you accidental  the whole of your response this comment
 
2014-01-12 06:22:04 AM

Ethical objections to legal business is a market inefficiency.

Someone will come in and - for a markup to cover their additional exposure - plug this gap in the markets. There are more than enough bankers who don't quail at the amoral, to worry about the  unethical.

 
2014-01-12 06:23:11 AM

Mad_Radhu: (like tobacco companies seeing their profits declining and looking for a new market to exploit)


that's what I'm waiting for, the tobacco companies coming up with their own brands.

you know it's going to happen, it's just a matter of when.
 
GBB
2014-01-12 06:28:21 AM

me texan: fusillade762: The feds can fine banks up to $500,000 PER TRANSACTION. I think that's going to get their attention.

Yep.  And they'll pass those costs right on to their customers and shareholders.


Shareholders?   No.  Customers? Yes.
 
2014-01-12 06:44:49 AM

gwowen: Ethical objections to legal business is a market inefficiency.


It's not an ethical objection when it's a quasi-legal business. It's a legal dilemma which is why the banks don't want to touch it with a 10 foot pole right now. Lets say that in 2016 an anti-pot republican gets in the White House and tells the FBI, DEA and so on to start back up with full enforcement of laws already on the books. Then what? The banks risk getting hammered with fines for being in the drug trade (or at least enabling it) and get the smack down from the Fed, the SEC and so on with possible jail time in the mix.

That's why the banks are staying away in droves as soon as they find out that the business is a pot based business. They won't get in trouble for stopping transactions as soon as their compliance division finds out but if they continue doing business after that they are at considerable risk. Until the federal laws are actually changed (and that's not going to happen before 2016 unless something drastic happens to make them change) they are not knowingly going to be getting into any aspect of the pot business.
 
2014-01-12 07:53:31 AM
ya know when our store manager had to carry large sums of cash from one place to the other he got a ride from one of the local cops. why couldn't they work an arrangement like this? or at least a wells fargo service.
 
2014-01-12 07:53:55 AM

fusillade762: Leaders in the marijuana trade point out that giving accounts to businesses would allow for more transparency and meticulous regulation and would help ensure that jurisdictions receive the taxes they are entitled to.

This is really the only bright spot in this story.


me texan: Please.  There will be bankers lining up at their doors soon.  They cant stay away from money and since when has anything about the law kept them from making a buck off the common man?  They know they'd never go to jail its not our way.  We punish those at the bottom for the crimes of those at the top.

The feds can fine banks up to $500,000 PER TRANSACTION. I think that's going to get their attention.


And has that EVER happened?  The banks had NO problem laundering money for the cartels and when busted six ways to Sunday they paid a fine that was less than the profits they'd made off the money laundering.
 
2014-01-12 07:57:25 AM
I used to smoke pot, but I had to stop. The handles kept poking me in the eyes,
 
2014-01-12 07:59:49 AM

log_jammin: Mad_Radhu: (like tobacco companies seeing their profits declining and looking for a new market to exploit)

that's what I'm waiting for, the tobacco companies coming up with their own brands.

you know it's going to happen, it's just a matter of when.


If I was a grower I'd be hiring some marketing guys and be setting myself up to become the Jack Daniels of weed.
 
2014-01-12 08:26:59 AM
static1.businessinsider.com
 
2014-01-12 08:29:54 AM
If I was in the pot business, I would also be worried about getting pulled over by a cop that would confiscate all the cash. The property confiscation laws are legalised robbery. I'm sure most cops in WA and CO would listen to reason, but I guarantee there are some who would take it to buy some new toys for their department.
 
2014-01-12 08:43:21 AM
Ever head of an armored car?
 
2014-01-12 08:43:56 AM

Wrencher: If I was in the pot business, I would also be worried about getting pulled over by a cop that would confiscate all the cash. The property confiscation laws are legalised robbery. I'm sure most cops in WA and CO would listen to reason, but I guarantee there are some who would take it to buy some new toys for their department.


Sadly, I was thinking of this as well.
 
2014-01-12 08:48:41 AM

log_jammin: Mad_Radhu: (like tobacco companies seeing their profits declining and looking for a new market to exploit)

that's what I'm waiting for, the tobacco companies coming up with their own brands.

you know it's going to happen, it's just a matter of when.


No it probably will not happen. I see it about as likely as the tobacco industry getting into the beer game. Weed is not going to creep into tobacco profit. Ecigarettes on the other hand will and already are hitting tobacco profit.

I suspect there will not be any major corporate players in marijuana.
 
2014-01-12 08:55:20 AM

Hobodeluxe: ya know when our store manager had to carry large sums of cash from one place to the other he got a ride from one of the local cops. why couldn't they work an arrangement like this? or at least a wells fargo service.


Same reasoning as the banks. Loomis Armored does not want to transport "drug money" because they can't afford a Federal indictment.

Obama could change his mind at any moment, or a Federal DA could decide to prosecute end his career with a bang by actually enforcing the law.
 
2014-01-12 08:58:02 AM
The industry is still in its infancy (can't believe that's the case in 2014)...give it time.
 
2014-01-12 08:59:30 AM
And if these legal pot business try to transfer funds between their own separate businesses - say between a company selling pot and a separate holding company that conducting a different business they will run afoul of the feds if they don't file a CTR (Currency Transaction Report) with the IRS. You can be prosecuted and fined for failure to report each and every cash transaction over $10,000, even if you are, in effect, giving it to yourself.

I work for a check casher. We operate 8 stores and due to state regulations, it was less cost and paperwork for the owner to set up separate companies rather than one large company. Every time we transfer over 10K between certain stores, we have to file a CTR with the feds. The IRS audits our operation on a very regular basis and we have to be squeaky clean.

And, because we are what is defined as a Money Service Business (registered as such with the IRS) most banks won't touch our business. There are a couple who won't even allow our owner to have a personal account with them.
 
2014-01-12 09:01:41 AM

tripleseven: log_jammin: Mad_Radhu: (like tobacco companies seeing their profits declining and looking for a new market to exploit)

that's what I'm waiting for, the tobacco companies coming up with their own brands.

you know it's going to happen, it's just a matter of when.

No it probably will not happen. I see it about as likely as the tobacco industry getting into the beer game. Weed is not going to creep into tobacco profit. Ecigarettes on the other hand will and already are hitting tobacco profit.


Where do you think the nicotine comes from?
 
2014-01-12 09:02:02 AM
It's gonna be interesting when pot businesses and their owners start contributing large sums to political campaigns.
 
2014-01-12 09:13:39 AM

CptnSpldng: You can be prosecuted and fined for failure to report each and every cash transaction over $10,000, even if you are, in effect, giving it to yourself.


And that number has not been adjusted for inflation since it was introduced and there is no indication it ever will be.
 
2014-01-12 09:21:08 AM
I was going to say in the cartel thread yesterday, but didn't get around to it: Business opportunity for some soldiers fresh back from Afghanistan or Iraq. Cash transport. I see there is already at least one company like that mentioned in the article.
 
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