Pubdate: Mon, 24 Feb 2014
Source: Washington Times (DC)
Copyright: 2014 The Washington Times, LLC.
Contact:  http://www.washingtontimes.com/
Details: http://www.mapinc.org/media/492
Author: Robert Charles
Page: B1

JUST SAY NO TO DRUG MONEY

Banks That Accept Proceeds Based on Official Assurances Will One Day
Regret It

The Obama administration recently released departmental "guidance"
saying banks may "provide financial services to marijuana related
businesses operating legally under state law." Let's be clear: No
federal trump card exists that can erase bank liability for handling
of drug money.

Put differently, there is no conceivable way to remove criminal and
civil liability for complicity in money laundering by departmental
"guidance." Thus, any bank that wants to avoid federal, state and
private liability has only one choice: Say no to drug money. Here is
why.

For all the hoopla, narcotics distribution is still drug trafficking,
even if you dress it up as legal. Processing drug money is still complicity.

Foreseeable liability for bank involvement is enormous. Congresses led
by both Republican and Democratic majorities over 40 years have
crafted anti-money-laundering and anti-drug statutes to prevent
infection of the U.S. banking system with illegal proceeds.

Relevant laws include the Bank Secrecy Act (1970), Money Laundering
Control Act (1986), Anti-Drug Abuse Act of 1988 (co-authored
incidentally by then-Sen. Joe Biden), Annunzio-Wylie Anti-Money
Laundering Act (1992), Money Laundering Suppression Act (1994), Money
Laundering and Financial Crimes Strategy Act (1998), Title III of the
USA Patriot Act (2001), and Intelligence Reform and Terrorism Act of
2004.

The new federal "guidance" is notable for what it does not say. It
does not assure banks that they will not be prosecuted under these
laws, and does not answer the tough questions.

If banks process marijuana monies - all cash, since the credit card
companies sensibly do not want anything to do with it - how do they
distinguish between large cash sums derived from marijuana and sums
from other illicit drugs, such as cocaine, heroin and
methamphetamine?

How do they separate cash deposits of "legal pot" traffickers from
those "passed along" by illegal traffickers in neighboring states? If
they get the call wrong once, they are then de facto processers of
illicit proceeds - that is, liable.

Add this conundrum: If a Colorado bank processes pot money from
Colorado, but bank patrons sell to users in other states - a la "drug
tourism" - how does the bank avoid felony liability in other states?
If another state proves that a Colorado bank is accepting monies
illegal under that state's laws, wouldn't that be a handy way to
balance a state budget?

What about liability for international trafficking, when Mexican pot
shows up in bank deposits? Or interstate liability when non-legalizing
states seek damages from banks for facilitating international
trafficking on their roads and rails? In short, there is no way to
protect against such lawsuits, nor should there be.

Then on the interstate front, consider lawsuits by contiguous states
for drugged driving, pot-related traffic accidents, and drivers
trafficking pot from the legalizing state. Who will come to the rescue
of involved banks then? Who will protect the drug-affiliated banks
when they try to move drug-tainted money into the interstate banking
system?

All this is just half the problem. Put aside liability to government
entities and imagine that issue gone by fiat, which it never will be.
This still leaves liability to nongovernment litigants - that is, to
private parties adversely affected by the newly authorized drug
trafficking and drug-related banking practices. For all their
eagerness to do so, the Obama administration cannot eliminate
individual - and class-action - rights by private parties adversely
affected by bank complicity.

Any state that legalizes marijuana has opened the door to a
"public-spirited" - and often insatiable - plaintiffs' bar. Complicit
banks are in the mix.

Civil law suits will proliferate, just as they did against tobacco
companies, and for better reason. First, anticipate the tort claims
for millions of dollars in damages by victims of drugged-driving
accidents, legally sanctioned overdoses, or in cases where "legally
acquired marijuana" is a proximate cause. Next expect the
multimillion-dollar wrongful-death claims by families who can
affirmatively link their child's marijuana use, addiction or
subsequent overdose from any drug to the state-sponsored
drug-distribution program and bank participation. Who will these eager
litigators identify as deep pockets? Banks. Then watch class-action
litigators re-emerge, the ones who got rich suing cigarette companies.
They will file against everyone who touches pot money, articulating
colorable claims for compensatory and punitive damages against all
pockets. Prepare for a replay of nicotine addiction, organ damage and
death.

Stripped of pro-drug hype, marijuana is actually more dangerous than
nicotine, more addicting and more physically and mentally damaging.
Moreover, the science is all public. Ironically, studies by the
Department of Justice and the Centers for Disease Control and
Prevention will make the case. Medicine is never smoked, and promoting
drug addiction is never benign.

Finally, add peripheral claims, contributory negligence in workplace
accidents, marijuana related violent and property crime, domestic
abuse and reimbursement to hospitals for higher emergency-room costs.
Private litigators must already be rubbing their hands together. This
is not rocket science, nor even difficult data analysis. This is pure
replay, which is what makes the pending fiasco so surreal. Once on the
slope, banks are all but in the litigation abyss. The foreseeable
liability of those embracing legal pot is enormous - greater than for
cigarettes or alcohol - since the addicting power, and traceable and
proximate damages from marijuana are established, provable and public.

As long as families and plaintiffs' attorneys have a right to seek
redress for actions by private parties complicit in promoting drug
abuse, major lawsuits can be anticipated. Waiving a few bank
regulations will make no difference. The trump card is still held by
the injured public. Any bank worth its salt should expect them to play
it.

Robert B. Charles is a former U.S. assistant secretary of state
for international narcotics and law enforcement and heads a D.C.
consulting firm, the Charles Group LLC.
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MAP posted-by: Matt