
Banks Say No to Marijuana Money, Legal or Not - danso
http://www.nytimes.com/2014/01/12/us/banks-say-no-to-marijuana-money-legal-or-not.html?ref=business&pagewanted=all&_r=0
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Eliezer
I don't think much of Bitcoin but even I tend to read this and think, "Well,
screw the banks, we have Bitcoin."

~~~
patio11
Does using Bitcoin avoid the trip to the local government tax agency with
$51,000 in hard currency? They'll accept payments in anything, as long as
anything is US dollars.

Does using Bitcoin help assist someone who has a debit card purchase
marijuana? Bear in mind that this person is likely non-technical. They're also
physically present at a marijuana distributor, and sufficiently difficult
processes will cost them a 30 minute car drive to another marijuana
distributor, who transacts via cash and an ATM or using the ATm->distributor's
account loophole.

Does using Bitcoin help Totally Not A Marijuana Dispensary LLC avoid the
scrutiny of its bank's compliance department such that they can maintain a
business bank account, write checks to employees and vendors, demonstrate a
credible revenue/expense history and thereby secure credit, and otherwise plug
into the mainstream financial system? For example, will large wire transfers
coming in from an identifiable company in Tokyo, or their cutouts, raise less
flags than dealing in equivalent amounts of cash, like every pizzeria, car
wash, laundromat, video arcade, etc in America?

The last one might not be obvious, so as someone who has extensive experience
with American and Japanese banks doing routine wire transfers between each
other: this reads as Very Effing Exotic to risk/compliance officers and even
if you're utterly aboveboard you'll be asked to explain yourself _a lot_. I
get to have a quick chat with the manager of my bank branch for _every single
wire_ , and let's just say it is a very good thing that I have a US passport,
an accountant on speed dial, a stack of invoices and contracts, sterling
credit, and the interconnected stack of social privileges which let me
convince skeptical people that I'm an "international professional" rather than
"drug dealer" in five minutes of conversation.

~~~
arohner
> They'll accept payments in anything, as long as anything is US dollars.

Sometimes, not even then: "One dispensary owner told me about taking seven
thousand dollars in cash to the Washington Department of Revenue, to pay his
monthly tax bill. He was turned away, because the teller refused to deposit
his “drug money.”"

[http://www.newyorker.com/reporting/2013/11/18/131118fa_fact_...](http://www.newyorker.com/reporting/2013/11/18/131118fa_fact_keefe?currentPage=all)

~~~
rmc
Interesting legal/tax follow question? Does he still owe the tax money? I
presume that argument won't go down well with the tax man, but could be
interesting if he got to court.

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patio11
It's curious how HNers can simultaneously say "Serves those banksters at HSBC
right -- finally, the government decides to fine them a billion dollars for
laundering drug money" and then "Pfft, getting your bank accounts shut down
for being in marijuana is a silly problem to have -- here, I'll describe a
foolproof money laundering strategy which could get seen through by an eight
year old. That should keep things square with the banks and their regulators,
wink wink."

~~~
gaius
To be completely fair, HSBC didn't launder anything - they were _used_ to
launder money, and were fined for not detecting it. I do wonder if the average
HNer hasn't really thought this through. It's no different from the govt
fining Google because they didn't flag up people discussing drugs in their
GMail.

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falsestprophet
Banks aren't the only place to safely store money and transmit money. Is there
any reason an armored car service can't pick up marijuana industry cash and
sell these businesses cash equivalent securities that are not at risk of being
stolen (like short term federal or Colorado bonds)?

It could be that insurance companies would not cover armored car services for
marijuana industry clients, but presumably it would be possible to raise rates
to cover expected losses (FBI data shoes that only 7 armored cars were robbed
in 2010).

edit: This sounds vaguely like a valid business plan. One could start a
Colorado-only Colorado-regulated bond broker-dealer. This broker dealer could
cooperate with armored car services to move cash from marijuana industry
clients to the broker's bank (or to the State of Colorado as payment for
bonds). Marijuana industry clients would be unburdened from carrying large
physical cash positions and free from a great deal of counter party risk
because the marijuana industry clients would own liquid bonds.

~~~
gloverkcn
The problem is that armored car companies currently have no have no ability
offer that service. All pickups are settled through settlement accounts at
banks. You cannot take deposits without falling under federal regulatory
compliance.

The state needs to pass laws creating or making possible the creation of a
state approved depository. This could begin to undermine the power of the fed
and start a. It states rights battle

~~~
adekok
> You cannot take deposits without falling under federal regulatory
> compliance.

