When states across the U.S. began legalizing marijuana for medical or even recreational use, their laws came into direct conflict with federal drug laws. When Attorney General Eric Holder announced recently that the federal government would no longer prosecute individual users or small-time dealers, it was a big step toward reconciling the conflicting policies, but it’s clear there is still a long way to go.
One area where the troublesome state-federal law conflict is only now becoming clear is not in federal drug policy, however, but in federal banking law. Up until now, providing banking services to known marijuana producers and distributors was clearly considered a form of money laundering under federal law. Now, however, the legal marijuana industry would like a place to legally deposit its money.
Here in Florida, of course, marijuana is still strictly prohibited. However, many of our banks are national, and they, too could potentially be implicated in money laundering if their branches in legal-marijuana states begin serving the legal pot industry. What should be done?
On Tuesday, four members of the Senate Judiciary Committee met in an attempt to address the issue. They were able to come to no firm conclusions, despite testimony by officials from political and law enforcement officials from Colorado and Washington State, where small amounts of marijuana are now legal for recreational use.
Unfortunately, the option of doing nothing is unrealistic. Legal marijuana dispensaries are currently required to operate on a cash-only basis, with no safe place to store that cash and no legal way to leverage their operating capital like normal businesses. Banks are simply not willing to take the risk of being prosecuted for money laundering by serving these businesses.
That creates not only business vulnerability but also a serious invitation to robbery. It also sets up an incentive for tax evasion, according to the sheriff of King County, Washington, that state’s largest county.
Republican committee member Chuck Grassley of Iowa was not interested in accommodating the so-called legal marijuana industry at all. He disapproves of the state efforts to decriminalize the drug, which he feels is off-limits for good reason.
On the other hand, there’s no denying that times are changing, as the King County Sheriff pointed out. “My experience shows me that the war on drugs has been a failure,” he told the senators. “We have not significantly reduced demand over time, but we have incarcerated generations of individuals. … The citizens of the State of Washington decided it was time to try something new.”