Cash only for marijuana businesses after credit union backs away
Verity Credit Union has backed away from helping marijuana businesses open checking accounts. The move is a major setback for pot businesses as the Seattle credit union had been the only financial institution in the state openly providing banking to those shops.
Medical marijuana businesses have struggled to find a place to keep their cash. They also need checking accounts to pay vendors, workers, and state business taxes. Banks have been refusing to let them open accounts, but Verity was different.
That changed a few weeks ago after banking regulators in Olympia "invited" Verity executives to come have a chat.
"They drove down here and met with the division director," says Scott Jarvis, director of Washington’s Department of Financial Institutions, the top local regulator for banks and credit unions. He says the conversations were purely educational; they just wanted to talk to Verity about how they were interpreting federal banking laws.
"My general counsel listed various federal laws … the Bank Secrecy Act, the need to file SARS [suspicious activity] reports, money laundering issues," says Jarvis.
Since the federal government still classifies marijuana as an illegal drug, Jarvis says anyone who handles the money could be seen as laundering drug money. Verity had been operating under its own interpretation of federal rules.
Soon after that meeting, Verity apparently notified all of its medical marijuana clients (approximately 15 businesses) that it was closing their accounts. Credit union executives declined to comment.
One of those closed accounts belonged to Cale Burkhart of Seattle, who is hoping to win a state marijuana license for his business making cannabis lotions and edibles.
"We have to order lot of packaging materials, a lot of labels, and most of those things are all purchased online," he says, so he needs a check-card or credit card. "And also being able to do payroll and pay our taxes, moving forward," is a lot simpler if you have a checking account.
For now, Burkhart says most marijuana businesses have to use their personal bank accounts, or else try operating under a name that might slip under the radar.
Banking is one of the lingering challenges for the marijuana industry. State lawmakers, regulators, bankers, and marijuana businesses have been meeting to look for other ways meet the banking needs, as they attempt to implement Initiative 502, which establishes a growing and retailing system for marijuana.