Feds Squeeze Banks in Bid to Freeze Out Medical Marijuana [FEATURE]

Special to the Chronicle by Clarence Walker

[Editor's Note: Houston-based crime and criminal justice journalist Clarence Walker is an occasional contributor to the Chronicle. He can be reached at cwalkerinvestigate@gmail.com.]

Federal regulators ignited a firestorm of controversy recently when they ordered banks located in the North Coast area of California to spy on transactions of customers who are suspected of making money in the marijuana business. In a bid to crack down on California's marijuana industry, regulators have ordered banks to look out for suspicious activity by those running such operations, but that is leaving legal -- under state, but not federal law -- medical marijuana businesses out in the cold.

The G-men are putting the squeeze on the banksters over pot proceeds (Image via Wikimedia)
Although DEA and FBI officials are not specifically targeting medical marijuana, they say they are looking for drug traffickers and money launderers, and they regard any marijuana-related banking activities with suspicion. The banks are not being ordered to not do business with dispensaries, but are instead closing accounts rather than put up with the hassles of investigating and reporting those transactions.

Banks in the North Coast region, including Savings Bank, Wells Fargo, the Exchange Bank, and Ukiah Bank, as well as other financial institutions in the Sacramento and San Joaquin areas are scrambling to comply with the government's order as the feds continue their onslaught against the legal marijuana trade.

The enforcement action is the result of the North Coast's widespread reputation for marijuana production and also includes the arrest of citizens in the area operating legal medical marijuana businesses under California state law. California voters passed Proposition 215 in 1996, legalizing the medical use of marijuana for patients whose doctors have recommended they use it.

According to the Santa Rosa Press-Democrat, the policy took effect last month when the largest bank in Mendocino County informed shareholders that federal banking regulators would now require the North Coast banks to scrutinize deposit accounts because the area had been designated a high-risk area for money laundering, particularly from those in the medical marijuana business.

"This area in general has been targeted by Washington because the amount of cash that comes out of here," said Charles Mannon, chief executive of the Ukiah Bank.

Mike Johnson, an entrepreneur in the marijuana industry who requested that this article not identify the name of his business, felt the squeeze from the federal regulators when Wells Fargo and the Umpqua Bank closed his accounts last year. "They think we're all drug dealers," Johnson said.

Those in the trade familiar with the feds' regulation policy complain of how the government has forced banks and financial institutions to enlist as foot soldiers in the war on drugs. The new requirements force banks to expend unnecessary time and money probing clients' accounts for evidence of illegal activity associated with the marijuana business, they say.

To bypass the stringent rules, several banks closed the accounts of medical marijuana dispensaries. Bank officers said that since medical marijuana is a violation of federal law, they are required under the Bank Secrecy Act to report on businesses involved in the state authorized medical marijuana industry.

Last year, Exchange Bank issued a policy which prohibits medical marijuana businesses from opening up accounts because of the time-consuming scrutiny they would have to undergo and because of the expense of having to purchase pricey monitoring systems.

"State and federal law are in conflict with each other," said Bill Schrader, president of Exchange Bank. "If there are suspicious activities under federal law, we have to report it."

No room at the bank for medical marijuana? (Image via Wikimedia)
The extensive monitoring of bank accounts works this way: If a bank agent or its anti-laundering system detects suspicious activity, the feds have required banks and credit unions to file a report with the Financial Crimes Enforcement Network (FINCEN), which operate massive databases available to the FBI and DEA.

Currently there are 14 states including the District of Columbia allowed to sell medical marijuana legally under state law, but under the federal Controlled Substances Act of 1970, marijuana is classified as an illegal Schedule 1 drug.

The federal government cannot force states to comply with federal law or require states to enforce federal law, but the US Department of Justice has the authority to prosecute offenders and organizations in violation of federal law against sales or possession of marijuana. This law effectively blocks banks from dealing with those in the legal marijuana business who must operate business accounts to accept credit and debit cards for their services.

"Our organization is regularly contacted by cannabis businesses that can't make daily deposits or have credit card processing," Allen St. Pierre, executive director of NORML, told the Chronicle. "The inability of cannabusinesses to gain access to regular banking and financial services continues to hamper the expansion of medical cannabis dispensaries."

St. Pierre took a shot at the Department of Justice. "Despite the 2009 'Ogden' memo from the Obama administration's attempt to allow greater autonomy for states to regulate medical cannabis, the memo didn't address the legal concerns expressed by banks and financial services who fear they are violating federal laws if they do business with cannabis businesses."

