Pot legalization puts U.S. bankers in a pickle

Thu Nov 8, 2012 6:05pm EST

ST. LOUIS, Nov 8 (Thomson Reuters Accelus) - Colorado and Washington may have voted to legalize recreational marijuana, but it is far from a green light for banks to provide accounts or other services to the pot industry in those states.

Financial institutions across the country still face legal risks if they do business with marijuana shops because pot remains illegal under federal law.

"If financial institutions are federally licensed or insured, they must comply with federal regulations, and those regulations are clear about conducting financial transactions with money generated by the sale of narcotics," said Jim Dowling, a former Internal Revenue Service special agent who also acted as an anti-money laundering advisor to the Office of National Drug Control Policy.

The ballot measures on Tuesday made Colorado and Washington the first states to permit recreational marijuana sale and use. Medical-marijuana laws have been around in some states for more than a decade.

California was the first state to legalize medical marijuana in 1996. With the addition of Massachusetts, which passed a medical-marijuana ballot initiative on Tuesday, 18 states and the District of Columbia now have such laws on their books.

The medical marijuana business was worth $1.7 billion in 2011 and growing, according to a study by financial-analysis firm See Change Strategy.

The federal government does not recognize states' authority to legalize marijuana under any circumstances, however. It has targeted some medical-pot businesses for violations of the 40-year-old Controlled Substances Act, which classifies the drug a Schedule 1 narcotic, meaning it is considered addictive and with no medical value.

The Justice Department on Wednesday said its marijuana enforcement policies remained unchanged. "We are reviewing the ballot initiatives and have no additional comment at this time," its public statement said.

A Justice Department spokeswoman did not respond to a request for additional comment related to banking activity.


Under President Barack Obama, federal authorities have focused enforcement efforts on large commercial medical marijuana operations that generate a lot of money. In some cases, federal money-laundering and forfeiture laws have been used against such businesses.

The U.S. Drug Enforcement Administration (DEA) began warning banks and credit card companies away from medical marijuana businesses four years ago, and many, if not all, have responded by closing the businesses' accounts. Even small regional banks that once publicly embraced the industry have abandoned it.

Some medical marijuana businesses pose as traditional medical clinics to open bank accounts, or clandestinely misuse existing personal or business accounts.

U.S. attorneys offices in states with medical marijuana laws have had a large degree of autonomy in determining when to bring criminal prosecutions for marijuana-related infractions of the Controlled Substances Act.

In 2010, Californians considered legalizing the recreational use of marijuana. While the measure ultimately failed, prior to the vote U.S. Attorney General Eric Holder vowed to aggressively prosecute "organizations that possess, manufacture or distribute marijuana for recreational use".

After Tuesday's votes, the Justice Department and individual U.S. attorneys offices will have to clarify their intentions with regard to enforcing the federal marijuana ban in Colorado and Washington, former federal enforcement officials said.

The recreational marijuana measures in both states will allow pot to be sold at state-licensed stores.

However, former Justice Department officials said that financial institutions, even those in Colorado and Washington State risk possible criminal or civil penalties for doing business with pot shops.

Once the states have begun their licensing processes, financial institutions may need to update their reviews on existing business customers by ensuring they are not on lists of state-licensed marijuana stores, the sources said.

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Comments (4)
darkcycle wrote:
Sure. I’m sure Wachovia is in a real moral bind about this. I know the banks are absolutely sticklers for following the law.
I mean, look at how they’re handling their foreclosures.

Nov 09, 2012 11:12am EST  --  Report as abuse
columbare1 wrote:
When the United States passed prohibition on alcohol, they also included marijuana. When they realised their mistake they repealed the prohibition on alcohol only. The time has come for the government to finish the job, and legalise marijuana, and stop stigmatising their citizens as they used to for possesing alcohol. And save ourselves tons of money spent on arresting,and prosecuting,and jailing,citizens for marijuana.

Nov 09, 2012 12:39pm EST  --  Report as abuse
workinghard wrote:
So is this country run by the people or the feds? The people of colorado and washington have spoken, who are the feds the impose there beliefs on the state of colorado. Thats why they call it a vote, and we have the right to vote for what we as US citizens want. The war on drugs is an utter failure. Why are we puting people in jail and causing them to loose there jobs and sometimes there families becasue they have a joint in there pockets. Its time for the feds and all the idiots in washington to understand THIS IS OUR COUNTRY! Colorado said yes, so get over it Mr. Fed Dont impose your outdated and worthless beliefs on us. Give it a chance and see that you have been wrong. Again this counry is about the will of the people, it would do the feds a world of good to recognize that. I sure dont hear anyone challenging the vote for barack obama to get reelected. No! thats just fine isnt it! Leave colorado and washington alone and move on to something more important and let this country be free like it is suppose to be. Why do we even have a vote if the feds are going to challenge everythiong they dont like. If the vote had went the other way not a word would have been said. So just because it did not go the way of the oposition they want to CRY and try and fight it. The vote was YES! GOT IT! get over it give the people of colorado and washington what they asked for and move on! dont for get, They elect you and they pay your salary!

Nov 12, 2012 10:27pm EST  --  Report as abuse
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