Aaron Smith, executive director of the National Cannabis Industry Association in Washington, D.C., says that at a time when the marijuana industry has hailed recent legalization measures as the first steps toward legitimacy, a de facto boycott on the part of banks has forced the industry in many ways to stay in the shadows.
"You have folks who want to be out of the shadows, and they're now being encouraged or forced into cash-only businesses," Smith says. "No other legal industry finds itself in that situation today. None."
Some marijuana entrepreneurs have skirted the status quo with creative strategies. On Dec. 31, a pot-friendly cafe opened in Del Norte, Colo., selling coffee and drug paraphernalia out of one facility leased as a business property, while distributing free marijuana from another, neighboring facility leased as a residential space.
In Denver, meanwhile, an area attorney has opened a members-only establishment, called Club 64, that doesn't sell marijuana but invites patrons to bring their own, getting around the one-year wait for establishments that want to be among the state's first legal pot sellers. (The club is named for the new state measure, Amendment 64, that legalized the possession of marijuana in small amounts for recreational use.)
Some other entrepreneurs are trying to directly bridge the gap in financial services available to cannabis businesses.
Guardian Data Systems, a merchant services firm based in Vancouver, Wash., sells a credit-based technology that's designed specifically for marijuana sellers. Owner Lance Ott describes the product as "PayPal for the cannabis industry," and says that entrepreneurs like the tool because it gives them a way to transact business without handling as much cash.
"There aren't many opportunities to do what we do without running a cash business," says Ott, who signs off his emails with a "High Regards" and says he has taken marijuana for medicinal purposes. "We wanted to give people the option of operating their businesses in a different way."
Davis, the Seattle grower, says he devised a strategy to get access to banking services and to trick banks into granting accounts. The approach hinges on revealing as little information as possible.
"When the bank asks you what kind of business you're going to run, you should say, 'We're not sure yet, but we know we're going to make money,'" says Davis, who teaches classes on how to run a cannabis business. "It's not lying, but it's not entirely telling the truth, either."
Davis also suggests that any operation doing business as a pot seller should be set up under a holding company with a name that doesn't refer to reefer at all."Banks don't require that you tell them what the DBA is, so if your parent company is something like, 'World Corp.,' you should be safe," Davis says. "If you go in there with words like 'cannabis' or 'marijuana' in your business title, the bank is going to dismiss you right away."
But Davis' students may want to consider the potential flaws in this strategy.
For starters, even the most rudimentary Know Your Customer policies should allow banks to sniff out half-truths and outright bogus information that a would-be client supplies about its basic operations.
Davis says he understands that if banks were to find out the true nature of these businesses, they could close the accounts immediately. Experts say banks potentially could do much worse-blacklisting certain business owners, filing Suspicious Activity Reports with the Financial Crimes Enforcement Network or pressing fraud charges. After all, banks themselves are at risk of running afoul of regulators if they allow themselves to get duped by a customer.