It sounds like there's a need for a "safety deposit box delivery" service.
They'll deliver a safety box to you, which you fill with whatever makes you
happy. You close it, and they pick up the filled and locked box. It then gets
stored in a secure vault.

That would avoid a lot of fear surrounding the personal transport of money.

It sounds to me like a business ready for disruption.

~~~
gloverkcn
It is in need of disruption, but there are alot of laws surrounding taking
cash from people for something other than a product/service.

The problem you'll run into with the black box scenario is that the customer
has no access to the funds unless you bring them the box which makes it a poor
place to keep working capital funds that businesses use. Even if you start
giving loans based on the box you start hitting legal restrictions, and
compliance issues.

I worked for years in the financial industry focusing on services for the
under/unbanked which relies on a lot of cash handling.

Every way you can think about how to get around the law has been used in the
past to launder money and/or evade taxes.

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sxp
>While they are active, however, these accounts may have informal restrictions
placed on them — some self-imposed — so they do not draw the scrutiny of
bankers who may file suspicious-activity reports or would be required to
report deposits over $10,000 in cash. The account holders may make only small
deposits, and only at night and at certain branches. Mr. Kunkel of Seattle has
such an account.

That's not a good thing to admit to a newspaper. Even if the federal rules
allow legal marijuana sales, he could still be in trouble for structuring:
[http://en.wikipedia.org/wiki/Structuring](http://en.wikipedia.org/wiki/Structuring)

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elviejo
not all banks... just ask HSBC ;-) "Matt Taibbi: After Laundering $800 Million
in Drug Money, How Did HSBC Executives Avoid Jail?"

[http://www.democracynow.org/2012/12/13/matt_taibbi_after_lau...](http://www.democracynow.org/2012/12/13/matt_taibbi_after_laundering_800_million)

~~~
silveira
This. They should rewrite the headline, "Banks Say No to Marijuana Money...
Legal".

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1qaz2wsx3edc
tl;dr; Banks are federally insured, marijuana is still illegal at the federal
level. Policy must change.

~~~
danso
This is a critical distinction, and one that applies to virtually every kind
of rule and policy that affects our lives. Does anyone seriously think that
bankers have a moral objection to taking in money from legal pot growers? That
the banking profession is in the pocket of the tobacco industry? They are
reluctant because of the strange legal situation that the federal government
has allowed to exist...and yet it's so tempting to yell at the banks for being
unfair. Cathartic, yes, but if the situation is to be remedied, they aren't
the ones who have the most leverage to effect change.

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briandear
The irony here is that HSBC escaped criminal prosecution for laundering cartel
money. There was a recent rolling stone article about it. The solution might
be for these places to use offshore banks, but then you add another layer of
complications.

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lucb1e
Reading this, all I can imagine is them saying to each other in a satisfied
voice: "Who's making laws now, eh?"

Just like with Visa blocking Wikileaks months ago and banks presently blocking
Bitcoin (the Rabobank in the Netherlands leaked memo a few weeks ago that they
should not facilitate Bitcoin traders), I'm not sure I like these practices.
Not to mention PayPal's draconian policy.

Controlling people's money is a nice power to have... (So, Bitcoin anyone?)

~~~
pyduan
In this case: the federal government. The banks didn't randomly decide they
were against marijuana, they're just reluctant because while marijuana is
legal for medicinal or recreational use in a few states it's still a Schedule
I drug at the federal level, which makes it legally tricky to handle the
proceedings from the marijuana business.

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debian69
lol but hsbc says yes to organised drug money!

~~~
wavefunction
Not just HSBC, Wells Fargo and Bank of America among others.

Apparently domestic pot growers don't murder and rape enough to warrant
service.

~~~
dublinben
More seriously, they don't have the kind of capital that warrants that level
of service. Unsavory characters with billions of dollars are almost always
able to find willing banking partners. The same isn't true of those with
thousands of dollars.