In May 2010, following several attempts to pass legislation to eliminate federal penalties for medical marijuana, 15 members of Congress, led by Rep. Barney Frank (D-MA) issued a letter written by Rep. Jared Polis (D-CO) to Treasury Secretary Timothy Geithner.

"Legitimate state-legal businesses are being denied access to banking services, which does not serve the public interest," the letter said. The letter also requested "formal written guidance" to assure banks would not be federally targeted for conducting business with medical marijuana dispensaries.

"They were trying to ensure that medical marijuana dispensaries could have banking services provided to them because there's so much capital involved," said Mike Meno, director of communications for the Marijuana Policy Project.

It's not just Northern California. Sue Harank is the co-owner of Alpine Herbal Wellness in Denver Colorado. This medical marijuana dispensary has been operating less than a year. Within this time, Harank has been forced to switch banks four times after the institutions closed her accounts without prior warning.

Harank called situation as "one heck of a nightmare." According to Banktime.com, Harank now does business with Colorado State Bank, the only bank in the state allowing people in the legal marijuana trade to hold business accounts.

Don Duncan feels the adverse treatment as well, when dealing with financial institutions. Duncan, the California director of the pro-medical marijuana advocacy group Americans for Safe Access, had his bank accounts shut down without notice. "Banks can't figure out if it's okay to do business with medical cannabis organizations," he said.

US Attorney General Eric Holder issued a memo in October, 2009, expressing administration policy of not utilizing federal resources to pursue "individuals whose actions are in clear and unambiguous compliance with existing state laws providing for the medical use of marijuana." Despite Holder's direct orders the federal troops still pursue those legally operating marijuana businesses.

"It doesn't make sense. It is an un-American thing for the feds to do," said Mike Johnson. "Every major bank in California has been told not to handle marijuana accounts."

Legal conflicts surrounding the bank's secrecy laws forcing banks to report customers making suspicious deposits has created a "boom" in business for lesser known financial services. According to Banktime.com, Marijuanapos.com  is one of the few institutions to offer banking services, including credit and debit card processing, for legal marijuana businesses.

Jesse Cretaro, the marketing director of Marijuanapos.com, said they work with banks that deal with high-risk clients. Another financial service, Direct Bancard of Livonia, Michigan, offers medical marijuana providers a prime-time Cadillac service. Executive Vice President Martin Khemmoro explained that Direct Bancard often uses merchant services located overseas to bypass legal conflicts.

Guardian Data Systems offer similar services but deals only with medical marijuana dispensaries legal under California state law. Lance Ott, Guardian's chief executive officer said he's been trying for years "to offer honest and secure services to an emerging industry."

Meanwhile dedicated advocates for the medical marijuana industry insist that all they want is for those in the industry to have access to safe and transparent banking services, like other professional entrepreneurs.

"All medical marijuana merchants wants to do is obey the law and do what's normal," said Duncan.

But that's unlikely to happen as long as federal marijuana prohibition remains intact. While the federal raids on medical marijuana dispensaries have decreased -- if not ended completely -- the feds have demonstrated that they are determined to use all the weapons in their arsenal to continue to go after what they consider to be a criminal industry.

Permission to Reprint: This article is licensed under a modified Creative Commons Attribution license.
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Sounds like Communism to me,

Sounds like Communism to me, not a Democracy like we're supposed to have. Anyone else?

Sounds like Communism is

Sounds like Communism is creeping in, not a democracy where we should be free to make our own choices. Anyone else feel like this?

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the policy took effect last month when the largest bank in Mendocino County informed shareholders that federal banking regulators would now require the North Coast banks to scrutinize deposit accounts because the area had been designated a high-risk area for money laundering, particularly from those in the medical marijuana business.

umre

shareholders that federal banking regulators would now require the North Coast banks to scrutinize deposit accounts because the area had been designated a high-risk area for money laundering, particularly from those in the medical marijuana business.

Then I take stock of the

Then I take stock of the customers I had in the past. Hhhmmmppp...not looking good. I need a promotion, something to make my business catch fire, a cold or something, even a virus would be better than the project to project existence that my company has been going through, (short of getting my traditional doctor on the case) I’m at a loss. If it wasn’t for the sheer love for the industry and medium I would have folded a long-time ago..  storage Lancaster CA

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Brinna's picture

Time for a parallel economy?

