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

Obama: Alaskans Feel Signs of Climate Change

They're seeing bigger storm surges as sea ice melts, more wildfires, erosion of glaciers, shorelines More

Katrina Brought Enduring Changes to New Orleans

The city’s recovery is the result of the people and culture the city is famous for, as well as newcomers and start-up industries More

Magical Photo Slides Show Native Americans in Late 1800s

Walter McClintock spent 20 years photographing the Blackfoot Indians and their vanishing culture at the dawn of the modern age 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.
Colombians Flee Venezuela as Border Crisis Escalatesi
X
August 27, 2015 2:08 AM
Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Is China's Economic Data Accurate?

Some investors say China's wild stock market gyrations have been made worse by worries about the reliability of that nation's economic data. And some critics say the reports can mislead investors by painting an unrealistically-strong picture of the economy. A key China scholar says Beijing is not fudging ((manipulating)) the numbers, but that the economy is evolving quickly from smoke-stack industries to services, and the ways of tracking new economic activity are falling behind the change. V
Video

Video Next to Iran, Climate at Forefront of Obama Agenda

President Barack Obama this week announced new initiatives aimed at making it easier for Americans to access renewable energy sources such as solar and wind. Obama is not slowing down when it comes to pushing through climate change measures, an issue he says is the greatest threat to the country’s national security. VOA correspondent Aru Pande has more from the White House.
Video

Video Shipping Containers Provide Experimental Housing

Housing prices around the San Francisco Bay area are out of reach for many people, so some young entrepreneurs, artists and tech industry workers are creating their own houses using converted shipping containers. But as VOA's Mike O’Sullivan reports from Oakland, the effort requires ingenuity and dealing with restrictive local laws.
Video

Video Arctic Draws International Competition for Oil

A new geopolitical “Great Game” is underway in earth’s northernmost region, the Arctic, where Russia has claimed a large area for resource development and President Barack Obama recently approved Shell Oil Company’s test-drilling project in an area under U.S. control. Greg Flakus reports.
Video

Video Philippine Maritime Police: Chinese Fishermen a Threat to Country’s Security

China and the Philippines both claim maritime rights in the South China Sea.  That includes the right to fish in those waters. Jason Strother reports on how the Philippines is catching Chinese nationals it says are illegal poachers. He has the story from Palawan province.
Video

Video Technique May Eliminate Drill-and-Fill Dental Care

Many people dread visiting dentists because they're afraid of drills. Now, however, a technology developed by a British firm promises to eliminate the need for mechanical cleaning of dental cavities by speeding a natural process of tooth repair. VOA’s George Putic reports.
Video

Video China's Spratly Island Building Said to Light Up the Night 'Like A City'

Southeast Asian countries claim China has illegally seized territory in the Spratly islands. It is especially a concern for a Philippine mayor who says Beijing is occupying parts of his municipality. Jason Strother reports from the capital of Palawan province, Puerto Princesa.
Video

Video Ages-old Ice Reveals Secrets of Climate Change

Ice caps don't just exist at the world's poles. There are also tropical ice caps, and the largest sits atop the Peruvian Andes - but it is melting, quickly, and may be gone within the next 20 years. George Putic reports scientists are now rushing to take samples to get at the valuable information about climate change locked in the ice.
Video

Video French Experiment in Integrating Roma Under Threat

Plans to destroy France’s oldest slum have sparked an outcry on the part of its Roma residents. As Lisa Bryant reports from the Paris suburb of La Courneuve, rights groups argue the community is a fledgling experiment on integrating Roma who are often outcasts in many parts of Europe.
Video

Video Kenyans Turn to Agriculture for Business

Each year Kenyan universities continue to churn out graduates for the job market despite the already existing high rate of unemployment among youth in the country. Some of these young men and women have realized that agriculture can be as rewarding as any other business or job, and they are resorting to agribusiness in large numbers as a way of tackling unemployment. Rael Ombuor reports for VOA.
Video

Video First Women Graduate Elite Army Ranger School

Two women are making history for the U.S. Army by proving they are among the toughest of the tough. VOA's Carla Babb reports from Fort Benning, Georgia as 94 men and those two women rise as graduates of the difficult Ranger school.

VOA Blogs