Even though it is argued that a 1996 state law allowed
possession and growing of marijuana for medical purposes in California,
communities considering allowing the growth and sales of pot might want to look
at potential problems beginning with the fact possession is prohibited by
federal law.
Because
many states have "legalized" medical marijuana, the U.S. Justice Department
issued the "Cole Memo" in August, 2013, offering guidance to prosecutors and
law enforcement regarding marijuana enforcement which outlined eight
priorities:
1. Prevent
distribution of marijuana to minors
2.
Prevent marijuana
revenue from funding criminal enterprises, gangs or cartels
3.
Prevent marijuana
from moving out of states where it is legal
4.
Prevent use of
state-legal marijuana sales as a cover for illegal activity
5.
Prevent violence
and use of firearms in growing or distributing marijuana
6.
Prevent drugged driving or exacerbation of
other adverse public health consequences associated with marijuana use
7.
Prevent growing
marijuana on public lands
8.
Prevent marijuana
possession or use on federal property
Banks
are reluctant to provide banking services because distribution of marijuana
violates federal law, and any bank that supports those illegal activities could
be prosecuted or sanctioned.
The Obama administration recently sent a "memo" to the
nation's bankers which allowed banking services for marijuana related business
provided a detailed list of guidelines were followed.
A serious stumbling block to these new guidelines is the
increased paperwork and due diligence required to satisfy federal regulators
and prosecutors.
For
example, the Justice Department would expect a bank to make sure any marijuana
business with an account in their bank did not sell pot to minors, is not
involved in illegal activities and that the cash flow of that business is what
would be reasonably expected - now how is a bank going to know and/or enforce
their customers in accordance to this mandate?
Moreover,
the bank would have to file suspicious activity reports with the federal
government wherever there was a cash transaction of $10,000 or more.
The Colorado Bankers Association (where state law allows
recreational sale and use of marijuana) called this guidance message a red
light. Operating on a memo that is in
conflict with the law is simply unwise for any business, including financial
institutions.
Licensed and regulated pot shops in Colorado are doing a
booming business and soon retail stores are expected to open in
Washington. The problem is these
businesses, because they have no access to bank accounts, require customers to
pay in cash which means no checks, no credit cards and no debit cards. This results in a huge preponderance of cash
on the premises not to mention possible threat of profit skimming, fraudulent
income tax reporting and then there is the very real threat of armed robbery.
Even if offered a bank account, many of the Colorado
businesses experience income of $25,000 or more per day which, under banking
guidelines, would require a "suspicious activity report."
Prior to jumping on the band wagon to allow marijuana
activity in any California community,
local leaders would be well advised to consider the serious implications
of large sums of unreported cash and the related potential for armed robbery
and/or other criminal activities.