No Easy Money

From wealthy business owners to budtenders and window washers, people who earn money from the marijuana industry can’t put it in the bank.

By Kay Turnbaugh Editor’s Note: For their protection, the marijuana workers quoted in this article are not named.

The Treasury tent of Buffalo Bill’s world-famous Wild West Show, probably around 1900. The photo shows (left to right) Jule Keen, the show’s treasurer; William McCune, a former Army colonel; and Jim Mitchell, a “pretty tough” cowboy who rode bucking broncos. Behind Mitchell is a safe with a throw over it. You can see the combination lock for the safe. (Photo courtesy Buffalo Bill Museum and Grave0 — The Treasury tent of Buffalo Bill’s world-famous Wild West Show, probably around 1900. The photo shows (left to right) Jule Keen, the show’s treasurer; William McCune, a former Army colonel; and Jim Mitchell, a “pretty tough” cowboy who rode bucking broncos. Behind Mitchell is a safe with a throw over it. You can see the combination lock for the safe.
(Photo courtesy Buffalo Bill Museum and Grave0

Running a marijuana business is a lot like jumping back in time to when Wild West shows like Buffalo Bill’s crisscrossed the country in the late 1800s. In those days long before computerized banking, banks were scarce in many places, and were mostly used to hold onto customers’ money until they withdrew it. The hugely popular Wild West shows traveled with a safe where proceeds from daily ticket sales were kept. On payday, performers and crews were paid from its stash of cash. Payments for food, printing, livestock and other necessities also came from the safe. Even though cowboys were often assigned to guard it, robberies were inevitable. Colorado’s new marijuana businesses operate much like Buffalo Bill—not by choice, but because of the friction between federal law and state law concerning the legality of marijuana sales. Because marijuana is still illegal in the eyes of the federal government, banks refuse customers in the marijuana business, fearing the loss of their federal insurance if they deposit money earned in what the feds consider an illegal business.

Next Window, Please

One local businessman who has owned marijuana dispensaries for five years has been approved for 20 state and local licenses, and his businesses will make a little over $10 million this year. Yet he has no place to put it, having been rejected by eight banks. Everything—payroll for 50 employees, taxes and bills—has to be paid in cash because he doesn’t have a bank account. The first time he arrived at the IRS building with $120,000 in cash to pay his payroll taxes, it took two employees more than four hours to count it. (“Now they want me to call and make an appointment.”) On top of that, the IRS tries to encourage automatic deposits by charging a 10-percent penalty for paying payroll taxes with cash. “They are penalizing all of us who are trying to pay taxes,” the businessman says. What should take three clicks on the computer takes most of a day. He doesn’t want to ask employees to do it, because it is dangerous. It’s public knowledge when tax payments are due, and since all the marijuana businesses in the state have to make cash payments, robberies have occurred. He tried using Brink’s, “but they got a call from the DEA that they were moving drug money,” and Brink’s dropped him.

The financial officer at another medical marijuana company that has been rejected by four banks says the reasons he was given vary, from objections to the name of the company to the amount of cash deposited in the account. His accountant advised him to start a new company for the sole purpose of paying bills and payroll. A lot of major corporations like Walmart use payroll companies, but the bank removed the account anyway. Some workers in the marijuana industry have had their personal accounts shut down. Others have found ways to keep a personal account, but even businesses that supply basic services to the marijuana industry, such as washing windows, can have their bank accounts closed. “Banks will laugh at you if you want to get a loan,” says another employee. In order to buy a car, even with excellent credit, one person in the industry had to gloss over his employment, saying only that he worked in the “medical field.” Another gave up trying to buy a house when the underwriter backed out at closing—twice.

Why Banks Say No

Banks have good reason to be leery of dealing with marijuana-related businesses. They could be accused of violating federal law, including money laundering and aiding and abetting the distribution of marijuana. A bank that loans money and puts the proceeds in a checking account could be viewed as conspiring to distribute marijuana. Bank officers, directors and employees can be prosecuted for these crimes, which carry five-to-10-year mandatory prison sentences; the maximum sentence for participating in a marijuana conspiracy is life imprisonment. For money laundering, you could spend up to 20 years in prison. But, as U.S. Attorney General Eric Holder points out, “There’s a public-safety component to this.” Huge amounts of cash lying around, “with no place for it to be appropriately deposited,” should concern law enforcement, Holder says, and it seems the government should worry about the possibilities for tax evasion created when a business is cash-based. A memo from the Justice Department meant to reassure banks had the opposite effect. The memo said that the prosecution of financial crimes would follow the same eight federal law-enforcement priorities for prosecution of marijuana offenses, such as sales to minors and interstate smuggling. Unfortunately, that leaves banks in the position of making sure their customers (and their customers’ customers) comply with the law. And, even if banks follow the guidelines, the memo offers no guarantee that they won’t be prosecuted. In fact, Deputy Attorney General James Cole wrote that enforcement practices could change at any time, without warning. Elevations Credit Union, which has been providing banking services to Boulder since 1952, sent a letter to all its business members in 2009 asking if they were providing the sale, production or storage of marijuana. Members who did not respond in 30 days had their accounts closed. One local grower says his account was dropped after federal regulators spent 15 days in his bank. Sometimes a bank will give the customer a few weeks to get his affairs in order before closing his account, but sometimes the closure is immediate. One grower whose account was closed suddenly received a cashier’s check for the money in the account, but he’s never been able to cash the check. The law doesn’t allow checks made out to a business to be cashed—you can only deposit them—and without a bank account, he can’t do that.

Languishing Laws

U.S. Rep. Ed Perlmutter (D-Colo.), along with a bipartisan group of 23 legislators, introduced the Marijuana Business Access to Bank Act (H.R. 2652) in 2013. The bill is still languishing in committee and has only a 2-percent chance of moving forward and only an 8-percent chance of being enacted, which sadly is not far off the average for any bill proposed in today’s Congress. Colorado Gov. John Hickenlooper (D) signed a bill in June that could create the world’s first state-level cooperative banking system for legal marijuana companies. The credit-union-like co-ops would have to be approved by the Federal Reserve System. If the co-ops could get approved, the network would help marijuana businesses gain access to credit and merchant services, but it does nothing to change the fact that marijuana is federally classified as a Schedule 1 drug. For that reason, it’s generally acknowledged by both the banking industry and the pot industry that the bill won’t work. What it can do is show federal authorities that Colorado has done everything it can to resolve the banking issue and bounce the ball back to the feds to either reschedule marijuana as a less-dangerous drug or find a Congressional solution. “All we hear is that they are going to address the banking problem, but nothing happens,” says a local grower. “Banks themselves aren’t the problem. It’s got to come from the federal government, and the federal government is slow. I think it’s going to be a long, long time before we get a solution.” φ Kay Turnbaugh writes about a variety of subjects for Boulder Magazine. She is the author of Around Nederland, the award-winning The Last of the Wild West Cowgirls, and The Mountain Pine Beetle—Tiny but Mighty.