News / USA

New US Policy Won't Ease Marijuana Dispensaries' Banking Woes

Medical marijuana patient Roger Lingle sniffs a starter plant he bought at the Canna Pi medical marijuana dispensary in Seattle, Washington, November 20, 2012.
Medical marijuana patient Roger Lingle sniffs a starter plant he bought at the Canna Pi medical marijuana dispensary in Seattle, Washington, November 20, 2012.
Reuters
Even as a shift in U.S. prosecution policy gives states more leeway to legalize marijuana, the companies that dispense it are likely to have trouble finding a bank, financial service industry and enforcement experts said.
 
Federal anti-money laundering rules prohibit the handling of proceeds from illegal activities, and banks must follow strict monitoring and reporting procedures to stay within the law. Because a federal prohibition of marijuana is still in place, most banks do not work with marijuana businesses in states that have legalized medical or recreational use of the drug.
 
“There are simply too many unanswered questions at this time,” said Jimmy Gurule, a former enforcement official at the U.S. Treasury Department. “I don't think that the banks will run the risk of criminal prosecution.”
 
Banks are not mentioned in last week's four-page memo in which the U.S. Justice Department outlined the policy shift to prosecutors. This suggests that the Obama administration still is not prepared to allow money from state-recognized pot sales to flow into banks and other financial institutions.
 
“The Justice Department could have gone the next step and at least applied its new standards to financial transactions that derive from medical marijuana proceeds,” said Peter Djinis, a former regulatory policy official with Treasury's Financial Crimes Enforcement Network (FinCEN).
 
“Either Justice officials were not aware of this dilemma, which is hard to believe, or they didn't want to enter into that fray,” Djinis said.
 
A Justice Department spokesman did not respond to a request for comment. FinCEN spokesman Steve Hudak said only that the agency was “reviewing the latest developments.”
 
The Justice Department memo reiterated its commitment to enforcing federal restrictions on marijuana. But it told prosecutors to focus on areas of federal interest, such as distribution to minors, involvement of organized crime, trafficking across state lines and growing on public land. In other cases, enforcement would be a state matter.
 
Vulnerable to prosecution
 
Banks handling money from state-authorized marijuana dispensaries may face a money-laundering prosecution by either  the federal government or by another state if the funds cross state lines, said Gurule, who is now a professor at the University of Notre Dame law school.
 
Shunned by banks, dispensaries have flocked to money-services businesses to obtain money orders. But that industry is not well prepared to manage the legal obligations, Djinis said.
 
“This new policy [by the Justice Department] doesn't solve the problem at all for the financial services community,” he said. “If anything, it makes it more cumbersome, more confusing and less satisfying.”
 
For instance, he said, dispensaries that distribute to minors will still face prosecution. But a financial institution would have no way of knowing whether a client had engaged in that or another activity still targeted by federal enforcers.
 
The medical marijuana business was worth $1.7 billion in 2011 and is growing, according to a study by financial analysis firm See Change Strategy.
 
Roughly 20 states and the District of Columbia have legalized medical marijuana. Voters in Colorado and Washington state went a step further in November by legalizing recreational use.
 
But the U.S. Drug Enforcement Administration and the Justice Department probably “will continue to maintain that the proceeds are still illicit,” said a former Justice Department official who requested anonymity.
 
“I don't think the big banks will change their present policy and bank these outfits,” he said. “It's not worth the risk.”
 
Even if the Justice Department said financial institutions could serve state-authorized marijuana dispensaries, a regulator or a “rogue” U.S. attorney might have a different view and go after a bank, said Rob Rowe, a lawyer with the American Bankers Association's Center for Legal and Regulatory Compliance.
 
Some association members have said marijuana should remain illegal, he said, while others see “a viable small business opportunity” to offer banking services.
 
“But until Congress changes the law,” Rowe said, “there is not a lot a bank can do.”
 
(This article was produced by the Compliance Complete service of Thomson Reuters Accelus. Compliance Complete provides regulatory news, analysis, rules and developments, with global coverage of more than 400 regulators and exchanges.)

You May Like

Turkey: No Ransom Paid for Release of Hostages Held by IS Militants

President Erdogan hails release of hostages as diplomatic success but declines to be drawn on whether their release freed Ankara's hand to take more active stance against insurgents More

Audio Sierra Leone Ends Ebola Lockdown

Health ministry says it has reached 75 percent of its target of visiting 1.5 million homes to locate infected, educate population about virus More

US Pivot to Asia Demands Delicate Balancing Act

As tumult in Middle East distracts Obama administration, efforts to shift American focus eastward appear threatened More

This forum has been closed.
Comment Sorting
Comments
     
by: Windy
September 08, 2013 2:00 AM
I think cannabis businesses and dispensaries should just create their own private banking system, serving only cannabis growers, distributors and retailers and completely disconnected from all other banking systems, and especially the fed gov. Not being educated in high finance, I do not know the procedure for doing this but I'm sure they can figure it out. It is exactly how libertarians think ALL of society should function -- completely voluntarily, agorist, and private.

