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CHARLES: Banks must just say no to drug money
Financial institutions that accept proceeds based on official assurances will 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?
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