Pubdate: Mon, 17 Feb 2014
Source: Pottstown Mercury (PA)
Copyright: 2014 The Mercury, a Journal Register Property
Contact:  http://www.pottstownmercury.com/
Details: http://www.mapinc.org/media/2287
Author: Pete Yost, Associated Press
Page: B1

GOV'T LETS BANKS, MARIJUANA SELLERS DO BUSINESS

WASHINGTON (AP) - The Obama administration on Friday gave banks a road
map for conducting transactions with legal marijuana sellers so these
new businesses can stash away savings, make payroll and pay taxes like
any other enterprise. It's not clear banks will get on board.

Guidance issued by the Justice and Treasury departments is the latest
step by the federal government toward enabling a legalized marijuana
industry to operate in states that approve it. The intent is to make
banks feel more comfortable working with marijuana businesses that are
licensed and regulated.

Others have a keen interest, too, in a regulated financial pipeline
for an industry that is just emerging from the underground. Marijuana
businesses that can't use banks may have too much cash they can't
safely put away, leaving them vulnerable to criminals. And governments
that allow marijuana sales want a channel to receive taxes.

But a leading financial services trade group immediately expressed
misgivings and others, too, said the guidelines don't go far enough in
protecting banks.

"After a series of red lights, we expected this guidance to be a
yellow one," said Don Childears, president and CEO of the Colorado
Bankers Association. "This isn't close to that. At best, this amounts
to 'serve these customers at your own risk' and it emphasizes all of
the risks. This light is red." Washington and Colorado in 2012 became
the first states to approve recreational use of marijuana. A group is
hoping to make Alaska the third state in the nation to do so.

Currently, processing money from marijuana sales puts federally
insured banks at risk of drug racketeering charges, so they've refused
to open accounts for marijuana-related businesses.

Friday's move was designed to let financial institutions serve such
businesses while ensuring that they know their customers' legitimacy
and remain obligated to report possible criminal activity, said the
Treasury Department's Financial Crimes Enforcement Network, or FinCEN.
But in response, the American Bankers Association said "guidance or
regulation doesn't alter the underlying challenge for banks. 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."

The group says banks will only be comfortable serving marijuana
businesses if federal prohibitions on the drug are changed in law.

Denny Eliason, a lobbyist for the Washington Bankers Association, said
it will take some time before banks decide whether to take advantage
of the guidance. He called it a good first step, but said it sets
forth a complicated process for the banks to follow - for example, by
filing suspicious activity reports designated "marijuana limited" in
the case of business that seem to be complying with the rules, and
"marijuana priority" for those acting questionably.

"They'll have to have a real awareness of the activities of their
customers," he said.

State banking regulators in Colorado and Washington appear to believe
that mainly small and mediumsized banks will be interested in handling
financial transactions with legal marijuana stores, not the big ones,
a FinCEN official said, speaking only on condition of anonymity to
talk about internal deliberations.

"This is a decision that each financial institution needs to make on
its own," the official said. "We feel quite comfortable that we have
acted within the scope of our authority" and therefore don't expect
legal challenges to the new procedures.

FinCEN writes the rules that U.S. financial institutions must follow
to help protect the system from money laundering and the financing of
terrorism. The office said it expects financial institutions to
perform thorough customer due diligence on marijuana businesses and
file reports that will be valuable to law enforcement.

Under the guidance, banks must review state license applications for
marijuana customers, request information about the business, develop
an understanding of the types of products to be sold and monitor
publicly available sources for any negative information about the business.

Asked about the conflict in federal and state laws on marijuana use,
the official said the agency sought to balance competing interests.
One of them is the concern about having so much cash on the street
without an ability to get those funds into the safety of a bank.
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