Bankers Wary of Marijuana Money Say a New DOJ Memo Won't Be Enough to Make Them Comfortable

DOJDOJA couple of weeks ago, when Attorney General Eric Holder said the Justice Department and the Treasury Department will be issuing guidance "very soon" to banks wary of dealing with state-licensed marijuana producers and distributors, I wondered whether it would be enough to make cautious financial institutions comfortable with taking deposits from businesses that federal law still treats as criminal enterprises. A recent Politico article suggests not:

Financial firms must comply with a slew of anti-money-laundering rules enforced by bank regulators, and the risk of violations could be big for banks that choose to do business with companies that are breaking federal laws.

Also, the DOJ directive wouldn't be binding, and there have been past examples of prosecutors who disagree with similar guidance ignoring the directive. The next administration could also wipe it off the books. All it takes is one U.S. attorney to file criminal charges, and a bank could lose its charter and be forced to shut down.

With this in mind, for many banks—even with assurances from Justice as well as Treasury’s anti-money-laundering division—the risks still outweigh the rewards.

"From my conversations with bankers, I don't see that there's anything they can do that's going to give a bank the comfort they need until Congress changes the law," said Rob Rowe, senior counsel at the American Bankers Association....

Don Childears, the president of the Colorado Bankers Association, which has pushed hard for changes to the rules, said he is not convinced that an opinion from the executive branch is enough.

"It's a murky area," Childears said. "It literally will take an act of Congress."

One Colorado bank, Pueblo Bank & Trust, does not even allow its ATMs to be placed in or near marijuana businesses, presumably because it does not want customers to use cash from the machines to buy cannabis. "Marijuana remains an illegal drug under federal law," PB&T President Mike Seppala told The Pueblo Chieftain last week, "and that's the bank's policy."

Because growing and selling marijuana remain federal felonies, providing financial services to businesses engaged in those activities can be viewed as money laundering or aiding and abetting drug trafficking. Holder can announce that such prosecutions should not be a high priority for U.S. attorneys, but they won't necessarily listen, and the policy can be changed at any moment, by this administration or the next. Without new federal legislation, banks accepting marijuana money will always be taking a legal risk.

The Respect State Marijuana Laws Act, introduced last spring by Rep. Dana Rohrabacher (R-Calif.), would address the problem by declaring that the provisions of the Controlled Substances Act dealing with cannabis "shall not apply to any person acting in compliance with state laws."  The Marijuana Businesses Access to Banking Act, introduced last summer by Reps. Ed Perlmutter (D-Colo.) and Denny Heck (D-Wash.), takes a narrower approach, protecting banks that deal with state-legal marijuana businesses from criminal investigation or prosecution and from regulatory repercussions, including loss of federal deposit insurance.

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  • Hugh Akston||

    Look, what if Holder pinky-swears not to enforce the laws that are on the books like he has with the mandatory sentencing guidelines? Will that be good enough?

  • Almanian (yeah, I said it)||

    Wow - this is so....unexpected.

  • Rich||

    Holder said the Justice Department will be issuing guidance "very soon"

    Soon. Very soon.

  • DJF||

    The banks prefer to stick to traditional investments like laundering illegal drug money.

  • Robert||

    True. They're more interested in not getting caught than in being openly semi-legal. What would work better than assurances from Holder would be some reliable bribe-takers in Justice. Or just make sure they can plausibly deny they knew their depositors were in the business.

  • mad libertarian guy||

    Because growing and selling marijuana remain federal felonies, providing financial services to businesses engaged in those activities can be viewed as money laundering or aiding and abetting drug trafficking. Holder can announce that such prosecutions should not be a high priority for U.S. attorneys, but they won't necessarily listen, and the policy can be changed at any moment, by this administration or the next. Without new federal legislation, banks accepting marijuana money will always be taking a legal risk.

    This is why the Obama admin is especially evil. They want everyone to think they're doing something, while doing nothing at all.

  • Andrew S.||

    And so many people fall for it.

    This is why I think Obama's a genius. Because, at the very least, he's a master strategist. Even the most diehard Republican was off the Bush bandwagon during most of his second term. But Obama? His diehards are still begging for more, still taking everything he says at face value and blaming any problems on Team Red.

  • mad libertarian guy||

    His diehards are still begging for more, still taking everything he says at face value and blaming any problems on Team Red.

    I call this the Racist problem. Obamabots are afraid to call him on his bullshit because they think it will either make them racist or make them seem like a racist to their friends. and we all know that believing in Obama is about how it will make them look in their social circles.

  • Pro Libertate||

    Hoist by their own retard.

  • waffles||

    but some of these retards are extremely clever

  • Bobarian||

    ^^This

    There is no fucking way that Obama is a genius or master strategist. He is a blank slate.

