| WASHINGTON, April 29
WASHINGTON, April 29 U.S. Treasury Secretary
Jack Lew on Tuesday defended the Obama administration's decision
to let banks do business with marijuana dealers in states that
have legalized the drug, insisting to lawmakers that it was not
tacit approval under federal law.
Lew, testifying before a House of Representatives
Appropriations subcommittee, said Treasury's financial crimes
division issued the guidance to banks in February to help shed
light on the emerging licensed recreational marijuana trade in
Colorado and Washington state.
Because recreational sales of the drug remain illegal under
federal law and in all other states, banks were prohibited from
processing transactions from the state-licensed dealers,
effectively forcing them to operate on a cash-only basis. There
would be no way to track these sales, raising the risk of
illegal money laundering activity, Lew said.
"Without any guidance, there would be a proliferation of
cash-only businesses, and that would make it impossible to see
when there are actions going on that violate both federal and
state law and that would be a real concern," Lew told the
subcommittee. "We thought that the clarity, bringing it into
daylight, was a better solution."
Representative Harold Rogers, the Kentucky Republican who
chairs the House Appropriations Committee, challenged Lew,
saying the move was a "rubber stamp" for an activity still
illegal in most of the United States and that it would encourage
illegal drug gangs to try to exploit the U.S. banking system.
He said Washington state has not yet licensed most sellers,
yet Treasury was allowing banks to do business with them.
"If they aren't licensed or regulated by the state, how are
they different from a drug dealer on the street corner?" Rogers
"What about cocaine dealers? Shouldn't we give them the same
break?" he added later.
Lew said banks are already filing suspicious activity
reports on some transactions related to the legal marijuana
trade, helping law enforcement officials understand more about
it, something that would not happen if all sales were being made
Even so, few, if any, financial institutions have chosen to
begin serving legal pot dealers as a result of the guidance,
marijuana industry sources and bank anti-money-laundering
officials have told Reuters. The latter say the guidance does
not provide clear immunity from prosecution and requires due
diligence that would be too costly for banks to pursue.
According to the guidance, criminal prosecution for money
laundering and other crimes is unlikely if banks meet a series
of conditions, such as avoiding business with marijuana
operations that sell to minors or engage in illegal drug
Representative Mario Diaz-Balart, a Florida Republican,
questioned why Treasury did not stipulate in its guidance that
marijuana sales were still illegal under federal law.
"Our guidelines in no way change federal law," Lew said. "We
are in no way telling people that things that are illegal under
federal law are legal."
It would be preferable if Congress set policy on the issue
through legislation, Lew said, adding that the bank guidance was
"an attempt to have as much clarity as one can have given this
unpleasant situation with the state law."
(Additional reporting by Brett Wolf in St. Louis; Editing by