Pubdate: Thu, 07 Jan 2016
Source: Los Angeles Times (CA)
Copyright: 2016 Los Angeles Times
Contact:  http://www.latimes.com/
Details: http://www.mapinc.org/media/248
Author: David Kelly

AT A POT CREDIT UNION, STILL NO JOINT ACCOUNTS

Judge Blocks a Denver Institution That Wants to Serve the Cannabis 
Industry, Saying He's Upholding Federal Law.

DENVER - Saying he could not look the other way in the face of 
criminal behavior, a federal judge has dismissed a lawsuit by a local 
credit union seeking approval to become what would be the first 
financial institution to openly serve the cannabis industry. Doug Pensinger

In his nine-page order, U. S. District Judge R. Brooke Jackson 
rejected the lawsuit filed by Fourth Corner Credit Union against the 
Federal Reserve Bank of Kansas City, which oversees Denver, for 
refusing it a master account that would enable it to do business.

Fourth Corner wants to be the first financial institution in the 
nation to legally work with the cannabis business. But it's facing 
serious hurdles because pot, legal in Colorado, remains illegal in 
the eyes of the federal government, which regulates banking. As a 
result, few banks are willing to openly do business with the industry 
for fear of being prosecuted.

During a hearing last week, Jackson expressed sympathy for Fourth 
Corner's predicament but telegraphed his position early on by saying 
marijuana remains a controlled substance and his oath is to uphold the law.

Jackson harked back to that stance in his ruling Tuesday, saying the 
court cannot use its powers "to issue an order that would facilitate 
criminal activity."

Fourth Corner Chief Executive Deirdre O'Gorman said the credit union 
board was deciding whether to appeal.

The ruling is a setback for the state and national cannabis industry, 
eager to move away from a multibillion dollar economy conducted 
almost entirely in cash. Many elected officials - including Colorado 
Gov. John Hickenlooper, who opposed pot legalization-believe the lack 
of banking options is now a public safety issue.

Dozens of grow houses and dispensaries have been robbed at gunpoint. 
Some hire heavily armed security to shuttle cash around in armored 
vehicles. Others stash it in boxes, paper bags and safe houses. A few 
banks work with the industry but do so quietly and risk prosecution.

"This ruling sends a message loud and clear: Congress must act," said 
Aaron Smith, executive director of the National Cannabis Industry 
Assn. "There's no shortcut, there's no Band Aid, there's no 
work-around to fix this."

He called the inability for his industry to bank a crisis affecting 
public safety and law- abiding businesses.

There is bipartisan legislation pending in Congress to make banking 
with marijuana businesses less onerous.

Fourth Corner received a charter from Colorado last year and had 
hoped to get a master account from the Federal Reserve enabling it to 
offer checking and electronic banking services.

But the Fed denied the request, saying working with marijuana 
businesses would be illegal.

Yet its lawyers acknowledged in court that they couldn't recall 
refusing a master account to anyone else and that other banks that 
work with the pot industry have such accounts. Ultimately, they 
deemed the move "too risky."

The Fed declined to comment on the ruling.

Judge Jackson expressed his own frustration with the murkiness of current law.

In his decision, he cited a 2014 Justice Department memorandum that 
said banks and credit unions conducting transactions with money from 
the pot industry face criminal liability under money laundering statutes.

But the memo also said prosecutors might refrain from targeting them 
if the financial institutions ensured their marijuana clients 
complied with certain guidelines.

Jackson said the memo was not a green light for banks to work with 
marijuana businesses. It may allow federal prosecutors leeway in whom 
to target, he said, but it doesn't change the law.
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MAP posted-by: Jay Bergstrom