 

Sounds like a great opportunity for folks like Marijuanapos.com and Guardian Data System to set up a parallel economy based on medical marijuana sales (and all marijuana sales, for that matter, when it becomes legal on a state by state basis). God knows our federally-based economy is in the trash heap. I say, good riddance. Let the alternate money system begin! I can't think of a better industry to underpin it.
 

Couldnt agree more

Its just like in the days of prohibition of booze. They tried to do the right thing here and the governments task forces just keep coming like the gestapo in nazi germany. So by all means lets make this state legal business go underground lets stop paying taxes on it while we're at it. I say funnel all the money so the federal government doesnt see a dime. I bet their asses would be in a hurry to see where all the billions are going.

R U Kidding

How does one determine if, and/or prove any account is linked to marijuana? Do these "supposed marijuana account holders" go into the bank and say, hey I got all this cash from selling pot, can I open an account? LMAO.... this is the most retarded thing they have tried to pull yet. And what are the consequences if the banks don't comply or can't find any pot dealers, do they get fined or shut down? What is the reward for the banks that are complying? Do they get government assistance AGAIN, if/when they go bankrupt from closing everyone's accounts???? Who's great idea was this and how high were the people that all agreed to enforce it.

undrgrndgirl's picture

it may be retarded...

but it will be the feds most effective tool...hit 'em in the money...that's how they finally got al capone (and most gangsters), afterall...tax evasion.

Now Would Be A Good Time For State Banks

Now would be a good time for State Banks -- State-owned non-profit central banks.  One State already has one, and had one for 90+ years, North Dakota.  All State business is routed through the State Bank, which uses the funds to provide capital to small community banks -- you know, the ones that actually make loans to farmers, small business owners, to student loans, and so much more.  The BND has been doing for North Dakotans what the TBTF Banksters and Wall Street Mobsters practically choking on taxpayer bailouts have refused to do -- ease the credit crisis on Main Street USA.  Instead, those funds have wound up in executive compensation (salaries & bonuses), which unsurprisingly "trickles down" to their "bought-and-paid-for" politicians.  In fact, enough executive bonuses have been paid to the top echelon of Banksters since the economic meltdown of September 2008 to pay off every States' debt burden.

 

Drug Czar Gil Kerlikowske has been quoted as saying that the War on Drugs is not a War on People, and that it (the War on Drugs) has been "over" since January 2009.  LOL.  What a liar.  DEA raids still continue, although in States that have State-legal Medical Marijuana programs the arrests are down somewhat.  Instead, the Feds are seizing assets (equipment, cash, autos, real estate and product), as well as collecting intel on the dispensaries, co-operatives, patients, and physicians -- in spite of Federal HIPPA privacy laws to the contrary.  In turn, this intel has been passed along to other Federal agencies for further investigation and persecution.  The Feds are also using asset forfeiture laws to "encourage" municipal, county, and state LEOs as well as D.A.s and politicians, to undo that cannabis de-criminalization that has been passed by State legislatures or by voter initiatives -- hardly part of the small "d" democratic process or the Rule of Law.

 

All States should be considering the formation of State Banks like North Dakota, if only as a matter of economic self-survival.  And States with, or considering to enable Medical Marijuana programs would be advised to jump on board this State Bank bandwagon.  Besides all regular State business passing through their own publicly owned non-profit State Central Bank, all MMJ business should pass though these new financial institutions as well.  Monies that are theoretically supposed to be owed to the Federal government through business and private income taxes could be held in escrow by these State Banks, until such time as the federal government begins to honor the will of the people in MMJ States and the people's willingness to pay their taxes.  It would provide the additional color of State authority over their own MMJ programs, as well as provide political and legal cover for what is still considered to be Federal criminal offenses.  This would benefit the economies of the States themselves, as well as those organizations and individuals that provide much needed Medical Marijuana to their patients, a win-win situation IMVHO.

Why can't The People see?

You know that if, they are doing this with marijuana they have done this type of anti freedom, behind the scenes manipulation to other areas of our lives. Like schools,our employers, local & state gov't law, the voting booth.

In other words a liar lies across the board and a manipulator manipulates.  I find it difficult to reconcile with psychology as I understand it to believe that, these people just hate marijuana and they are otherwise saints.. If they lie ,cheat,manipulate and destroy marijuana against the wishes of a large percentage of the American people then, marijuana isn't the only place they do it. They learned it and practiced it and refined the techniques somewhere.

