POLITICS

Feds Move To Fix Pot Shops' Banking Problems

02/14/2014 02:04 pm ET | Updated Feb 17, 2014

WASHINGTON -- The federal government issued guidelines on Friday that officials said were intended to increase the financial services available to marijuana businesses that are legal under state laws.

Guidelines announced by the Treasury Department and a memo from a top Justice Department official were intended to ease concerns that the federal government would target banks working with marijuana-related businesses that are legal and regulated on the state level. Expanded banking access will enable them to function like traditional businesses, and implementing a reporting structure will allow the federal government to take a close look at how they operate.

Under the Treasury Department's plan, banks would file a "suspicious activity report," or SAR, for a wide range of financial transactions by any marijuana-related business, but they would specify that they did not believe illegal activity beyond simply dealing in the marijuana trade was taking place.

The Justice Department memo falls short of expressly protecting banks that work with state-compliant marijuana businesses from prosecution. It states only that banks working with businesses that don't violate one of DOJ's eight areas of concern related to the pot trade, like distribution of marijuana to minors, violence and the use of firearms, are less likely to be targeted by federal prosecutors.

"If a financial institution or individual offers services to a marijuana-related business whose activities do not implicate any of the eight priority factors, prosecution for those offenses may not be appropriate," Deputy Attorney General James Cole wrote in the memo, which was sent to federal prosecutors across the country on Friday.

While the phrase "may not be appropriate" falls far short of what the marijuana lobby and financial institutions were hoping for -- and the Cole memo didn't state outright that the move was meant to expand banking access for pot shops -- DOJ officials said easing the financial threat to marijuana businesses working in a cash-only environment was their intent.

"The Department shares the concerns of public officials and law enforcement about the public safety risks associated with businesses that handle significant amounts of cash," Justice Department spokeswoman Allison Price said in a statement. "These guidelines, together with the Treasury Department's guidance to financial institutions, are intended to increase the availability of financial services for marijuana businesses -- that are licensed and regulated -- while at the same time preserving and enhancing important law enforcement tools."

State-legal, state-licensed marijuana businesses often don’t have access to traditional banking, and cannot accept credit cards or open simple checking accounts, due to banks' fears that they could be implicated as money launderers. The businesses are forced into cash-only transactions, putting the retailers' safety at risk and creating issues involving taxes and employee payroll.

Treasury officials, based on their conversations with financial institutions, said they anticipated that the guidelines could encourage smaller and medium-sized banks to deal with marijuana businesses.

“While we appreciate the efforts by the Department of Justice and FinCEN, guidance or regulation doesn’t alter the underlying challenge for banks," said Frank Keating, the president and CEO of the American Bankers Association. "As it stands, possession or distribution of marijuana violates federal law, and banks that provide support for those activities face the risk of prosecution and assorted sanctions.”

Richard Riese, vice president of compliance at the ABA, told The Wall Street Journal that bankers are concerned about the legality of working with federally illegal businesses and have questions about how to effectively scrutinize the transactions made.

Bank of America’s policy, for example, has been to not accept any marijuana businesses as customers, and it’s unclear if the guidance proposed is enough to change that.

Currently, 20 states and the District of Columbia have legalized some form of marijuana, be it medical or recreational. The legal marijuana industry is expected to grow to $2.3 billion in 2014 in the U.S.. One study suggests that figure could balloon to over $10 billion by 2019.

“This is an important step,” Rep. Ed Perlmutter (D-Colo.), sponsor of the Marijuana Businesses Access to Banking Act, said in a statement. But Perlmutter also noted that the guidance doesn’t alleviate all liability for financial institutions interested in doing business with marijuana businesses.

“We need Congress to promptly consider and pass my legislation to provide certainty for financial institutions and the licensed marijuana related businesses to operate just like any other business,” Perlmutter added.

Rep. Jared Polis (D-Colo.), a co-sponsor of Perlmutter's banking legislation and sponsor of the Ending Federal Marijuana Prohibition Act, called the guidelines a "huge step in the right direction," but said the federal government's continued stance that marijuana is one of the "most dangerous" drugs needs to be reconsidered.

