New York (AFP) – Credit unions are the fuddy-duddies of US finance: unimaginative community banks that shy from risk, leaving the sexy business to the big-time Wall Street banks.
But one business that the big banks find way too risky is proving to be manna from heaven for credit unions: marijuana.
The industry of pot for recreational or medical use, newly legal in parts of the United States, has a big problem: how to handle huge amounts of cash rolling in when banks, conscious that federal laws still deem marijuana illegal, won’t take the chance to let the marijuana growers and vendors open accounts.
That’s where credit unions, essentially local savings banks that do home, car and small business loans, come in. With many only regulated by state authorities, they are opening their doors to marijuana entrepreneurs, helping to buoy what is projected to become a $20 billion industry by 2020.
Mostly concentrated in the US Northwest, the marijuana business has been frozen out by regular banks, which are closely regulated by Washington and could lose their licenses if they are involved in illegal business.
That forces legal pot purveyors to carry around large amounts of cash for salaries, supplies, rents and tax payments. They can’t make electronic transfers or write checks.
A number of credit unions have seen an opportunity, and are offering the industry money deposit, transfer and payment services.
“It is in the best interest of our members and of their communities that they are able to safely manage their business finances,” said Kelli Hawkins of Numerica Credit Union, a pioneer of the new business.
– Blacklisted –
Donald Morse, president of the Oregon Cannabis Business Council and owner of The Human Collective dispensary in Portland, said his business accounts were shut down by banks half a dozen times over the past six years.
“If you are honest with them and say ‘I am in the cannabis business,’ they will refuse to open your account,” he said.
To get accounts, he ended up lying about the nature of his business. But the truth was found out. “I’ve been blacklisted,” Morse said.
Without a bank, moving cash is more than just inconvenient — especially when paying the government the 25 percent tax on sales each month.
While looking over his shoulder against being robbed, Morse said, “I have to go down with cash to the Department of Revenue, going to a special bulletproof room and give them the money.”
Aiming to help the young industry in their states, Senators Jeff Merkley of Oregon and Cory Gardner of Colorado have introduced legislation to ensure that legal marijuana businesses can access banking services.
“Forcing businessmen and businesswomen who are operating legally under Oregon state law to shuttle around gym bags full of cash is an invitation to crime and malfeasance,” said Merkley.
– Odorless cash, please –
In the meantime, the credit unions, which only represent seven percent of the US banking industry, are getting the marijuana business.
It’s not exactly what they are used to in their clientele. While money is not supposed to have a smell, some credit unions like Oregon’s Maps Credit Union are insisting that all cash deposits be devoid of cannabis odors.
“We do charge a premium and a minimum monthly fee to offset the additional costs of monitoring and managing these accounts and the additional regulatory oversight required,” said Carmella Murphy Houston of Salal Credit Union in Seattle, Washington.
“The accounts are priced to be profitable but fair as we hope to bank these businesses for the long run.”
Strict conditions or not, requests for new accounts are flowing in. In 2014, Salal received 2,000 requests but only opened 200 accounts.
The particular needs of the industry have given birth to special service providers.
Link to Banking, which is staffed by anti money-laundering specialists, and Kind Financial, a software vendor, have joined hands to help marijuana companies and their credit union bankers negotiate the regulatory maze for risky business.
Their partnership offers banks software that “provides real-time information of the customers and of the customers’ customers,” said Kind Financial chief executive David Dinenberg.
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