Arizona's emerging medical marijuana dispensary industry is being forced to operate on a cash-only basis because banks won't do business with it.
Checking accounts and credit-card machines for state-licensed dispensaries are nonexistent because federally insured banks and credit unions steer clear of them. That's because pot remains illegal under federal law, banks have been warned by federal regulators to stay away, and banks are also worried about federal seizures.
Doing business only in cash is a nightmare for dispensaries, according to a report in The Arizona Republic. 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.
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The state's three operating dispensaries and more than 100 others that are 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, also takes only cash. Rouben Beglarian, president of the dispensary, said he's managed to land a business account with Wells Fargo, but still can't get a credit-card machine.
Wells Fargo would not discuss whether it had provided a bank account to the dispensary, but issued 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 said.
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.
Ryan Hurley, an attorney with Rose Law Group in Scottsdale, said banks could provide merchant services. The hangup 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."
"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."
Wells Fargo Bank statement