"The only true way to protect these small business owners is to remove marijuana from the list of schedule 1 narcotics," Polis said.

Dan Riffle, director of federal policies for Marijuana Policy Project, agreed that more needed to be done to resolve the conflicts between federal and state marijuana law.

"Rather than forcing federal agencies to work around our broken marijuana laws, Congress needs to act to permanently fix these problems by ending federal marijuana prohibition and allowing states to regulate marijuana in a manner similar to alcohol," he said.

The Treasury Department guidance:

FinCEN Guidance on Marijuana-Related Businesses

The Justice Department memo:

DAG Memo - Guidance Regarding Marijuana Related Financial Crimes

Also on HuffPost:

  • 1 Former President Bill Clinton
    AP
    Bill "Didn't Inhale" Clinton has supported decriminalizing marijuana for more than a decade and more recently has spoken out against the war on drugs.

    “I think that most small amounts of marijuana have been decriminalized in some places, and should be," he said back in 2000 in an interview with Rolling Stone. "We really need a re-examination of our entire policy on imprisonment.”

    He's since spoken about the issue of marijuana and drug prohibition a number of times. Last year, he appeared in the documentary, "Breaking the Taboo," where he argued that the war on drugs has been a failure.
  • 2 Sen. Rand Paul (R-Ky.)
    AP
    Paul exhibited his libertarian tendencies earlier this year when he explained that he'd favor reforming marijuana laws to either decriminalize or reduce penalties for possession.

    “I don't want to promote that but I also don't want to put people in jail who make a mistake," Paul said. "There are a lot of young people who do this and then later on in their twenties they grow up and get married and they quit doing things like this. I don't want to put them in jail and ruin their lives."

  • 3 Former Rep. Ron Paul (R-Texas)
    As a congressman, Paul took his opposition to marijuana and drug prohibition a step farther than his son has so far. He supported a number of bills that would have removed the plant from its current status as a Schedule I substance under federal law, where it is considered alongside heroin and PCP. Because his history on the topic is so expansive, just take a look at the video to the left for a selection of his comments.
  • 4 Evangelist Pat Robertson
    AP
    While the 83-year-old Robertson may say a lot of things that make him sound like a kooky old man, he's also made a few remarks to endear himself to marijuana advocates.

    "I really believe we should treat marijuana the way we treat beverage alcohol," Robertson said in an interview with The New York Times in 2012. "I've never used marijuana and I don't intend to, but it's just one of those things that I think: this war on drugs just hasn't succeeded."

    Robertson has made similar remarks on his "700 Club" show before, but the Times, like many others, perhaps felt they must have misheard him.
  • 5 New York City Mayor Michael Bloomberg
    Getty Images
    In a state of the city address earlier this year, Bloomberg made it clear that he supported a promise by New York Gov. Andrew Cuomo (D) to push marijuana decriminalization. "I support Governor Cuomo's proposal to make possession of small amounts of marijuana a violation, rather than a misdemeanor, and we'll work to help him pass it." A similar effort specific to NYC has made some progress, but faces an unclear path forward with New York lawmakers.
  • 6 Actor Bryan Cranston
    Getty Images
    Some may think of Cranston as more of a meth guy thanks to Walter White, his character on AMC's hit show "Breaking Bad," but in real life he's spoken out against current pot laws, suggesting that recreational marijuana use isn't a big deal -- and shouldn't be treated like it.

    “[T]o me, marijuana is no different than wine," he said in an interview with High Times. "It's a drug of choice. It's meant to alter your current state -- and that's not a bad thing. It's ridiculous that marijuana is still illegal. We're still fighting for it ... It comes down to individual decision-making. There are millions of people who smoke pot on a social basis and don't become criminals. So stop with that argument -- it doesn't work.”

    [H/T Marijuana Majority]
  • 7 Former New Mexico Gov. Gary Johnson (R)
    AP
    Unlike many politicians, Johnson, a Libertarian presidential candidate in 2012, has unabashedly admitted using marijuana. But beyond his personal history with pot, he's been an outspoken advocate for legalizing and taxing it.

