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Why Banks Won’t Work With the Cannabis Industry

If you walk into almost any medical marijuana dispensary in Northern Nevada, you’ll likely need to have cash in hand. It’s not because the businesses prefer it that way, but actually quite the opposite.

Cannabis has become an all-cash industry because most banks refuse to work with businesses that deal in marijuana.

“You see the financial aspect, it’s an up-and-coming business.” John Aramini is no stranger to starting a business. He’s owned a dentist office in Reno for decades, but he just recently joined the marijuana industry as part-owner of High Sierra Holistics, a local cultivation facility. It’s a venture that comes with some unique challenges.

Aramini said, “we had dealt with credit unions, we’ve dealt with national banks, local banks, we’ve dealt with all of them on several levels and none of them are willing to work with us.”

It’s a hurdle nearly every business in the cannabis industry can relate to. Mikel Alvarez works at Blum, one of the newest dispensaries in Reno. He said, “the banks would not allow us to open up a cannabis checking account with them knowing full well what we were doing.”

Although marijuana is now legal for adult use in Nevada, it’s still illegal on the federal level.

Nevada Medical Marijuana Association Executive Director Will Adler works with lawmakers on pot policy. He said, “this is a legal business in the state of Nevada, yet they’re selling a federally illegal substance; so because of the federal regulations on banking, that down streams to the state-level banks and they say, ‘We can’t take your money.'”

Some business owners have talked to bankers in the Reno community who say they are interested in working with cannabis companies. Aramini said, “they would love to start working with us and everyone else in the business, but their hands are tied.”

A Department of Justice memo drafted in 2013 puts more liability on banks who deal with marijuana businesses. Banks are now on the hook for things like making sure pot doesn’t get into the hands of minors and preventing driving under the influence.

Heritage Bank Senior Vice President Steve Carrick said the memo makes working with the cannabis industry too high of a risk. He said, “this is really uncharted territory. Most local banks aren’t going to go into uncharted territory.”

In the meantime, most marijuana businesses are forced to operate on a cash-only basis.

“It’s all cash deals, so we take our product in there. They give us cash.” Because they can’t open a checking account, Aramini and his partners are forced to pay their bills in cash as well.

He said, “our power bill could be up to $10,000 a month.” Their power company won’t accept large payments in cash so, “we have to actually take cash down to Walmart and use their facility because they’re willing to do it for us for a fee.”

But Walmart can’t help them out when it comes time for Aramini’s company to pay taxes. He said, “federal government doesn’t recognize us as a business, but they’re happy to take our money for taxes.”

Aramini’s cultivation company ends up paying more than they actually owe in taxes because they have to use cash. “They penalize us 10 percent.”

Dealing only in paper money can also pose a security risk for Nevada marijuana businesses.

Aramini said, “our people have to walk around with cash. They might have thousands of dollars or more at a time in their pockets, traveling around the state.”

Blum manager Mikel Alvarez said his dispensary takes extra security measures. “We do it in unmarked secure vehicles, but we don’t draw a lot of attention to it; so we also have 24-hour security on site.”

Many companies have to use secure vaults to store all of their cash earnings because they can’t make deposits at banks. Aramini’s business is no exception. “We have a safe room and then in the safe room we have several vaults as well.”

Most marijuana businesses are finding ways to make a cash-only model work, but with the marijuana industry booming across the nation, many stakeholders are hoping banking options will be available to them in the near future.

Alvarez said, “they need to have proper banking. It needs to happen quickly.”

Aramini believes it’s inevitable. “Eventually it’s going to happen. It has to. They have to catch up with the curve.”

Change could come sooner rather than later. Senator Elizabeth Warren is leading an effort to make the marijuana industry more secure in the United States, asking federal regulators to help banks work with cannabis companies.

On a state level, several Nevada lawmakers are expected to introduce bills in the upcoming legislative session, that focus on state banks working with marijuana businesses.

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