Jacob Redmond
Well-Known Member
Several companies preparing to open medical marijuana businesses in New York state say they have established relationships with banks as some dispensaries outside the state have struggled with cash-only operations. Because the substance remains illegal under federal law, banks have been cautious, shying away from doing business with dispensaries and manufacturers in other states where medical and/or recreational marijuana is already available.
Five New York corporations are approved to begin manufacturing and dispensing the drug in January, 18 months after state lawmakers passed the Compassionate Care Act allowing medical marijuana to be used by patients with certain illnesses. Three plan to open dispensaries in Albany County. Federally, marijuana is illegal and classified as a Schedule I drug, defined as a drug that has high potential for abuse and has no currently accepted medical use. Medical marijuana is legal in 23 states and the District of Columbia.
Empire State Health Solutions in Fulton County, which plans to distribute medical marijuana in four New York counties, will pay its employees and bills through banking services, said CEO Kyle Kingsley. He declined to identify the banks that his company uses.
New York marijuana manufacturers will likely have "normal banking relationships," Kingsley said, because they have "been through the wringer in the application process." He characterized the chosen New York organizations as "very clean" with backgrounds in medicine, science and business. The state Department of Health selected his company, as well as four other organizations, from 43 applications to manufacture and distribute marijuana.
Many banks shy away from the marijuana dispensary business because federal guidelines say they must police the organizations that use their services, News21 reports in its recent series featured in the Times Union.
Federal guidelines put the onus on banks to evaluate marijuana-related business. A February 2014 memo from the Financial Crimes Enforcement Network said banks must monitor for both "adverse information about the business and related parties" and "suspicious activity." The document also recommended that banks should evaluate a business's application for state licenses and understand the expected level of activity.
The stringent, highly regulated nature of the New York application process may ease banks' concerns, said Teddy Scott, the CEO of PharmaCann LLC, another of the five New York companies. PharmaCann has four dispensaries in Illinois, and Scott said the company uses banks, though he would not identify them by name.
"Is banking easy? No," he said. "But it's not an insurmountable challenge."
Banks must be "very cautious," said Roberta Kotkin, the general counsel and chief operating officer of the New York Banking Association. "At the end of the day, no matter how vigilant a process a state has set up to limit risk, you still have the federal law," she said.
Patients will use cash to pay for medication on dispensary premises, Kingsley said of his company, which has been approved to open dispensaries in four counties: Broome, Albany, Westchester and Queens. As patient costs can average anywhere from $250-$500 each month, patients can use on-premises ATMs to avoid carrying large amounts of cash, he said.
Columbia Care LLC, which will open dispensaries in Suffolk, Clinton, New York and Monroe counties, anticipates it will use electronic transactions for more than half of its New York state business, CEO Nicholas Vita said in a statement. The company declined to identify the banks that it uses and would not say if it plans to pay employees in cash.
At least one area financial institution has expressed support for working with medical marijuana companies. In July, Albany-based SEFCU announced it would provide banking and financial services for Fiorello Pharmaceuticals, Inc., whose application was later rejected by the state. SEFCU, among the 50 largest credit unions in the country, endorsed the company in a statement.
Fiorello Pharmaceuticals acknowledged the risk assumed by SEFCU but said operating through banking services would boost public safety. "SEFCU's commitment to serve this state-regulated industry speaks volumes to its character and concern for the communities it serves," said founder and CEO Ari Hoffnung in the statement.
SEFCU did not return requests for comment.
New York's program is considered strict. Its five companies must take the plant from "seed to sale" — growing it, drying it, extracting oil, making the ingestible product then distributing it.
Kingsley noted that the reliance on cash is a "big problem," saying that marijuana companies are unfairly stigmatized.
"We want to change the system because when they see what we're doing, they'll see we're doing the right thing," he said.
Earlier this year, Portland-based MBank backed out of marijuana business in Colorado, Oregon and Washington because of a lack of federal guidance and the high standard of "policing" the industry, CEO Jef Baker said in an interview. "As a small bank we just didn't have the resources and the capacity to properly manage that," he said.
New York applications were evaluated on 10 scored criteria, including financial standing and quality assurance.
Each application required a non-refundable application fee of $10,000 and a registration fee of $200,000.