    From his campaign platform:

    "By managing marijuana like alcohol and tobacco - regulating, taxing and enforcing its lawful use - America will be better off. The billions saved on marijuana interdiction, along with the billions captured as legal revenue, can be redirected against the individuals committing real crimes against society."
  • 8 Author Stephen King
    Getty Images
    King hasn't been shy about advocating for a legal marijuana industry that could give easy access to recreational users and revenue to the states.

    “Marijuana should not only be legal, I think it should be a cottage industry," he said in an interview with High Times. "My wife says, and I agree with her, that what would be really great for Maine would be to legalize dope completely and set up dope stores the way that there are state-run liquor stores.”

    [H/T Marijuana Majority]
  • 9 Rep. Dana Rohrabacher (R-Calif.)
    Getty Images
    Rohrabacher was a co-sponsor of the 2013 "Respect State Marijuana Laws Act," which seeks to protect marijuana users or businesses acting legally according to state marijuana laws from being prosecuted under the federal Controlled Substances Act.

    While marijuana has been made legal for various uses in a number of states, the Obama administration continues to enforce federal laws across the nation. This has led to numerous raids of marijuana-based businesses, as well as prosecutions of growers and other people involved in pot.

  • 10 Rep. Don Young (R-Alaska)
    AP
    Young was also a co-sponsor of the 2013 "Respect State Marijuana Laws Act."
  • 11 Rep. Justin Amash (R-Mich.)
    Getty Images
    Amash was also a co-sponsor of the "Respect State Marijuana Laws Act."
  • 12 Glenn Beck
    AP
    Back in 2009, when Beck had a Fox News show, he suggested that marijuana legalization could be a worthwhile solution to raging drug violence on the nation's border with Mexico.

    "I think it's about time we legalize marijuana," he said. "We have to make a choice in this country. We either put people who are smoking marijuana behind bars or we legalize it, but this little game we're playing in the middle is not helping us, it is not helping Mexico and it is causing massive violence on our southern border."
  • 13 Billionaire Richard Branson
    AP
    From an op-ed by Branson arguing for an end to the war on drugs:

    "Decriminalization does not result in increased drug use. Portugal's 10 year experiment shows clearly that enough is enough. It is time to end the war on drugs worldwide. We must stop criminalising drug users. Health and treatment should be offered to drug users - not prison. Bad drugs policies affect literally hundreds of thousands of individuals and communities across the world. We need to provide medical help to those that have problematic use - not criminal retribution."
  • 14 GOP Mega-Donor David Koch
    AP
    Koch may have funneled countless dollars to conservative candidates who oppose reforming marijuana laws, but back in 1980, when he was the vice presidential candidate for the Libertarian Party, he suggested that it was "ridiculous" to consider people who smoked pot "criminals."
  • 15 Texas Gov. Rick Perry (R)
    Getty Images
    In 2010, Perry told Jon Stewart that he believed in a federalist approach to marijuana laws -- that is, to allow states to determine their own approach and to tell the federal government to butt out. He's since suggested he'd be willing to support decriminalizing possession of small amounts of marijuana.
  • 16 Comedy Central's Jon Stewart
    Getty Images
    Stewart has made a habit of taking down politicians who exhibit an uncompromising stance on marijuana prohibition. In 2012, Stewart took New Jersey Gov. Chris Christie (R) to task for vetoing a marijuana decriminalization bill.

    “Alright, as much as I disagree, I don’t think marijuana should be illegal, but it is illegal on the federal level," Stewart began. "Christie is a former prosecutor, a man of conviction, of principle, doesn’t believe that the state should supersede federal law."

    The praise in the second sentence is a good sign that Stewart is about to shred Christie. Watch the rest of his takedown above.
  • 17 Actor Jack Nicholson
    AP
    In an interview with the UK's Daily Mail in 2011, Nicholson said that he personally still used marijuana, before making the case for ending the prohibition on pot as well as other drugs.