  • ||

    Even the most diehard Republican was off the Bush bandwagon during most of his second term. But Obama? His diehards are still begging for more, still taking everything he says at face value and blaming any problems on Team Red.

    What MLG said, but also it seems to me that Team Blue circles the wagons much better than Team Red does.

  • Anonymous Coward||

    Also, the DOJ directive wouldn't be binding, and there have been past examples of prosecutors who disagree with similar guidance ignoring the directive. The next administration could also wipe it off the books. All it takes is one U.S. attorney to file criminal charges, and a bank could lose its charter and be forced to shut down.

    Who knows better than bankers to get the deal, in writing, and make sure it is valid?

  • Pro Libertate||

    This is a small sample of the larger problem--commercial uncertainty about what arbitrary act is next from the government.

  • Almanian!||

    I blame Bush.

  • playa manhattan||

    This. And if you don't play along, you're "hoarding cash".

  • Pro Libertate||

    It's so weird that people don't see it for what it is. Uncertainty dries up investment dollars. Crap, how many individuals are having problems knowing what to do with their money, let alone businesses?

  • mad libertarian guy||

    Crap, how many individuals are having problems knowing what to do with their money, let alone businesses?

    I'm stuck between a rock and a hard place with my investments right now. I can cash out (or sell a good chunk of a large investment I made a decade ago that worked out great) and diversify in a way that makes more sense for the current market and take a massive tax hit for the pleasure of essentially wanting to shift investments (as opposed to liquefying it all and swimming in gold coins), and or let this massive investment just sit and languish in its current mediocrity.

    I'm fucked if I do, fucked if I don't. Either I see much of the value waste away, or give lots of money to the government because I made a few good choices ten years ago.

  • Bobarian||

    That nest egg?

    You didn't build that.

  • playa manhattan||

    I struggle with some of the same questions.

    Will lefties will be successful in getting capital gains taxed as ordinary income? IDK, but it would be stupid not to plan for it. Just another layer of uncertainty.

  • mad libertarian guy||

    This is a small sample of the larger problem--commercial uncertainty about what arbitrary act is next from the government.

    Psh. Uncertainty in business is just a right wing meme.

  • The Late P Brooks||

    Those crazy teabaggers; it's not like they have any concrete examples of the feds going after banks after they have offered assurances of amnesty.

  • Tim||

    I'm sure President Huckleberry will persecute them all come 2013.

  • Andrew S.||

    I dunno. If I find a Presidential candidate with a time machine, he'll probably have my vote.

  • Tim||

    How DARE you point out my fuck ups!

  • Robert||

    I thought it was a subtle joke. Maybe your complaint above is part of the setup. Run with it.

  • mr simple||

    "Marijuana remains an illegal drug under federal law," PB&T President Mike Seppala told The Pueblo Chieftain last week, "and that's the bank's policy."

    Peanut butter and tuna sounds terrible, but this is probably the smart choice. They could just ask all the medical marijuana people that the government said they wouldn't prosecute how well things go.

  • Pelosi's Rabbit||

    Pipes, bongs, and tokes.

  • Wintermute||

    These banker bastards are real cowards until they need a bailout.

  • Pro Libertate||

    Bankers Wary of Marijuana Money Say a New DOJ Memo Won't Be Enough to Make Them Comfortable.

    Ooh, they may be wary,
    And bankers they do get wary
    Hearing that same old shaggy B.S., yeah.
    But when they get wary
    You gotta try a little spending less, yeah, yeah.

  • The Late P Brooks||

    Uncertainty dries up investment dollars.

    This is why the Federal Reserve has striven so mightily to mask the real cost of money. Just think how much hoarding would be going on if the ten year Treasury were at 5.25%.

  • The Late P Brooks||

    "WEARY. They get WEARY, goddammit."

  • Pro Libertate||

    Thanks, I was getting worried there for a minute.

  • LPDave||

    Or, you know, the DEA could reschedule marijuana and then buying it wouldn't be a crime.

  • Robert||

    They'd have to deschedule rather than reschedule it for that. They could possibly reschedule it for med mj, given some changes in the states, but not for non-med mj.

    There is, however, one little-noted thing DEA could do that would solve the problem: allow the mfg. of mj by individual growers as "exempt preparations" by virtue of their composition, packaging, or conditions of sale.

  • Mainer2||

    Uncertainty. I don't think that's the problem. Because Obama and his people are very predictable. Divide and conquer. Vilify the opposition. Use businesses when politically convenient, fuck them over later. Always choose the path of bigger government and more control. Is there really any uncertainty at this point that Obama is a machine politician out of Chicago, a punish your enemies, reward your friends kind of guy ?

  • some guy||

    I'm sure a few banks will be willing to take the risk if they think there's enough money in it. This is what we mean by free markets balancing risk and reward, right?

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