Pubdate: Sat, 17 Mar 2012
Source: Denver Post (CO)
Copyright: 2012 The Denver Post Corp
Contact:  http://www.denverpost.com/
Details: http://www.mapinc.org/media/122
Author: Robert Frichtel
Note: Robert Frichtel is managing partner of the Medical Marijuana 
Business Exchange. He wrote this for Bloomberg News.

COLORADO POT BIZ NEEDS LEGAL BANKING

At a time when the country is trying to create jobs and encourage the 
growth of small businesses, why is the Obama administration going to 
such lengths to kill a thriving and legitimate industry?

Here's what's going on: Although Colorado, where I live, 15 other 
states and the District of Columbia have passed laws allowing medical 
use of marijuana, the federal government is sticking to its outdated, 
one-size-fits-all policy on drugs.

This was made clear last summer when the Justice Department issued a 
memo in which it restated that marijuana is still a so-called 
Schedule I drug - the equivalent of heroin or LSD - and has no 
legitimate medical use. In other words, growing and distributing 
medical marijuana is a felony under federal law.

The upshot of this is that any bank or credit union doing business 
with a medical-marijuana dispensary, even simply by allowing them a 
bank account, is potentially subject to money-laundering charges. 
These are the same class of charges that apply to genuine criminal 
activities such as human trafficking, arms smuggling and prostitution.

I've heard from many of our clients that run medical-marijuana 
businesses that banks have had their federal charters threatened, 
have been told that the access to Federal Deposit Insurance Corp. 
insurance programs could be at risk, and have been informed that 
individual bank employees may face criminal prosecution if they 
opened accounts or allowed existing accounts to stay open.

With this message from the federal government, banks have closed 
accounts summarily. With little or no notice, medical-marijuana 
businesses have been told to stop using a bank's services and 
withdraw any deposit balances they have.

Try being the owner of a legal business that does not have access to 
the banking system. You can't accept credit cards (that service was 
shut off, too), so all the day's business is done in cash. What do 
you do with the proceeds of the day's sales? How do you pay your 
employees? How do you pay your suppliers?

It has created many unnecessary challenges and expenses for the 
industry. And in states where the laws require strict and detailed 
accounting of business transactions, compliance becomes more difficult.

But medical marijuana is a legal business, approved by voters in 
Colorado in 2000. Since then, medical marijuana has become an 
industry that contributes $25 million in sales taxes and fees and 
employs thousands of people at more than 600 dispensaries and 
manufacturers of food and other products infused with medical 
marijuana. In Denver County, there are more medical-marijuana 
dispensaries than there are Starbucks in the state.

It's easy to see the strong economic prospects for this industry.

There is a possible solution to this industry's banking crisis, but 
it's got a long way to go. Last year, two members of Congress - Rep. 
Jared Polis of Colorado and Rep. Barney Frank of Massachusetts - 
introduced legislation to allow state-certified medical marijuana 
businesses to have full access to banking services.

While the legislation inches its way through the federal system, 
individual states are starting to take action, too. Last month 
Colorado state Sen. Pat Steadman introduced a bill that would allow 
the medical-marijuana businesses in Colorado to create 
financial-services cooperatives to supply basic banking service to 
the industry. Sadly, this measure failed in committee, but it's 
likely that another attempt for a state-sponsored solution will be 
made either here in Colorado or another state where medical marijuana is legal.

It is unfortunate that these extra measures are needed when the 
federal government could easily solve the problem it created by 
simply reclassifying marijuana as a Schedule II drug and taking the 
pressure - to avoid medical-marijuana businesses - off the banking 
system. The federal government should be working with the states to 
allow them to carry out their laws allowing medical marijuana, not 
try to push it back underground.
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MAP posted-by: Jay Bergstrom