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argumentum
Bitcoin to the rescue .. ?

~~~
smtddr
First thing that came to mind. This is one way bitcoin helps people; when
banks start refusing to allow you to use your money how you want.

Remember when wikileaks couldn't get donations because "pressure" was put on
paypal, mastercard & visa not to process those payments? Bitcoin.

Wanna donate to the piratebay? Anonymous? ...bitcoin.

Megacorps wanna donate to a political campaign without being found out later
on? ....bitcoin.

~~~
kungfooguru
Yea, put your companies capital into a volatile, non-FDIC insured, commonly
robbed medium. Genius.

~~~
Sambdala
When the subject at hand is about companies that don't have an option?

~~~
cowsandmilk
I don't see what problem bitcoin solves for these businesses. The first
example in the article is having to take $51,000 in cash to pay the company's
taxes to the state. Bitcoin does not solve this in any fashion. I really
struggle to find the problem that bitcoin solves in this situation.

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acd
Well a small supergroup of financial companies rules the world through central
banking creating money out of thin air.

Check page 4/36
[http://arxiv.org/PS_cache/arxiv/pdf/1107/1107.5728v2.pdf](http://arxiv.org/PS_cache/arxiv/pdf/1107/1107.5728v2.pdf)

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memracom
Reading between the lines, it seems that US Federal law is driving the
creation of an alternative banking system. This would not be a bad thing
considering the amount of concentration in the banking system and how that led
to the recent big banking bust.

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chaostheory
TDLR

> Though 20 states and the District of Columbia allow either medical or
> recreational marijuana use — with more likely to follow suit — the drug
> remains illegal under federal law.

> As a result, banks, including state-chartered ones, are reluctant to provide
> traditional services to marijuana businesses. They fear that federal
> regulators and law enforcement authorities might punish them, with measures
> like large fines, for violating prohibitions on money-laundering, among
> other federal laws and regulations.

------
JosephHatfield
Just saw a recent news post reporting the executives at High Times are about
to start a private-equity fund called the HTG Fund that will provide and cash
and credit to cannabis-related businesses. Wonder if they'll also be able to
provide advice on handling large amounts of cash.

~~~
Freestyler_3
> advice on handling large amounts of cash.

I will always be willing to accept gifts.

Hey if there is a topic about drugs on a tech forum, I don't think the
established ethics apply.

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socrates1998
The irony that banks take a stand against these small time shop owners is
ridiculous, they are all guilty of laundering billions of dollars.

I can see smaller credit unions being genuinely concerned, but big banks?
Really?

It allows them to claim they follow the rules without actually hurting their
bottom lines.

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Zenst
Sad fact is this will either impact or open up a new market to some 3rd party
to offer what the banks will not. Then once estabilished and working the banks
will either compete or borg the company. Profit for banks has a dynamic moral,
wait and see.

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asdkl234890
Well there is no such thing as _federally_ legal marijuana yet, right?

~~~
Crito
There actually is, but in an _extremely_ limited form.

There are currently four living people that receive medical marijuana from the
federal government. They were grandfathered in after the _Compassionate
Investigational New Drug program_ was closed to new applicants in 1992.

[http://en.wikipedia.org/wiki/Compassionate_Investigational_N...](http://en.wikipedia.org/wiki/Compassionate_Investigational_New_Drug_program#Remaining_patients)

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guard-of-terra
"The Controlled Substances Act, enacted in 1970 classifies marijuana as a
Schedule I drug"

I wonder what people who underwrote it are doing now.

(Most of them are dead for good, sure)

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VladRussian2
the moment somebody comes with a real solution for marijuana sellers may
happen to be an "Ice Age" style crack in the banking business. Forcing people
to invent ways to workaround the system may be not good for the system in the
long run.

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sergers
i live in vancouver BC canada.

nearly every medical marijuana dispensary i have been to have been accepting
DEBIT/INTERAC/MASTERCARD/VISA etc without any issue for about 2 years now

~~~
refurb
The thing that helps in Canada is that the medical marijuana legislation was
done at the federal level. Banks don't have to worry about violating any laws
in regards to working the with medical marijuana businesses.

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llcoolv
pun aside, but don't these precautions seem a bit too paranoid or is it just
me? :D

~~~
auntienomen
Imagine that you're known to be regularly moving around in an unarmored car
with $50K. Would you take a chance that you get the robber who won't just
shoot you dead?

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anonbanker
they should all start banking in Canada. Water's fine here.

