That’s because many of the financial institutions doing business in Colorado Springs and elsewhere in Colorado have decided not to do business with the dispensaries.
K.C. Stark, who owns Go Green Cross in downtown, said he’s already had to move his business accounts from two banks.
“Who knows what’s going on? One week, it’s fine to do business with them, the next week it isn’t,” he said. “It’s unprecedented.”
Stark said he feels the banks are discriminating against medical marijuana providers.
“It’s a constant struggle,” he said. “We’ve tried Wells Fargo; we’ve tried the Bank of Broadmoor.”
Not only are they rejecting new account applications, but the banks are also closing the accounts of any customers whom they discover are in the medical marijuana business.
“We’re a nationally chartered bank, and we have to follow federal laws,” explained Steve Helbing, southern Colorado regional president of Wells Fargo, one of the largest banks doing business in the region. “Our attorneys believe this is the best way to follow banking laws and regulations.”
The Bank of Broadmoor declined to discuss its policy, citing the sensitive nature of the issue.
Actually, there are no specific laws barring banks from opening accounts for dispensary owners.
But banks are worried about their image, and they worry that doing business with operations that some in society still view as illicit could hurt their reputations.
Wells Fargo is taking the same approach in all 14 states that have legalized medicinal marijuana, Helbing said.
“It’s still illegal on the federal level, so we have to be careful,” he said. “We will be closing down any accounts that we know are medical marijuana businesses.”
Paradoxically, before it took a closer look at the legal issues, Wells Fargo was once known as the pot-friendly bank, according to online blogs that serve as information hubs for the medical marijuana industry.
Chase bank has also denied accounts to medical marijuana businesses, citing “financial operational and compliance risk.”
Credit unions are following the banks’ lead.
“We are a federally chartered and insured credit union,” said Cathy Grossman, vice president of corporate communications for Ent Federal Credit Union. “We do not allow these types of accounts because we have to adhere to federal law — and marijuana is still illegal at the federal level.”
It’s a problem in every state that has legalized marijuana, and some lawmakers in Congress are now trying to help.
In a recent letter, these legislators asked Timothy Geithner, secretary of the Department of the Treasury, to formally issue a policy “assuring that department priorities do not include targeting or pursing institutions whose account holders are involved in a business ostensibly operating in compliance with a state medical marijuana law.”
Rep. Jared Polis, D-Boulder, signed the letter, as did seven other members of Congress.
Polis said the banks’ stance don’t serve the public interest.
“The effects of this denial of service include an increased risk to public safety with potential theft or robbery that any cash-only or cash-reliant business faces; a decreased likelihood that medical marijuana vendors will have the ability to accurately account for tax liability; and an affront to fundamental fairness, since forcing businesses to operate with cash exposes the owners to greater legal risk,” the letter said.
Polis’s office said the representative had not heard back from Geithner.
The Colorado Bankers Association, meanwhile, has asked for advice from both state and federal regulators — but hasn’t heard back from them, either. Spokesman Tim Powers isn’t surprised by the banks’ caution.
“Current bank regulations require us to broadly know what type of business our customers are operating in, and determine that the business is not blatantly operating an illegal business, or engaging in illegal activity,” he said. “With regard to medical marijuana dispensaries, unfortunately the banks are caught between conflicting state and federal laws — one saying this action is legal and another saying it is not.”
Powers said individual banks have also approached regulators about the medical marijuana issue, but received only vague — and sometimes conflicting — guidance.
“Some have been told to be ‘very cautious’ and warned of potential compliance issues with current regulations, while recently others have unofficially been told to not open these accounts until rules and guidance has been established,” he said.
Given the absence of regulations at both the state and the federal level, the banks are taking what they feel is the safest route.
Steve Strunk, banking commissioner for the state of Colorado, said his office cannot act until lawmakers adopt some sort of legislation.
“The state legislature hasn’t passed any laws regarding banking regulations for this industry, or any other industry,” he said. “We can’t invent regulation that doesn’t exist at the state level. Banks are private businesses, and they can decide what customers to accept and which ones not to accept.”
Strunk said in his days as a banker in Las Vegas, the bank where he worked refused to open accounts for certain types of businesses, even though those businesses were legal in Nevada.
“Banks operate on their reputation,” he said. “And they’ve gotten beaten up by the media, so there’s little wonder that they’re cautious.”
That’s a point underscored by the Office for the Comptroller of the Currency, which regulates national banks.
“There’s no banking law that covers medical marijuana dispensaries,” said Kevin Mukei, spokesman for the OCC. “Banks can choose what to do. But they have to make sure they are following federal law — and where federal law and state law conflict, there could be a problem.”
The banks say they are left with little choice.
“I had a lady call to complain we wouldn’t open an account for her medical marijuana business,” Helbing said. “She said she had friends in the same business with accounts here. I told her to give me their names, and we would close their accounts. It’s something we’re being very serious about.”
Stark knows that all too well; he is still looking for a bank that will take his business.
Rob Larimer contributed to this story.