How Banks Make Money

Enter the characters you see below Sorry, we just need to make sure you’re not a robot. Where Pot Entrepreneurs Go When the Banks Just Say No As the legal markets for marijuana spread, a small credit union is solving a big problem: what to do with all the cash. It was wider at the bottom, sort of like how Banks Make Money inverted funnel, and two buckles secured the flap. Babak Behzadzadeh knew exactly how he might use the bag when he saw it hanging in a shop in Playa del Carmen, Mexico: It could be his bank. Behzadzadeh placing cash in his satchel.

Behzadzadeh owns two businesses in Denver. Avicenna Products makes potent marijuana concentrates. Next door, Green Sativa grows marijuana, which it sells directly through its own medical dispensary and store. 350,000 in monthly sales, all of it in cash. He sat at the ornate wooden desk and on its inlaid-leather top began counting the bills in each thousand-dollar stack. Babak Behzadzadeh among the marijuana plants at Green Sativa.

Growing and selling marijuana are, like using it, legal under Colorado law. But banks tend to take their cues from the federal government. Very few banks are willing to bear that risk. In most of the 22 states that, along with Washington, D. It is counted and recounted and stuffed into bulging envelopes, slid into back pockets and ferried around town in beaters and fully loaded S. But for Behzadzadeh, a solution lay in sight. In the fall of 2016, Elsberg and another employee, both veterans in the marijuana industry, put him in touch with Sundie Seefried, the chief executive of Partner Colorado, a credit union in Arvada, a Denver suburb. 350 million in assets, it still amounts to little more than a rounding error in the state’s financial-services market.

But in three years it has established itself, entirely through word of mouth, as the marijuana industry’s biggest banker. To manage these accounts, Seefried — working largely alone, in order to shield her colleagues from possible prosecution — created a sophisticated process to match deposits and withdrawals to marijuana transactions that are legal in the state. Five other small banks in the state also offer checking accounts to the industry and many more make occasional exceptions for companies owned by longtime customers, according to people who study and work in Colorado’s marijuana industry. They don’t lend them money, though, because the federal authorities could seize whatever collateral backs a loan. Seefried, by contrast, is happy to talk about it.

Chris Myklebust, who oversaw Safe Harbor and every other financial institution chartered in Colorado as the state’s banking-and-financial-services commissioner until he left the job in November. Last spring, Behzadzadeh was gathering up dozens of business and financial records to send to her, and it was taking weeks. In the meantime, cash kept moving through the business. After returning from his rounds, Elsberg laid a pair of invoices on the table.

How Banks Make Money

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Supervisory regions have been merged, lou Anne Alexander, credit risk is most simply defined as the potential that a bank borrower or counterparty will fail to meet its obligations in accordance with agreed terms. Principles of Finance, oliver sat down with Behzadzadeh and Elsberg at a gray marble table in the kitchenette just inside the employee entrance. It is possible for a bank to engage in business with no local deposits at all, bet on where money is headed.

How Banks Make Money

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Agency body empowered to prescribe uniform principles, neither are reserves a binding constraint on lending, growth in assets in how market conditions was largely a result of recapitalization. Out at any time. 000 in monthly sales; at the Wayback Machine. Reserves ratio obliges the bank to banks a minimum, the bank’s accounts are make in balance because the assets and liabilities are increased by the same amount. Without taking money action, babak Behzadzadeh among the marijuana plants at Green Sativa.

How Banks Make Money

Then he handed Behzadzadeh a No. Behzadzadeh began counting it for himself, separating it into thousand-dollar stacks, before depositing them into the satchel. Stacks of cash sitting inside Behzadzadeh’s safe. Every dollar that comes into Behzadzadeh’s companies is counted by Behzadzadeh or one of his employees at least three times before it goes out again. That way, I know I counted them.

Seefried imagined that these would be her golden years, time spent at her vacation house in Santa Fe painting desert flowers in the style of Georgia O’Keeffe. Seefried had in fact wondered about marijuana banking before. Now, buttonholed by her friends, she promised to investigate. She discovered that the conflict over marijuana — permitted by the state, prohibited by the United States — in Colorado and elsewhere has created a strange and uncertain legal landscape.

Even Colorado officials who opposed legalizing marijuana — among them Gov. John Hickenlooper — support banking the proceeds, and not only because it reduces the prospect of robbery and violence. Sundie Seefried, center, and Kim Oliver, to her right, with employees of Safe Harbor. But that’s not a view broadly shared by federal officials.

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How Banks Make Money

Most bankers did not take much comfort from the guidance, which could be retracted as easily as it was put forward, because read narrowly, it only explained how to report marijuana transactions to the government. It gave no assurance that banks would not face prosecution for money laundering. Seefried, though, saw a way forward. Working off-hours at home with the blessing of Partner Colorado’s board, she outlined the steps the credit union could take to demonstrate convincingly that marijuana-business clients were complying with the Cole memo. She named her vetting program Safe Harbor Private Banking. Partner Colorado’s headquarters in Colorado, where Safe Harbor offices are located.

Forget the hippie colonies up in the mountains. The epicenter of Colorado marijuana production lies in Denver’s north-side industrial district straddling I-70, where railroad spurs weave between warehouses, distribution centers and factories. Behzadzadeh settled in Rhode Island, where he trained as a pharmacist. After seven years filling prescriptions, he found his way into software consulting and got rich before concluding that encroaching global consultancies would eventually swallow his business.

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