MBank First in Oregon to Open Its Doors to Marijuana Industry
Wednesday, September 03, 2014
“Our regulators have indicated we’re allowed to provide services to the medical marijuana community, at least in Oregon,” MBank CEO Jef Baker said. “We recognize there’s a need for those services so we’re working hard on how to put that together.”
Baker said he is working with state and federal regulators on exactly what that will look like, while noting that the bank has a plan to get medical marijuana providers out of the cash-only business. Most banks have been afraid to work with the weed industry, leaving the pot business to rely on cash transactions alone.
That opens them up to more potential robberies and a potentially riskier working environment.
“It’s been really hard finding one," said Melissa Kruse, co-owner of AmeriCanna RX, a medical marijuana dispensary that opened in Portland in May. Kruse said she has been open with banks about the business she operates and has been turned down for banking services. "Since it was federally illegal still they didn’t want anything to do with it."
So the federal government gave banks the green light to provide financial services for marijuana businesses when it issued guidelines in February. Federal law still considers marijuana an illegal substance, but the guidelines allow banks to offer accounts to state-legalized pot businesses if they meet the lengthy regulatory requirements.
Twenty states and Washington D.C. have legalized medical marijuana. Washington and Colorado made recreational weed legal in 2012. Oregon legalized medical marijuana in 1998 and the legislature passed a law last year allowing medical marijuana dispensaries to sell pot to patients.
Since medical marijuana became legal in Oregon about 200 dispensaries have been operating in a legal gray area; the legislature, however, passed a law last year officially regulating the establishments. As of mid-August, 183 had been approved for official operation.
Still, MBank is the first to try its hand at medical marijuana banking. Baker said the bank can't loan money, but will be able to provide deposit services and help medical marijuana providers use electronic transactions instead of cash.
Police and neighbors have expressed concerns, Baker said, about cash on the street from medical marijuana operations.
Kruse said she hasn't had any trouble yet in terms of threats of robbery. She said the state requires the medical marijuana dispensaries to keep a 1,500-pound fireproof safe, adding that the goal is to be able to operate as other businesses do and to offer electronic transactions as an option for patients.
"We would like to be able to keep it in the bank and pay our bills," she said.
Portland Police Sgt. Pete Simpson said the bureau has not heard of dispensaries being broken into regularly but he said there are likely a number of unreported crimes as some businesses are reluctant to report if they are not adhering to state regulations. He said robberies do happen at other non-pot related businesses that operate with electronic transactions, but that removing dependence on large amounts of cash would improve safety.
"It makes them less likely to become a target for the really violent people who see a paycheck for tens of hundreds of thousands of dollars," he said.
ReLeaf MM in Southeast Portland was robbed at gunpoint in May 2013. A man armed with a handgun forced employees to hand over cash and large jars of pot.
Banks in other states where marijuana is legal, either for medical purposes or recreational, are starting to jump on board as well. A U.S. Treasury official announced in mid-August that more than 100 banks are getting into the pot business, according to the Washington Post.
In Oregon, 146 cities and 26 counties have banned pot shops until May 1, mostly over concerns about how to police and regulate medical marijuana dispensaries.
Operating solely in cash transactions could be cause for concern when the shops open, said Washington County Sheriff's commander Shawn Fischer. Washington County is one of the 26 counties that banned dispensaries.
"It’s certainly one of the risks we’ve had in the back of our minds as this thing rolls out," Fischer said. "We’re not panicking over that issue or anything, but it’s definitely a risk."
Baker said the hope is that electronic banking services can alleviate some of that risk.
“Sure there’s opportunity for the bank, but we feel good about being able to meet a lot of peoples’ needs, not just the customers,” Baker said.
“I’m optimistic we’ll be able to make things work,” he said. “We know there’s a huge need for financial services. Nobody else is stepping up to provide it.”
Baker said that while his bank's branches are located in the Portland metro area, he hopes to be able to provide services statewide.
He said the bank will be looking to work with medical marijuana providers who can comply with federal and state regulations.
“It’s going to be the people that are organized and appreciate doing things by the book,” he said.
Simpson said as the legal weed market grows with the potential for recreational marijuana to be legalized this November, he encourages businesses to add security measures such as video surveillance.
"It’s an emerging area that we hope, as the dispensaries continue to expand, will make a serious investment in protecting their employees," he said.
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