News Moderator: Jacob Redmond 420 MAGAZINE ®
Full Article: Banks Edge Into New York Medical Marijuana Markets
Author: Lindsay Ellis
Contact: Email The Author
Photo Credit: Joe Amon
Website: Times Union
Five New York corporations are approved to begin manufacturing and dispensing the drug in January, 18 months after state lawmakers passed the Compassionate Care Act allowing medical marijuana to be used by patients with certain illnesses. Three plan to open dispensaries in Albany County. Federally, marijuana is illegal and classified as a Schedule I drug, defined as a drug that has high potential for abuse and has no currently accepted medical use. Medical marijuana is legal in 23 states and the District of Columbia.
Empire State Health Solutions in Fulton County, which plans to distribute medical marijuana in four New York counties, will pay its employees and bills through banking services, said CEO Kyle Kingsley. He declined to identify the banks that his company uses.
New York marijuana manufacturers will likely have "normal banking relationships," Kingsley said, because they have "been through the wringer in the application process." He characterized the chosen New York organizations as "very clean" with backgrounds in medicine, science and business. The state Department of Health selected his company, as well as four other organizations, from 43 applications to manufacture and distribute marijuana.
Many banks shy away from the marijuana dispensary business because federal guidelines say they must police the organizations that use their services, News21 reports in its recent series featured in the Times Union.
Federal guidelines put the onus on banks to evaluate marijuana-related business. A February 2014 memo from the Financial Crimes Enforcement Network said banks must monitor for both "adverse information about the business and related parties" and "suspicious activity." The document also recommended that banks should evaluate a business's application for state licenses and understand the expected level of activity.
The stringent, highly regulated nature of the New York application process may ease banks' concerns, said Teddy Scott, the CEO of PharmaCann LLC, another of the five New York companies. PharmaCann has four dispensaries in Illinois, and Scott said the company uses banks, though he would not identify them by name.
"Is banking easy? No," he said. "But it's not an insurmountable challenge."
Banks must be "very cautious," said Roberta Kotkin, the general counsel and chief operating officer of the New York Banking Association. "At the end of the day, no matter how vigilant a process a state has set up to limit risk, you still have the federal law," she said.
Patients will use cash to pay for medication on dispensary premises, Kingsley said of his company, which has been approved to open dispensaries in four counties: Broome, Albany, Westchester and Queens. As patient costs can average anywhere from $250-$500 each month, patients can use on-premises ATMs to avoid carrying large amounts of cash, he said.
Columbia Care LLC, which will open dispensaries in Suffolk, Clinton, New York and Monroe counties, anticipates it will use electronic transactions for more than half of its New York state business, CEO Nicholas Vita said in a statement. The company declined to identify the banks that it uses and would not say if it plans to pay employees in cash.
At least one area financial institution has expressed support for working with medical marijuana companies. In July, Albany-based SEFCU announced it would provide banking and financial services for Fiorello Pharmaceuticals, Inc., whose application was later rejected by the state. SEFCU, among the 50 largest credit unions in the country, endorsed the company in a statement.
Fiorello Pharmaceuticals acknowledged the risk assumed by SEFCU but said operating through banking services would boost public safety. "SEFCU's commitment to serve this state-regulated industry speaks volumes to its character and concern for the communities it serves," said founder and CEO Ari Hoffnung in the statement.
SEFCU did not return requests for comment.
New York's program is considered strict. Its five companies must take the plant from "seed to sale" — growing it, drying it, extracting oil, making the ingestible product then distributing it.
Kingsley noted that the reliance on cash is a "big problem," saying that marijuana companies are unfairly stigmatized.
"We want to change the system because when they see what we're doing, they'll see we're doing the right thing," he said.
Earlier this year, Portland-based MBank backed out of marijuana business in Colorado, Oregon and Washington because of a lack of federal guidance and the high standard of "policing" the industry, CEO Jef Baker said in an interview. "As a small bank we just didn't have the resources and the capacity to properly manage that," he said.
New York applications were evaluated on 10 scored criteria, including financial standing and quality assurance.
Each application required a non-refundable application fee of $10,000 and a registration fee of $200,000.
News Moderator: Jacob Redmond 420 MAGAZINE ®
Full Article: Banks Edge Into New York Medical Marijuana Markets
Author: Lindsay Ellis
Contact: Email The Author
Photo Credit: Joe Amon
Website: Times Union