    "I don't tend to say this publicly, but we can see it's a curative thing. The narcotics industry is also enormous. It funds terrorism and - this is a huge problem in America - fuels the foreign gangs," he said. "More than 85 percent of men incarcerated in America are on drug-related offences. It costs $40,000 a year for every prisoner. If they were really serious about the economy there would be a sensible discussion about legalization."
  • 18 Former Utah Gov. Jon Huntsman (R)
    AP
    In a 2013 American Conservative op-ed chock full of moderate Republican views, Huntsman snuck in a call to "applaud states that lead on reforming drug policy."

    While Obama and his administration have responded to state marijuana reforms by saying they must enforce federal laws against marijuana, the president has the power to reschedule the drug, which would allow federal authorities to shift resources away from a prohibitive approach.
  • 19 Former Alaska Gov. Sarah Palin (R)
    AP
    Palin spoke out on marijuana in 2010, saying she didn't support legalizing it but also calling it a "minimal problem" for the nation.

    "However, I think we need to prioritize our law enforcement efforts," Palin said. "If somebody's gonna smoke a joint in their house and not do anybody any harm, then perhaps there are other things our cops should be looking at to engage in and try to clean up some of the other problems we have in society." While Obama has spoken repeatedly about not being interested in prosecuting small-time marijuana users, he hasn't done anything to prevent them from being busted by law enforcement in states where the drug is still illegal.
  • 20 Comedian Jimmy Kimmel
    Getty Images
    Kimmel notably took a shot at Obama while serving as host of the 2012 White House Correspondents Dinner, questioning a continued marijuana crackdown under the president's administration. He then went on to say that the issue of its continued illegality was a serious political concern for many Americans.

    (Check out the video above.)
  • 21 Former President Jimmy Carter
    Getty Images
    Carter hasn't minced words in expressing his opposition to harsh marijuana and drug prohibition policies.

    In 2012, the former president said he was fine with state legalization efforts, though he himself doesn't necessary support legalizing the drug.

    “As president 35 years ago I called for decriminalizing -- but not legalizing -- the possession of marijuana,” Carter said. “Since then, U.S. drug policies have been very horrible to our own country because of an explosion in prison populations.”
  • 22 Former Virginia Attorney General Ken Cuccinelli
    AP
    A staunch conservative who failed in a run for the U.S. Senate last year, Cuccinelli suggested in 2013 that he was "evolving" on marijuana legalization, and that he supported the rights of states to determine their own pot laws.

    "I don't have a problem with states experimenting with this sort of thing I think that's the role of states," Cuccinelli said, according to Ryan Nobles of WWBT.
  • 23 Columnist Dan Savage
    AP
    Savage slammed Obama for perpetuating the war on drugs while on HBO's "Real Time With Bill Maher" in 2009.

    “The proof will be in the policy. The war on drugs has gotten a really bad rap, when you ask people if they support the war on drugs they say no ... [Obama's] budget once again has the same old drug warrior policy ... I reject the assumption that everybody who is using drugs needs treatment or is an addict and needs to get arrested ... Not all drug use is abuse.”

    He's kept up the fight for drug policy reform since.

    [H/T Marijuana Majority]
  • 24 MSNBC's Al Sharpton
    Getty Images
    Sharpton has repeatedly spoken out in favor of reforming drug laws. In 2011, he suggested that the nation had wasted trillions of dollars in an ill-fated effort that had weighed particularly heavily on the African American community.

    “We've been fighting the war on drugs since the '60s. And guess what? Trillions of dollars later, we are losing," Sharpton said during a segment on MSNBC. "When you look at the disparities in sentencing drug offenders, hasn't this kind of injustice undermined the legitimacy of our criminal justice system?”

    [H/T Marijuana Majority]
  • 25 Former Rep. Tom Tancredo (R-Colo.)
    AP
    Tancredo came out aggressively in favor of reforming marijuana laws in 2010, telling the Colorado Independent that the correct path forward was "Legalize it. Regulate it. Tax it."

    Tancredo continued, “The arguments against marijuana today are the same as the arguments against liquor years ago.”

    Years later, the former congressman agreed to smoke pot on camera with a documentary filmmaker, a deal that he later backed out of.
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