LAS VEGAS (KTNV) — Green and getting greener. The marijuana business is on fire in Nevada, but it still has what many consider is a dangerous flaw in the system.
13 Investigates looks at the fix that some lawmakers are trying to roll out.
“It just makes the whole situation a little bit more, I guess you could say, nerve-racking,” said Alex Myers.
Myers is a regular at Inyo Dispensary, and like all the customers she has to pay for her cannabis with cash.
“It’s inconvenient,” she said. “It’s very inconvenient. I have to pay an additional fee.”
That’s because most banks don’t deal with marijuana money,
All that cash creates obvious security concerns, as 13 Investigates first reported in 2015 when the industry was budding.
“I don’t like having to carry a large amount of cash on me,” said Myers. “Especially when I’m coming to buy something such as marijuana, because of the fact it makes it a little bit more dangerous for me as a young woman.”
If it’s legal to buy marijuana in Nevada, what’s preventing the banks from doing business with cannabis companies after all these years?
“Because it’s considered illegal money,” said Jim Lamb with the Las Vegas Medical Marijuana Association.
Illegal because, despite being legal to buy and consume in some form in over 30 states, Washington, D.C., and Guam, marijuana is still a Schedule 1 controlled substance in the eyes of the feds.
Tyler Kimas is the executive director of the Nevada Cannabis Compliance Board.
“From the regulatory enforcement side of things. I mean, large cash transactions are the unique signature, right, for money laundering,” said Klimas.
This is why cannabis businesses have so many hurdles in handling their money.
“There are suspicious activity reports,” Lamb explained, “all other types of reporting related to money laundering, et cetera, that have to be done, which makes it extremely expensive as well as highly risky for a banking institution to do that.”
The possible solution; House Bill 1996, the Safe Banking Act. Lawmakers hope it will reduce the risk.
What the Safe Banking Act would do is essentially take what’s been considered dirty money and call it clean by allowing banks to accept cannabis cash without having a target on their back: the fear of federal enforcement.
Darcy Spears: “If that’s passed, what exactly does it mean for you and how does it change things?”
David Goldwater: “It means that the banks will no longer be subject to any penalties for dealing with any cannabis business.”
David Goldwater owns Inyo Dispensary and has been saying for years it doesn’t make sense.
“I think we’re all going to look back in five years and look at what we did in this period and just laugh,” he said.
He says although banks won’t take cannabis cash, someone else will.
“The same dollar I take in from selling a cannabis product is the exact same dollar I take down to the Department of Taxation, but I can’t write them a check,” Goldwater explained. “That’s the exact same dollar they take to Bank of America and deposit on behalf of tax collections of the state.”
All that points to why Goldwater says it’s past time for dispensaries to be looked at like all other legitimate businesses.
“In effect, we can go open bank accounts, hopefully, and take loans,” said Goldwater.
Which he says will solve a lot of basic problems.
“It means that we won’t be carrying large amounts of cash places. We won’t have to pay extra staff to handle the cash. Our customers will feel safer. Our vendors will feel safer.”
Change in the law would make employees’ lives easier too. As of now, it’s difficult for the entire cannabis industry workforce to do basic things like apply for a car loan or buy a home.
“So we’ll be able to pay our employees in the normal way with direct deposits and they won’t have issues,” said Goldwater.
For employers like Goldwater, Klimas with the CCB said, “If they have traditional banking services or they bank with somebody, we now have that extra insight into those books and those audits. And in addition to that, any kind of cash transaction that’s outside of the norm raises a flag and allows us to further audit those books.”
And for banks, it opens doors to a new world of customers.
“Legalizing cannabis has created a huge market,” said Phyllis Gurgevich with the Nevada Bankers Association.
“It’s a market with great potential to grow,” Gurgevich explained. “So there are a lot of dollars here. And having those inside the banking system, it just supports more economic growth.”
Customers like Myers just want one-stop shopping.
“I can go into any other business and pay with my card like normal and not have to worry about the ATM withdrawal,” said Myers. “And then I come to a dispensary and I don’t get that same privilege. So I don’t think it’s very fair.”
The Safe Banking Act was passed in the House in April. Most recently it was referred to the Senate Committee on Banking, Housing and Urban Affairs.
All of Nevada’s federal lawmakers are supporting the Safe Banking Act which shows it’s getting bipartisan approval.
Sen. Catherine Cortez Masto’s office provided the following statement:
“This bipartisan SAFE Banking Act is critical for Nevada’s legal marijuana businesses and economy, and it will also help us keep our communities safe from money laundering and other crimes. When business owners can’t access banks, they have to rely on cash, which creates security risks and can force them to lose out on small business loans or access to capital to grow their business. We need an inclusive banking system that works for Nevada, and this common sense legislation will make a big difference.”
Sen. Jacky Rosen sent the following statement:
“A lack of access to banking services has hindered our state’s legally-operating marijuana businesses, as well as increased the risk to public safety in our communities. Federal law restricts banks from providing its services to marijuana businesses, forcing most of these businesses to operate only in cash and opening the door to increased crimes such as theft and robbery. I’m proud to co-sponsor this bipartisan legislation, which will provide Nevada’s marijuana businesses with the same access to financial institutions as any other legal business. I will continue working to support Nevada’s industries with forward-thinking solutions to the issues that impact them.”
Rep. Steven Horsford made the following comments when HR 1996 passed in the House:
“The current misalignment of state and federal law on cannabis banking has forced legal cannabis businesses to operate on a cash-only basis, which endangers public safety and increases the risk of financial fraud,” said Congressman Steven Horsford. “Since cannabis became legal for sale in Nevada, my office has heard from countless small business owners about the need for the SAFE Banking Act. I was glad to vote for this important, bipartisan bill, and I hope the Senate will act swiftly to pass the SAFE Banking Act through Congress.”
Rep. Mark Amodei provided the following statement:
“While current federal law forces legal cannabis-related businesses to operate on a cash basis, the same federal implications do not exist for cities, counties, and states looking to also deposit cash from legal cannabis transactions into the federal banking system. Meaning, state and local governments can show up to the bank with all the cash they want – and there are no questions asked. In my opinion, it’s the height of hypocrisy for the federal government to accept tax money from cannabis-related businesses in Nevada, while at the same time, banning them access to the banking system. Additionally, being forced to operate exclusively on a cash basis, not only makes businesses soft targets for criminal activity, but it prevents the proper enforcement of billions of dollars in revenues for regulatory compliance purposes.
By allowing state-licensed cannabis businesses access to the federal banking system, this legislation will protect public safety while also allowing law enforcement officials and financial regulators to properly monitor legal cannabis transactions.”
Rep. Dina Titus made the following comments:
“Across Nevada, legal businesses that serve the cannabis industry are shut out of the banking system. These outdated rules create security concerns and make it harder for cannabis businesses to hire more workers. I voted to pass the SAFE Banking Act to help bring federal financial laws into the 21st century. Our state is proof that the era of marijuana prohibition is over. It’s time for the federal government to start acting like it.”
Rep. Susie Lee posted this on Twitter:
“Conflict between state and federal law means legitimate businesses are forced to operate on a cash-only basis, creating a serious public safety risk and providing opportunities for tax evasion and money laundering.
That’s why I was proud to vote to pass the #SAFEBanking Act.”