10/25/2014

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Big dilemma: Banks won't take money that smells like marijuana

Big dilemma: Banks won't take money that smells like marijuana
SEATTLE -- Imagine setting up a multi-billion dollar legal business without using a bank? That's what our state is facing as it wrestles with legalizing a marijuana industry.

It's a serious dilemma that puts our state on conflict with federal law. The problem? Money that smells like pot won't fly in the banking industry.

Cash has an interesting quality -- it absorbs smells. So if it's kept anywhere near marijuana, you'll have problems taking it to the bank.

"I guarantee you that you are going to talk to the bank manager and that's not a comfortable situation to be in," said John Davis.

Davis knows that first hand. He's had his business checking, and credit card accounts shut down once the banks found out he runs a West Seattle medical marijuana access point. Banks don't anything to do with pot.

"Everything I do here has to be cash, which makes it more attractive to theft which is why my store is built like a bank on steroids," Davis said.

His employees follow a strict routine to avoid the marijuana smell, putting cash in a separate safe. It's a provocative dilemma as our state wrestles with a new multi-billion dollar legal pot industry that needs the banks involvement.

For banks, it comes down to a money laundering issue because money made from pot is illegal in their eyes. Since banks are regulated by the federal government, and the feds see marijuana as illegal, any bank knowingly receiving money from a business selling an illegal drug -- regardless of state law -- is subject to federal penalties.

"Right now, it doesn't make sense to me to take the risk," said David Straus, president and CEO of Fortune Bank. "The banks are between a rock and hard spot."

He won't give an account to a guy like Davis but believes some banks, seeing profits, may take a don't ask, don't tell approach.

"I think there will be banks that will take it," Straus said. "But I think there has has to be allot more clarity before banks get involved with something that's illegal at the federal level."

What is going to happen?

"I don't think anybody knows," Straus said.

Davis agreed.

"It's going to get weirder weirder and weirder," he said.

Banks guilty of money laundering are fined a percent of their profits would could be millions of dollars. Straus says banks will be reluctant to accept deposits from a marijuana grower, processor or retailer even if they are operating legally in this state without federal changes.
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