Pubdate: Wed, 12 Feb 2014 Source: Denver Post (CO) Copyright: 2014 The Denver Post Corp Contact: http://www.denverpost.com/ Details: http://www.mapinc.org/media/122 Author: Don Childears Note: Don Childears is president and CEO of the Colorado Bankers Association. MARIJUANA INDUSTRY BANKING REQUIRES AN ACT OF CONGRESS 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 happen. - --- MAP posted-by: Jo-D