Banking on Pot: Arizona's Banks and Medical-Marijuana Dispensaries Seek an Unprosecutable Relationship

On a recent Friday afternoon, Nick Kriaris, owner of Encanto Green Cross medical-marijuana dispensary in Phoenix, and his brother, Chris, tried to open an account at Bank of America for their nonprofit business with $420 in cash.

The attempt at the bank branch at 3030 North Central Avenue was, to some extent, a stunt, from the pot-culture-inspired amount of the initial deposit to the dispensary employee videotaping his bosses. They knew the odds of success were minimal, if not zero.

But if the bank agreed to take the medical-marijuana retail shop's money, it would have been something of a minor historical moment. Although dozens of dispensaries are authorized to operate in the state, no bank will deal openly with them -- yet.

At first, things went smoothly.

The young bank representative behind the desk was gracious and happy to be able to open a new business account. The hopeful businessmen tried to be as transparent as possible. The brothers, both in their late 40s, wore black T-shirts with the dispensary's logo, featuring a cross with a green marijuana leaf in the middle. Nick Kriaris presented his certificate to operate, issued by the Arizona Department of Health Services, and required business documents. The representative got a woman from the bank's credit card services office on the phone, because Kriaris wants to offer his customers the same convenience of any other retail outlet.

"They have all their paperwork -- they're doing quite a bit of transactions," the bank representative told the woman. "It's a medical-marijuana dispensary. Mm-hmm. Okay. They're licensed through the state and everything. I could fax all that to you if you need it."

Then he hung up. "She says she'll call back."

Seemingly, the bank rep was the only one who didn't realize the transaction wasn't really going anywhere.

"I haven't heard of any problems with dispensaries," he said. But then the woman called back and told him that no bank account could be opened. A message on his computer screen followed, stating that this type of business is restricted. A branch manager walked over and apologized, saying he had just gotten off the phone with the "back office," which told him the account couldn't be opened. He'd also phoned other local bank managers and heard the bank had turned away similar businesses.

Back at Nick Kriaris' dispensary, near 27th Avenue and Thomas Road, the businessman discussed previous attempts to obtain financial services. Once, he was given a large check written from a Chase bank account to the dispensary. Chase wouldn't cash it, and the teller told him the bank didn't serve his "kind" there, he says.

"I told her, 'You better rephrase that,'" he said. She apologized, but the bank wouldn't budge, forcing him to ask the issuer of the check to cut him another check to a different name.

That's one way the game works, anyway. Kriaris won't go into details, naturally. He told another story, this one about the day one of the accounts he used closed. The bank called him in, having figured out that the account was tied to the dispensary and said it had transferred all of the dispensary's money -- an amount well into six figures -- into his personal account at the bank. Then, it closed that personal account and issued him a cashier's check.

"The president came down, actually. I started complaining. I said I'm not leaving with this check -- are you kidding me?" Kriaris recalled. "That's a big check."

The next problem was finding a bank in which to deposit the funds. Kriaris found a bank by opening an account in the name of another company he owns that doesn't appear to have anything to do with marijuana.

The name of his dispensary is "red-flagged now," he said.

Yet his dispensary accepts credit and debit cards. He pays his employees by check. The company he used to get the account issues checks and makes bank deposits both in cash and by check.

It's all on the sly -- an odd position for a legal, state-authorized business to be in.

"We're under the radar. Maybe you have a different LLC that's owned by something else," he said, describing in vague terms some of the methods he must use to work with a bank. "But I'm always the type -- I like to be open, straight, and honest. Why should I have to do [business like] that?"

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Ray Stern has worked as a newspaper reporter in Arizona for more than two decades. He's won numerous awards for his reporting, including the Arizona Press Club's Don Bolles Award for Investigative Journalism.

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