In Response

by: E Christina Dabis from: USA
September 08, 2013 2:05 PM
U.S. banks are prohibited from opening accounts for NON U.S. Citizens, too! Did that stop them? No. Bank of America is still known as Bank of Amigo with their violation of Federal laws. Do you really think that banks would turn down drug money? No.

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Natural Gas Export Plan Divides Maryland Towni
X
Deborah Block
September 21, 2014 2:12 PM
A U.S. power company that has been importing natural gas now wants to export it. If approved, its plant in Lusby, Maryland, would likely be the first terminal on the United States East Coast to export liquefied natural gas from American pipelines. While some residents welcome the move because it will create jobs, others oppose it, saying the expansion could be a safety and environmental hazard. VOA’s Deborah Block examines the controversy.
Video

Video Natural Gas Export Plan Divides Maryland Town

A U.S. power company that has been importing natural gas now wants to export it. If approved, its plant in Lusby, Maryland, would likely be the first terminal on the United States East Coast to export liquefied natural gas from American pipelines. While some residents welcome the move because it will create jobs, others oppose it, saying the expansion could be a safety and environmental hazard. VOA’s Deborah Block examines the controversy.
Video

Video Difficult Tactical Battle Ahead Against IS Militants in Syria

The U.S. president has ordered the military to intensify its fight against the Islamic State, including in Syria. But how does the military conduct air strikes in a country that is not a U.S. ally? VOA correspondent Carla Babb reports from the Pentagon.
Video

Video Iran, World Powers Seek Progress in Nuclear Talks

Iran and the five permanent members of the U.N. Security Council plus Germany, known as the P5 + 1, have started a new round of talks on Iran's nuclear program. VOA State Department correspondent Pam Dockins reports that as the negotiations take place in New York, a U.S. envoy is questioning Iran's commitment to peaceful nuclear activity.
Video

Video Alibaba Shares Soar in First Day of Trading

China's biggest online retailer hit the market Friday -- with its share price soaring on the New York Stock Exchange. The shares were priced at $68, but trading stalled at the opening, as sellers held onto their shares, waiting for buyers to bid up the price. More on the world's biggest initial public offering from VOA’s Bernard Shusman in New York.
Video

Video Obama Goes to UN With Islamic State, Ebola on Agenda

President Obama goes to the United Nations General Assembly to rally nations to support a coalition against Islamic State militants in Iraq and Syria. He also will look for nations to back his plan to fight the Ebola virus in West Africa. As VOA White House correspondent Luis Ramirez reports, Obama’s efforts reflect new moves by the U.S. administration to take a leading role in addressing world crises.
Video

Video Migrants Caught in No-Man's Land Called Calais

The deaths of hundreds of migrants in the Mediterranean this week has only recast the spotlight on the perils of reaching Europe. And for those forunate enough to reach a place like Calais, France, only find that their problems aren't over. Lisa Bryant has the story.
Video

Video Westgate Siege Anniversary Brings Back Painful Memories

One year after it happened, the survivors of the terror attack on Nairobi's Westgate Shopping Mall still cannot shake the images of that tragic incident. For VOA, Mohammed Yusuf tells the story of victims still waiting for the answer to the question 'how could this happen?'
Video

Video Militant Assault in Syria Displaces Thousands of Kurds

A major assault by Islamic State militants on Kurds in Syria has sent a wave of new refugees to the Turkish border, where they were stopped by Turkish border security. Turkey is already hosting about 700,000 Syrian refugees who fled the civil war between the government and the opposition. But the government in Ankara has a history of strained relations with Turkey's Kurdish minority. Zlatica Hoke reports Turkey is asking for international help.
Video

Video Whaling Summit Votes to Uphold Ban on Japan Whale Hunt

The International Whaling Commission, meeting in Slovenia, has voted to uphold a court ruling banning Japan from hunting whales in the Antarctic Ocean. Conservationists hailed the ruling as a victory, but Tokyo says it will submit revised plans for a whale hunt in 2015. Henry Ridgwell reports from London.
Video

Video A Dinosaur Fit for Land and Water

Residents and tourists in Washington D.C. can now examine a life-size replica of an unusual dinosaur that lived almost a hundred million years ago in northern Africa. Scientists say studying the behemoth named Spinosaurus helps them better understand how some prehistoric animals adapted to life on land and in water. The Spinosaurus replica is on display at the National Geographic museum. VOA’s George Putic has more.
Video

Video Iraqi Kurdistan Church Helps Christian Children Cope find shelter in churches in the Kurdish capital, Irbil

In the past six weeks, tens of thousands of Iraqi Christians have been forced to flee their homes by Islamic State militants and find shelter in churches in the Kurdish capital, Irbil. Despite U.S. airstrikes in the region, the prospect of people returning home is still very low and concerns are starting to grow over the impact this is having on the displaced youth. Sebastian Meyer reports from Irbil on how one church is coping.


Carnage and mayhem are part of daily life in northern Nigeria, the result of a terror campaign by the Islamist group Boko Haram. Fears are growing that Nigeria’s government may not know how to counter it, and may be making things worse. More

AppleAndroid