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Pot dispensaries forced to work on cash basis

Pot dispensaries forced to work on cash basisArizona’s emerging medical marijuana dispensary industry is being forced to operate on a cash-only basis because banks won’t do business with them.

Checking accounts and credit-card machines for state-licensed dispensaries are nonexistent because federally insured banks and credit unions steer clear of them. That is because pot remains illegal under federal law and they’ve been warned by federal regulators to stay away, and banks area also worried about federal seizures.

Doing business only in cash is a nightmare for dispensaries, according to a report in The Arizona Republic Sunday. They have to set up safe houses and potentially use armored transport for the cash they collect. It also makes it hard to pay bills and taxes and meet payroll.

It also poses a safety risk for customers who may become robbery targets. Arizona’s health director said the lack of bank accounts will make annual audits of dispensaries more challenging and potential fraud easier to pull off.

“I have personally been in all of the major banks, and all of the smaller banks, and a fair amount of the credit unions, and they’ve been told not to do business with us,” said Bill Myer, of Arizona Organix in Glendale, which opened earlier this month and is the state’s first dispensary.

The state’s three operating dispensaries and more than 100 others expected to open have become casualties of a crossfire between state and federal laws. Although Arizona voters approved marijuana in 2010 for certain medical conditions such as chronic pain and cancer, it remains illegal under federal law.

“I have personally been in all of the major banks, and all of the smaller banks, and a fair amount of the credit unions, and they’ve been told not to do business with us,” said Bill Myer, of Arizona Organix in Glendale, which opened earlier this month and is the state’s first dispensary.

A second dispensary in Tucson, Southern Arizona Integrated Therapies, is also taking only cash. Rouben Beglarian, president of the dispensary, said he’s managed to land a business account with Wells Fargo, but he still can’t get a credit-card machine.

“We are a small operation,” he said, noting the dispensary is taking patients by appointment only. “We’re not going to keep much cash on hand.”

Wells Fargo could neither confirm nor discuss whether it had provided a bank account to Southern Arizona Integrated Therapies. But it did issue a statement saying, “Wells Fargo has opted not to bank these businesses.”

“While marijuana legalization initiatives were recently approved in Colorado and Washington, and medical marijuana dispensaries are legal in some states, the sale and use of marijuana is illegal under federal law,” the statement says.

Dispensaries must be nonprofits, and independent accountants will audit them each year.

The Arizona Department of Health Services issues licenses for dispensaries. Director Will Humble said the dispensaries will be regulated in a number of ways to ensure inventory control and that they truly are nonprofits. He said outside auditors will examine staff and board compensation, but he also said having dispensaries operate only in cash does open the door for fraud.

Ryan Hurley, an attorney with Rose Law Group in Scottsdale, said banks could provide merchant services. The hang-up is really over lending, he said. Banks are wary of lending to marijuana dispensaries because of the threat of federal seizures.

“It doesn’t come down to the fact that they are FDIC insured,” he said. “They have potentially legitimate concerns that the federal government might come in and seize that property, in which case their loan is worthless.”

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3 comments

  1. Wow, it seems like it would be hard to keep track of all of your expenses if you can get help from banks and credit unions. It seems like it would be best to get a really good accountant to help you out especially if you have to run your cannabis business on cash. I would want to hire someone who had experience working in a similar business.

  2. I wouldn’t feel safe running a business on strictly cash. I understand why the banks would avoid these dispensaries. It makes running one of these operations a real challenge.

  3. It was the great challenge for Govt Institutions but now today the reality is different. Government has the grip on this matter but as individual, it matter a lot regarding the security issues, anyhow it is the great content.

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