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U.S. pot sellers stash cash as banks leave them high and dry

Money from cannabis sales is stored in a safe at a California dispensary before it is picked up and deposited at a bank or credit union, in California, U.S., May 19, 2021, in this handout picture obtained by Reuters on May 21, 2021. Operational Security Solutions/Handout via REUTERS

The U.S. cannabis business has a very particular cashflow problem — too much of it.

Marijuana can be sold legally in 36 U.S. states and the District of Columbia (D.C.) for medical use and in 15 of them and in D.C. for recreational purposes. But it’s still illegal on a federal level, meaning most banks won’t service the industry in case they fall afoul of money laundering laws.

With the COVID-19 pandemic and increasing legalisation driving a surge in cannabis use, the sector’s producers, manufacturers and retailers are awash in cash, adding risk and costs to the most basic business transactions from paying employees and filing taxes to finding somewhere to store their income.

“All this cash flowing around is just a recipe for disaster,” said Smoke Wallin, chief executive of hemp health products maker Vertical Wellness Inc. “How do you account for it? Where do you keep it? How do you move it? Even in a safe, it’s a security risk for employees.”

Ryan Hale, a U.S. Navy veteran and co-founder of cash management firm Operational Security Solutions, had to persuade a weed farmer in California to stop hiding cash in a tree. On another occasion, Hale had to help a bewildered cannabis retailer who had lost count of the dollar bills overflowing from his store’s lockers.

Legal U.S. cannabis sales grew 30% to $22 billion last year, more than the $17.5 billion Americans spent on wine, according to data from Euromonitor. Sales are expected to jump more than 20% this year.

The sales boom could have left cannabis companies with a cash pile of more than $10 billion to deal with last year, according to research firms Headset.io and New Frontier Research.

Big players can afford unmarked armoured vans and heavily armed guards to transport money but smaller operators have to rely on themselves.

One weed producer in Los Angeles, who declined to be identified, said he had to carry $120,000 in a bag and drive for six hours from Los Angeles to Oakland to pay a supplier instead of taking a flight and put himself at greater risk of being robbed or the money being confiscated by airport security.

During the last weekend of May 2020, when protests erupted across the United States against police brutality and racism after the murder of George Floyd, there were at least 43 attacks on weed dispensaries along the West Coast, according to Cannabis media site Leafly’s review of police reports and business owners’ statements.

One of the stores attacked was Cookies Melrose in Hollywood, owned by rapper Gilbert Milam Jr, known by his stage name ‘Berner’.

It suffered damages in the “high six figures” when around a hundred people attacked the store on May 29, a company spokesperson said.

To Read The Rest Of This Article By Shariq Khan on Reuters

Published: May 24, 2021

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