Pubdate: Wed, 12 Feb 2014
Source: Denver Post (CO)
Copyright: 2014 The Denver Post Corp
Author: Don Childears
Note: Don Childears is president and CEO of the Colorado Bankers Association.


Now that recreational marijuana is legal in Colorado, banks are
supportive of government efforts to permit financial services for
marijuana businesses. However, numerous obstacles prevent banks from
serving them and their customers as they conduct legal activities.

Public safety risks associated with cash-heavy businesses cause
concern. And, several federal laws preclude banks from serving these
businesses, regardless of state law. Only Congress can resolve this.

While recent comments by U.S. Attorney General Eric Holder indicate
his plans to issue "guidance" against prosecuting banks for providing
accounts to marijuana businesses, he cannot change the fact that the
substance remains illegal at the federal level and banks must follow
all laws.

Banks are responsible to regulators, most of whom are independent and
uncontrolled by the executive branch. The idea of no prosecution is
nice but, to banks, regulators have the real power.

The only real solution is an act of Congress, which isn't likely in
the near future, though needed. Elections can bring a change in
guidance- and Holder's directive would be the fourth Department of
Justice formal position on marijuana in recent years. Put simply:
Banks need the permanence of law versus changeable guidance.

A number of federal laws now preclude banks from opening accounts
related to marijuana. The Controlled Substances Act prohibits
everyone, including banks, from dealing with controlled substances or
the proceeds from them, like the cash from a pot shop. A bank commits
money laundering by accepting deposits from marijuana activities. The
Bank Secrecy Act, anti-money laundering laws and Know Your Customer
doctrine hold banks responsible when customers engage in federally
illegal activities, even if a customer attempts to disguise the true
nature of an account or a deposit's origin.

Some bank customers have gone to great lengths to disguise accounts
related to marijuana, even spraying deposited cash with air freshener,
for example. But banks, as required by these laws aimed at fighting
organized crime and terrorism, are on the lookout for attempts at
money laundering and must file suspicious activity reports if anything
appears amiss- and pot-related deposits fall in that category. Last
year, about 1.6 million suspicious activity reports were filed in the
U.S. and 342 people were sentenced to an average of 40 months in
prison as a result. Bankers face criminal and civil penalties should
they fail to act on their suspicions. These laws can't simply be swept
aside; they are both technically and politically complex.

Regulators can impose various civil money penalties, cease-and desist
orders and fines, and can ban bankers from their careers for life
should they violate federal law.

To provide services to marijuana businesses, a bank would require
numerous "green lights." To date, banking has seen only "red lights"
from federal laws, the Department of Justice, bank regulators and
others. Holder's statement at best indicates a forthcoming "yellow
light" from the federal Treasury.

Some have advanced the idea of a state-owned bank as a solution, but
it won't work. While a state can own its own bank, the moment it
connects to the payment system with checks, ATMs, debit or credit
cards, Internet banking or wire transfers, federal law applies to it,
the same as any other bank. State ownership would do nothing other
than to conveniently aggregate marijuana-related deposits in one
location for federal seizure.

HR 2652 by U.S. Rep. Ed Perlmutter and others could accomplish a
solution by prohibiting federal regulators from punishing any bank
servicing marijuana businesses in states where it has been legalized
and regulated. Banking services would greatly resolve state regulation
and taxation issues, serve customers and businesses in legal
transactions and help public safety. But only Congress can make that
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