Medical marijuana: Ohio's newest industry has a big problem, what to do with its money

Twitter icon

 

When Ohio's medical marijuana dispensaries finally open their doors later this year or early next year, they're expected to rake in a ton of cash. But they probably won't be heading straight to the bank with it.

Most banks and credit unions won't handle proceeds from marijuana-related businesses because the drug is still considered a controlled substance by the federal government.

Consequently, companies providing financial services to marijuana-related businesses could be subject to prosecution for money laundering and other federal crimes. Most aren't willing to take the risk, forfeiting billions of dollars in potential deposits from marijuana growers, processors, retail dispensaries and other related businesses.

Regulated marijuana sales in North American are projected to reach $24 billion by 2021 - more than double the $10 billion in sales forecast for this year, according to research from Arcview and BDS Analytics. Ohio will account for a small fraction of that amount, but the the state is still expected to generate $300 million in annual sales of medical marijuana over the same period.

"We as an industry are really stuck between a rock and hard place on this,'' said James Thurston, a spokesman for the Ohio Bankers League, representing about 230 banks. "As more currency comes into the system, the problem is only going to get greater.''

Garbage bags full of cash

The lack of access to banking also poses a potential threat to public safety in the 31 states and the District of Columbia have legalized marijuana in some form.

Because they can't bank it, many marijuana businesses have been forced to accumulate huge sums of cash, stored in safes, warehouses, even garbage bags.

With all that cash floating around to pay employees, taxes and other expenses, dispensaries and other marijuana businesses have become prime targets for criminals.

"The situation is not ideal,'' said Andrew Jolley, president of the Nevada Dispensary Association and CEO of The Source dispensaries. "Safety and security is always a concern.''

Most dispensaries have property safeguards like steel doors, security guards and cameras to deter crime. But those measures don't always thwart determined criminals.

An Enquirer review of dozens of online news reports found violent holdups, smash-and-grabs and other property crimes reported at dispensaries in nearly every state where marijuana is legal.

In Denver, for example, nearly 600 dispensary robberies were reported in the three years after marijuana was legalized in Colorado for recreational use in 2014, according to a story in the New York Post.

The Denver Police police disputed those figures with a chart showing just 10 "marijuana robberies'' in Denver from 2014 through the year to date.  Still, robberies do happen. And as officials across Ohio brace for the start of legal marijuana sales, they continue to express concern about the crime associated with un-bankable cash.

"There is this experience in other states that show these types of businesses might be targets for robberies, and that is something business owners should take into account when assessing their facilities security,'' said Dan Tierney, a spokesman for Ohio Attorney General Mike DeWine.

Securing Ohio's new cash crop

Ohio's marijuana enterprises are already required to have a ton of security and meet some of the most stringent security measures of any of the states that have legalized marijuana.

For example, only licensed dispensary employees and customers or caregivers with state-issued medical marijuana cards can enter any of the 56 retail dispensaries licensed to sell medical-marijuana products in Ohio.

That includes a half dozen dispensaries expected to open in the Cincinnati area. When the dispensaries are closed, they must be locked and equipped with alarm systems and surveillance systems that collect and store video surveillance on a 24-hour basis.

But such measures are no guarantee that theives won't target the stores or their customers and employees for cash or product.

"Ultimately, you want to prevent any crime from occurring...but you have to be realistic,'' said Lt. Steve Saunders, public information officer for the Cincinnati Police Department.

Saunders wouldn't speculate on whether the medical marijuana dispensaries opening across the area would lead to a spike in robberies. But he encouraged dispensary operators "to work with their customers to make sure they’re keeping their customers safe.''

Mixed messages from Washington 

The public safety threat is a direct result of the disconnect between state and federal law regarding marijuana. The U.S. Department of Treasury attempted to shield banks from federal sanctions in a 2014 memorandum. 

The memo stated that the agency would not enforce federal marijuana prohibition in states that had "legalized marijuana in some form."  But Attorney General Jeff Sessions rescinded the Cole memo earlier this year, muddying the waters for banks and other financial institutions. That hasn't stopped all financial institution from jumping in.

 At least 334 banks and 107 credit unions are providing banking services to marijuana-related businesses across the country, according to the most recent report for the Treasury's Financial Crimes Enforcement Network (FinCEN). And broad reforms are being considered by federal legislators that might boost those numbers even higher.

U.S. Sen. Jeff Merkley, an Oregon Democrat, introduced the Secure and Fair Enforcement (SAFE) Banking Act, which would allow financial institutions to accept cash from legal marijuana transactions without the threat of federal interference.  Republican Senator Cory Gardner of Colorado co-sponsored the bill, which has bi-partisan support.  

But no action has been taken on the proposed legislation, and similar efforts to address marijuana banking issues have failed. That includes a proposal in Ohio for a "closed-loop'' payment system that would require medical marijuana businesses and patients to use a designated financial institution for virtually all transactions.

The proposal failed to pass the Ohio legislature earlier this year. Even if the measure had passed, it's usefulness would have been doubtful, according to the banker league's Thurston.

"Anything that we do at state level is going to in conflict with federal law, so until its addressed at the federal level it really doesn’t matter what the states do,'' he said. "We need a solution.''

e-mail icon Facebook icon Twitter icon LinkedIn icon Reddit icon
Rate this article: 
Regional Marijuana News: