Legal marijuana’s all-cash business and secret banking

But forcing businesses into cash-only transactions brings about all sorts of problems — it undermines the state’s efforts to tax the industry and creates security risks at stores.

The Northwest Patient Resource Center, a Seattle store that grows and sells cannabis, ran into its first hardship last year when it could no longer process customers’ credit cards. Davis, the center’s CEO, said American Express and Discover dropped him in the fall. Visa and Mastercard soon followed.

Davis resorted to buying his own ATM machine. Every night, he refills it with a few thousand dollars of his own cash. He deposits the rest at his bank the next day. The practice makes Davis uneasy.

“The more cash you have sitting around, the more of a target you are,” he said.

Last September, he received a letter from his bank — which he prefers to not name — that made matters worse: “After a thorough assessment and evaluation, it is with deep regret that [we] will cease offering banking services for medical marijuana/cannabis businesses and/or facilities,” it read.

Davis hasn’t banked openly ever since.

To create distance between him and the pot business, he started an unrelated holding company.

More than a dozen interviews with dispensaries and growers in Washington show this kind of secret banking is a common practice.

CNNMoney asked the nation’s largest retail banks with operations in Washington about their policies for small marijuana businesses. HSBC didn’t respond. JPMorgan Chase(JPM, Fortune 500), U.S. Bancorp (USB, Fortune 500) and Wells Fargo (WFC,Fortune 500) said they don’t serve the industry, citing federal law. Bank of America(BAC, Fortune 500) didn’t respond but has previously stated that it turned away marijuana-related business clients after warnings from the U.S. Drug Enforcement Administration five years ago.

However, more than a dozen cannabis businesses have told CNNMoney they all keep corporate accounts at Chase, U.S. Bank and Wells Fargo, in addition to small, local banks.