The state of Washington’s first licensed recreational cannabis retail stores will open in a matter of weeks, but without any access to the banking system. That unfortunate circumstance – another result of Congressional foot-dragging – leaves retail store owners and their employees in a precarious position.
Without the ability to deposit its daily cash receipts, like any other business operating legally under Washington state law, retail cannabis stores will have large amounts of cash in unsecured locations. That makes them a target for criminals, and raises safety concerns of employees and customers.
Forcing retail stores to operate on a cash-only basis may also create a temptation for some store owners to inaccurately report sales to the state for taxation purposes.
Two state credit unions have said they will provide financial services for licensed growers and processors of cannabis, but not for retail stores. They are acting on guidelines contained in a February memo issued by the federal Treasury and Justice Departments that considered retail operations too problematic.
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Gov. Jay Inslee and Colorado Gov. John Hickenlooper sent a joint letter to the two federal departments last week asking for more clarity about how federal regulatory agencies will handle cannabis industry funds deposited in banks.
As the Colorado experience teaches us, no access to the banking systems leads inevitably leads to suspicious activity.
Federal authorities discovered that Colorado cannabis businesses were depositing money in personal accounts or opening new accounts with bland names, or using safe deposit boxes. They confiscated $850,000 from eight accounts.
In response, the Colorado Legislature approved the creation of a state credit union whose membership would be restricted exclusively to licensed cannabis businesses, except retail stores. The proposal still needs a green light from the Federal Reserve Bank to begin operation.
Rep. Denny Heck and Colorado Rep. Ed Perlmutter have introduced a bill that would free federally regulated banks to do business with cannabis businesses. But it has gotten nowhere, so far.
No surprise there. The elected representatives from the other 48 states that have not legalized recreational cannabis don’t want to take a vote on a controversial issue during an election year.
However, last Friday’s vote in the U.S. House to block the federal government from enforcing its marijuana laws in states that have approved use of the drug for medical purposes offers some hope. As of now, the Senate has no plans to consider such a bill.
Any solution in time to help our state’s new retail stores will probably fall to the Obama Administration issuing directives to the Justice Department. It cannot change federal banking laws, only Congress can do that, but it can tell prosecutors not to pursue legitimate, state-licensed cannabis businesses.
Whether that’s enough cover from federal regulators for small banks operating only with Washington state’s borders is a moot point until Justice provides some specific guidance.
Washington’s experiment in legal cannabis must be fully transparent to succeed. But an industry run on piles of cash invites secrecy and deception, all kinds of other unwanted problems