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DOJ Unlikely To Prosecute Banks For Marijuana Accounts, Official Says

By Nicole Flatow on September 3, 2013 at 1:30 pm

"DOJ Unlikely To Prosecute Banks For Marijuana Accounts, Official Says"

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MedicalMarijuanaAs part of the Department of Justice’s new policy suggesting it will not prioritize state-compliant marijuana distributors, the Department is also unlikely to prosecute banks that do business with dispensaries, according to one official. Speaking anonymously to the Huffington Post, a senior official reportedly said the Department is unlikely to go after financial institutions and others that do business with marijuana enterprises that are compliant with state law.

If that assurance convinced banks to change their policies, it could ease a major burden on marijuana suppliers and distributors, as Washington and Colorado move toward implementing the first state laws to legalize and regulate recreational marijuana, and 20 states grapple with federal prosecution of their state-compliant medical marijuana operations. Most banks have policies that prohibit marijuana businesses operating openly from even opening a bank account or taking out a loan because of federal money laundering laws. Credit card access is also very limited. This means medical marijuana dispensaries and growers now operating under existing laws in 20 states and forced to operate cash-only businesses are even more vulnerable to crime. Some have attempted to skirt the limitations, at least for a time, by opening accounts under their personal name or other alias. Over time, financial institutions have started rejecting applications for their services not just for marijuana businesses, but for any individual who has a stake in a marijuana business.

According to the anonymous DOJ source, Attorney General Eric Holder told Washington and Colorado during a phone conversation Thursday about the Department’s marijuana policy that the DOJ is “actively considering” how to handle bank transactions with marijuana businesses. In the memo to prosecutors released publicly that day, the Justice Department de-prioritized prosecutions against not just users of marijuana in states where it is legal, but also suppliers and dispensaries in states deemed to have their own “strong and effective regulatory system.”

Over the past few years, state-compliant businesses have been targets of federal prosecution, as federal officials maintained only that they would not prioritize prosecution of “users.” Even the new policy leaves significant room for continued prosecutions, by laying out eight priority areas for federal prosecution that could be used to justify prosecutions by those U.S. Attorney determined to continue targeting state-compliant actors. And the unnamed official said the same eight priorities would apply to banking institutions.

This may not be sufficient assurance for financial institutions that don’t need the marijuana industry’s business to risk changing their policies. But as the Huffington Post’s Ryan Reilly and Ryan Grimm point out, banks may have one reason to feel more protected from prosecution than marijuana businesses. While marijuana businesses are typically prosecuted by regional U.S. attorneys who make their own varying determinations about how to interpret the federal directive, bank prosecutions are handled by headquarters, which perpetuated the new policy.

A bill has also been introduced in Congress to address just the banking issue, in addition to several other bills to scale back federal marijuana prohibition. “We need to address the public safety, crime and lost tax revenue associated when these legal and regulated businesses are operating in a cash-only system,” Rep. Ed. Perlmutter (D-CO) said in introducing the bill. Yet another major obstacle for marijuana businesses is that they cannot deduct their business expenses in filing taxes, the subject of yet another bill and something not yet addressed by DOJ.

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