Budding businesses can’t bank on marijuana: Cash-only trade raises fears
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Gracen Hook, owner of Alternative Clinic medical marijuana dispensaries in Port Townsend and Port Hadlock, measures medical marijuana. Photo by Joe Smillie/Peninsula Daily News

By Joe Smillie
Peninsula Daily News

PORT TOWNSEND –– Every day, Gracen Hook takes stacks of cash from his medical marijuana businesses to a secret, off-site storage facility.

He staggers the time to prevent potential crooks from picking up his habits.

“I’ve had to bring in a special team of people to count cash,” said Hook, owner of the Alternative Clinic medical marijuana dispensaries in Port Townsend and Port Hadlock.

For the North Olympic Peninsula’s legal marijuana industry — as elsewhere in the nation — day-to-day duties such as paying utility bills, taxes and employees include toting around stacks of cash since federal law prevents banks from providing them with business accounts.

“Until the federal government clears the way, I’m stuck using cash,” Hook said.

And since he can’t accept credit cards without banking services, all of Hook’s revenues come in cash.

Even a simple chore like paying taxes requires stuffing wads of cash in bags and driving them to the Department of Revenue in Tumwater.

“We obviously want to make it as simple as possible for these businesses to pay their taxes,” department spokeswoman Kim Schmanke said.

“But clearly, some of these businesses are unable to make electronic transactions because they don’t have bank accounts.”

Hook was willing to speak on the record about a problem plaguing all medical marijuana providers and which hovers over upcoming retail shops.

Although Washington state voters approved the use of regulated medical marijuana in 1998, several federal laws — the Controlled Substance Act, the Bank Security Act and the Patriot Act — make it illegal for banks to take money from marijuana businesses.

The federal Drug Enforcement Administration classes marijuana as a Schedule I drug, considered among the most dangerous on par with heroin, ecstasy and peyote.

“Schedule I drugs, substances, or chemicals are defined as drugs with no currently accepted medical use and a high potential for abuse,” the DEA says on its website www.justice.gov/dea.

“In essence, we would be laundering money as the law looks at it,” said Larry Hueth, president and CEO of Port Angeles-based First Federal.

“We would be breaking the law.”

In September, Bank of America announced that it would accept Washington state’s revenues from marijuana taxes, but banks are leery of accounts with pot shops.

Hueth said his bank has denied marijuana businesses accounts because of the risk of penalties.

“Until the federal government clears the way for us to legally accept money from these businesses, we can’t do it, or we’re at risk of several penalties, not the least of which is having that money seized,” Hueth said.

The problem became more drastic after Washington state and Colorado legalized marijuana for recreational use.

Colorado’s retail shops could open Jan. 1. In Washington state, marijuana later this year will be available for retail purchase in state-sanctioned stores by anyone older than 21.

Several other states are expected to consider legalizing recreational marijuana in 2014.

The number of states approving marijuana for medical purposes has also been growing. California was the first in 1996 and has since been followed by about 20 other states — including Washington — and the District of Columbia.

The state Liquor Control Board is allowing 10 retail stores to be sited on the North Olympic Peninsula, six in Clallam County and four in Jefferson County.

Growers and processors also will be licensed.

Some medical marijuana purveyors have been able to get accounts for their dispensaries, but only by not fully disclosing what their business is to the banks.

Hook said colleagues he knows in the area had accounts closed when banks discovered they were running pot shops, though they would not consent to be interviewed.

Running an all-cash business also presents its share of security concerns.

Time magazine reported last week on an unnamed California marijuana vendor who was kidnapped and mutilated by robbers who wanted him to lead them to a stash of cash they thought he had buried in the desert.

Sheriffs in both Clallam and Jefferson counties said the all-cash businesses prompt worries about potential robberies.

“That’s gonna be a real issue,” Jefferson County Sheriff Tony Hernandez said.

Clallam County Sheriff Bill Benedict, also concerned about the potential, said he knew of one robbery of a pot shop but that owners of medical facilities often opt not to report such thefts.

“They were advised by their attorneys to not even report it,” Benedict said.

“That leads me to think there may very well be other rip-offs that just haven’t been brought to our attention.”

As reported Thursday by Politico magazine, U.S. Attorney General Eric Holder announced that the federal Justice and Treasury departments are working to give a bit of legal cover to banks so they can deal with the legal marijuana industry.

“There’s — what, 23, 24? — states in which marijuana is legal in some form. Cash is not the way to do this,” said Scott Jarvis, director of the state’s Department of Financial Institutions.

While Holder told officials federal agents would not prosecute banks for dealing with pot shops, Jarvis said it still doesn’t make it legal.

“We’re getting closer to the goal post,” Jarvis said Friday.

“But this still doesn’t have the authority that an alphabet regulator like the FDIC would provide.”

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Sequim-Dungeness Valley Editor Joe Smillie can be reached at 360-681-2390, ext. 5052, or at jsmillie@peninsuladailynews.com.

Last modified: January 25. 2014 6:07PM
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