Pubdate: Fri, 14 Feb 2014
Source: New York Times (NY)
Copyright: 2014 The New York Times Company
Contact: http://www.nytimes.com/ref/membercenter/help/lettertoeditor.html
Website: http://www.nytimes.com/
Details: http://www.mapinc.org/media/298
Author: Serge F. Kovaleski

U.S. ISSUES MARIJUANA GUIDELINES FOR BANKS

The Obama administration on Friday issued guidelines intended to give 
banks confidence that they will not be punished if they provide 
services to legitimate marijuana businesses in states that have 
legalized the medical or recreational use of the drug, even though it 
remains illicit under federal law.

The guidance, which requires banks to vigorously monitor their 
marijuana-industry customers, was provided by the Treasury Department 
and the Justice Department in separate advisories. The policy does 
not grant immunity from prosecution or civil penalties to banks that 
serve legal marijuana businesses. But it directs prosecutors and 
regulators to give priority to cases only where financial 
institutions have failed to adhere to the guidance.

Still, the banking industry was quick to say that the new guidelines 
would not be sufficient to make banks feel at ease about opening 
accounts for or granting loans to marijuana businesses because the 
drug would still be illegal under the federal Controlled Substances Act.

"While we appreciate the efforts by the Department of Justice and 
FinCEN, guidance or regulation doesn't alter the underlying challenge 
for banks," Frank Keating, president of the American Bankers 
Association, said in a statement, referring to the Financial Crimes 
Enforcement Network, the Treasury unit that issued part of the 
guidelines. "As it stands, possession or distribution of marijuana 
violates federal law, and banks that provide support for those 
activities face the risk of prosecution and assorted sanctions."

Twenty states and the District of Columbia allow the use of marijuana 
for medical purposes, and two of those states, Colorado and 
Washington, have also legalized the recreational use of the drug. 
Those numbers may grow this year, as several other states are 
considering measures to legalize marijuana use.

In a three-page memo to prosecutors issued in conjunction with the 
new banking guidelines, Deputy Attorney General James M. Cole wrote 
that prosecutions may not be "appropriate" when banks do business 
with marijuana entities that are operating legally under state law 
and do not violate any of the eight priorities set forth in a Justice 
Department memo last August. Those priorities include preventing the 
distribution of marijuana to minors and preventing revenue from the 
sale of marijuana from going to criminal enterprises.

Jennifer Shasky Calvery, director of the Financial Crimes Enforcement 
Network, said she was unaware of any banks that have been punished 
for servicing legal marijuana businesses.

Legal marijuana entrepreneurs have stressed that access to banking 
has been their most pressing concern. Their businesses are conducted 
almost entirely in cash, raising huge security concerns, because it 
is difficult for them to open and maintain bank accounts, or to 
accept credit cards. Banks have been apprehensive about providing 
services to marijuana businesses for fear that the authorities might 
punish them for violating money-laundering laws, among other federal 
statutes and regulations.

Last month, Attorney General Eric H. Holder Jr. acknowledged that 
having so much cash on hand presented a public safety problem for 
legal marijuana businesses, adding that they should have access to 
the country's banking system.

Some representatives of the legal marijuana industry said that 
although the guidelines showed progress, federal laws need to be revamped.

"It's a great step in the right direction, but ultimately it would 
not solve all the problems here," said Michael Elliott, executive 
director of the Medical Marijuana Industry Group in Colorado. "We 
need to go beyond saying that this is a low law enforcement priority. 
There are still violations of federal law going on here. So, federal 
laws need to be changed to ensure that what is legal in states like 
Colorado is legal at the federal level, as well."

Marijuana remains a Schedule 1 drug - along with heroin, LSD and 
Ecstasy - under the Controlled Substances Act. This week, 18 members 
of Congress, in a joint letter to President Obama, asked him to 
instruct Mr. Holder to remove marijuana from any of the drug 
schedules or to reschedule it to a lower category.

"Classifying marijuana as Schedule 1 at the federal level perpetuates 
an unjust and irrational system," the lawmakers, led by 
Representative Earl Blumenauer, Democrat of Oregon, said in the 
letter. "Schedule 1 recognizes no medical use, disregarding both 
medical evidence and the laws of nearly half of the states that have 
legalized medical marijuana."

Ms. Shasky Calvery said in a conference call with reporters that the 
guidelines should clarify how financial institutions can provide 
services to marijuana businesses while maintaining their obligation 
to comply with the federal anti-money-laundering law, the Bank 
Secrecy Act. She also said that the guidelines were drafted "to move 
from the shadows" the financial operations of marijuana businesses.

The guidance "will provide transparency and mitigate the risks to the 
financial system," Ms. Shasky Calvery said. The authorities do not 
intend to crack down on banks "for a technical mishap," she said, 
adding: "We are not looking to have a gotcha enforcement regime."

In a seven-page document explaining the guidelines, FinCEN called for 
"due diligence" by financial institutions in monitoring their 
marijuana customers, including reviewing their applications for state 
licenses and understanding their "normal and expected activity," such 
as the types of products they sell and whether they have medical or 
recreational customers.

Since the financial transactions of a marijuana business are 
considered illegal under federal law, banks are required to file 
suspicious activity reports on those entities. A spokesman for the 
Treasury unit, Steve Hudak, said the reports under the guidelines 
would be abbreviated versions. Banks will have to initially file one 
suspicious activity report on a marijuana business, then three a year 
after that.

The new guidelines also establish different kinds of suspicious 
activity reports, depending on whether a bank believes a marijuana 
business is running afoul of the Justice Department's priorities or 
is violating state law.

Matt Apuzzo contributed reporting.
- ---
MAP posted-by: Jay Bergstrom