With Senate Bill 5052 going into effect July 1, Washington’s medical and recreational marijuana industries are soon to merge. Amidst the shuffle, despite difficulties in obtaining a license and adjusting to stricter product tracking, many dispensary owners see a lack of banking options as their biggest security threat.

Once they’re licensed, such businesses are required to maintain state standards in security for their locations, as well as tracking and reporting on all marijuana products. 

However, for many, meeting those standards isn’t their biggest concern. First and foremost, as Paul Lugo, director of local dispensary Herbal Connection Inc., says, “It’s all about the money.” 

Currently, marijuana businesses can’t deposit their money in banks because of federal banking laws. Banks are federally insured, and marijuana is still illegal at the federal level. As a result, banks won’t take money from marijuana sales or offer checking or credit card services, as they fear being shut down by federal authorities. 

Lugo says that while credit unions such as Numerica are beginning to offer some banking services to those marijuana-related businesses that have producer or processor licenses, such services still remain unavailable to retailers. 

“It’s a huge health and safety concern, as these businesses are forced to find ways of keeping cash safe, and transporting it to pay their taxes,” he says. 

These large amounts of cash make retail shops and medical dispensaries a target for criminals, and without bank accounts, businesses also have difficulties paying employees and vendors. 

The Washington State Liquor and Cannabis Board reported $260 million in marijuana sales for the state’s 2015 fiscal year, which ended last June 30. Those sales generated $65 million in taxes. Sales in the first half of the 2016 fiscal year already have nearly doubled 2015’s full-year total, with $482 million in sales so far and $92 million collected in taxes.  

The organization reported Spokane County had $37 million in sales, and $9 million in taxes for 2015.

With those big dollar figures, it’s easy to see why marijuana business owners might be nervous about an inability to secure banking options. 

“Banking for the industry is an issue that requires changes at the federal level,” says Mikhail Carpenter, a spokesman for the WSLCB. “Our state representatives are aware of it, and are working on finding solutions.”  

In the meantime, Joe Corcoran, owner of Spokane’s Cured Cooperative, says businesses like his have had to find ways of using all that cash. 

“It’s definitely scary that we still have to work with these large amounts of cash,” says Corcoran. “Right now, we’re trying to invest some of it in business assets, using it to build things up, rather than just sitting on it,” he says.

As far as other state required security measures, both Corcoran and Lugo seem confident their medical businesses will be able to meet them once SB 5052 is implemented. 

Lugo says Spokane businesses are uniquely well prepared as a city ordinance already mandated store’s security to fall within the parameters of SB 5052.

“Because of that ordinance, our security measures are already up to state standard, and have always been pretty good,” he says. 

State security requirements for marijuana licensees require identification badges for all employees, alarm and surveillance systems, and a record within the state’s tracking system of all marijuana startup inventory, samples and products.

“All licensees have to meet our security requirements to obtain a license. Should the city or county have additional requirements in place for businesses, that would be a matter between the two of them,” says Carpenter. He adds that producers and processors also might have more security requirements than retailers, as they often monitor outdoor as well as indoor growing facilities.

Spokane-area marijuana businesses are reluctant to talk about their security measures, with most declining to disclose information about what systems they have in place or what break-in attempts they’ve experienced. 

Lugo acknowledges that Herbal Connections has had several attempted break-ins, but he says because of its surveillance systems, no one has ever escaped police. 

“Initial security is about installing these systems,” says Lugo. “I would guess most businesses probably pay $300 a month on security monitoring and upkeep. We go a bit overboard with additional backup systems, watching both on- and off-site,” he says.  

As for Cured Cooperative, its store at 7826 N. Market has bars on the windows, secured doorways, and bulletproof glass covering its checkout area.

Corcoran says security always has been paramount, and the business’s systems are already better than what the state requires. 

“We’ve really only had one security issue, back when we first opened in 2013,” he says. 

Corcoran declined to elaborate on what that security issue involved. He estimates the business spends about $50 a month in security maintenance and monitoring. 

According to Corcoran, besides marijuana business owners needing to find a more secure way to manage and transport cash, one other security measure that may present a challenge for dispensaries is adjusting to the state’s tracking system for marijuana products. 

“A lot of medical dispensaries have old or buggy software,” he says.  “I can see how checking every crumb of product that goes in and out might be difficult for those businesses to adjust to.” 

The state’s traceability system, called BioTrackTHC, is a software the WSLCB uses to follow marijuana through the supply chain from seed to sale. 

Washington state-licensed marijuana producers, processors, and retailers can employ their own inventory tracking software as long as information from those systems can still be collected and submitted to the WSLCB as required in tracking rules for licensees.

According to the state agency’s website, licensees are required to submit monthly reports that include records of sales, current inventory, and lost or destroyed product.

They’re also required to comply with separate regulations concerning production, transportation, recordkeeping, tax reporting, servings and transactions, waste disposal, packaging and quality assurance, location and ownership changes, advertising, packaging, and hours of operation.

Corcoran says Cured Cooperative already has a system for packaging its product, which is tested through a lab, sealed in individual packets and affixed with a sticker listing the type of marijuana strain and laws pertaining to its use.

Corcoran’s concern following the merging of the industries is in testing for quality, and protecting patients from products that might contain pesticides.

“People don’t realize a lot of products are tested only for potency and some types of molds, but not harmful pesticides,” he says. “We’re advocating for pesticide tests, but the industry just isn’t there yet.” 

Corcoran also worries patients may go back to growing their own plants, or buying on the black market, rather than chance using poor quality marijuana or having to be added to a patient registry. 

“They can grow their own in limited amounts, and prices are lower,” he says. “Medical dispensaries keep ‘old school’ paper records of patients right now, so nothing is online. That would also change once we’re integrated, and most patients I know aren’t comfortable with that.”

Currently, Corcoran says being prepared for security upgrades and tracking systems could all be for naught if his business is unable to obtain a retail license. 

“I’ve applied for three retail licenses, but am still waiting to hear whether they’ve been approved,” he says. 

At this point, Corcoran says he’s not overly optimistic about his chances, as all of his license applications are listed as priority three. 

“I’ve been told they probably won’t get that far in approving license applications,” he says.

The WSLCB’s licensing application system is divided into three categories, and gives first priority to applicants who applied for a marijuana retail license prior to July 1, 2014, operated or were employed by a medical marijuana collective garden prior to January 1, 2013, and who maintained a state and local business license, and have a demonstrated history of paying applicable state taxes and fees.

The WSLCB’s weekly report for Jan. 26, lists 232 retail licenses, 145 producer licenses, 87 processor licenses, and 593 producer/processor licenses that have been granted in the state. Currently the agency lists 114 active licenses in Spokane County, with 88 more pending.

Carpenter says the application process usually requires 60 to 90 days to complete. 

“For every business that is ready with documentation, there are multiple businesses who are not,” he says. “Those applications end up being a challenge, as investigators need to go back and retrieve information that wasn’t provided.”

Licensing applications may be denied for various reasons, including failure to meet basic licensing requirements, objections by local jurisdictions, a premise being located within 1,000 feet of a school or other restricted entity, questionable sources of funds, indicators of hidden ownership, criminal history, and misrepresentation of facts. 

Once granted, licenses can also be revoked for various reasons. Although the WSLCB won’t disclose how many licenses have been revoked, or for what reasons, Carpenter says failure to meet the state’s security requirements would be grounds for license revocation. 

“There are varying degrees of penalties involved when a licensee fails to maintain things like surveillance or reporting requirements,” says Carpenter. A list of regulatory violations is also listed on the WSLCB’s website, under penalty guidelines.