A man doesn't kick just one breed of dog.

It just frustrates me that, the people i live,work, attend church & associate with believe that the gov't can do no wrong. That, they should obey gov't at all costs. I'm here to tell you that these gov't enforcer types are so clean and immaculately groomed on the outside to hide the evil filth growing on the inside.

Why can no one see that? I mean, many see but, many more do not. I believe they have been brainwashed and deceived by the sleight of hand of gov't for so long, That the practices are so common that, they go unnoticed by the general population?

Sheeple walking as a lamb unto the slaughter.

 

 

 

 

 

Granny

My Grandmother, who really raised me, became my room mate when she was 92.  We had a blast together.  One night, while watching TV, we came across an hour program about, yep, MJ.  She sat quietly and watched and listened.  After it was over, she looked straight at me and asked, "Were they telling the truth?"  I said "I don't think so."  Then, she acquired target lock and drilled the question at me, "You've tried that, haven't you?"  What can you say to a Grandmother that knows you better than you know yourself?  "Yes, I have."

 

Then, she asked, "Do you have any?"  "No, Granma."  "Can you get some?"  "I think so."  Well, that discussion led to the evening several days later when I handed her a joint she'd just finished watching me roll.  She asked "How do I do it?" and I told her that, since she was an ex-smoker, do it just as she did with cigarettes, just don't exhale so quickly.

 

That was the funniest night of my life with her.  She was a real hoot!  The next morning, she came into breakfast and I asked her if she had a "craving" for anything, chuckling.  She didn't think it was funny.  She actually seemed upset.  You see, Granny was a dyed in the wool, deep Southern Baptist Texan.  Just as straight as the proverbial string.  No, she was MAD!

 

She was mad because she was realizing just how much lying had passed her way via the government.  The only thing that would have made the moment better was if we'd had a politician knock on the door, canvassing the neighborhood.

 

I promised her I'd keep the fight going.  I'm holding true to my word!

This is great, your granny

This is great, your granny got to find the truth about how the government tell you what to think,so glad she got to see  the truth,you go girl. from a great grandmother,that thanks you rock.

Federal asset forfeiture

It's long been known that the federal government doesn't have the resources to step in and prosecute everyone who is using marijuana if a state decides to let them use it.  However, specifically targeting those who have financial assets is a whole different story.  If the federal government can make money by going after dispensaries that have financial assets, then that gives them the resources they would otherwise not have.  Civil forfeiture is easier than prosecuting a criminal case, because the standard of proof is not as high.  This is where the federal government is going and it's about time the 15 states that have legalized dispensaries got organized and move to have marijuana federally reclassified as a medicine.

Obama Has Betrayed the Cannabis Community!

[The following letter to President Obama presupposes that the reader is aware of the content and import of the Ogden memorandum of Oct. 19, 2009 (http://blogs.usdoj.gov/blog/archives/192), which was the most definite statement about the policy of non-interference the Obama campaign promised to Citizens for Safe Access before the 2008 Democratic Convention.  The letter from U.S. Attorney Melinda reversing that policy can be found at:  http://www.cannabistherapyinstitute.com/legal/feds/doj.haag.memo.pdf

A lack of access to banks may be the least of our worries.]

 

Robert Chase

Colorado Coalition for Patients and Cargivers

Denver, CO 80218

 

The President

1600 Pennsylvania Avenue NW
Washington, DC 20500

 

March 19, 2011

 

 

Dear Mr. President,

 

Your disavowal of the principle enunciated in the Ogden memorandum has not gone unnoticed.  We, the People of the United States, demand the resignations of Attorney General Holder and US Attorney Melinda Haag.  The dissolution of the DEA and the repeal of the Controlled Substances Act are essential elements of our determination that America become once again "the land of the free".  Our status as the leading prison-nation in the world is a completely unacceptable outrage, and drastically reducing our prison population must be America’s first priority.

 

Haag's memo reveals the "United States Justice Department" to be an illegitimate institution waging war against the people of the United States, and an enemy of American liberty.  Real Americans will act against the criminal gang of fascists controlling the Congress, many state legislatures, the Courts, and their Schutzstaffel, the Injustice Department.  No terrorist or serial murderer threatens our society more than rabid animals like Haag and the dupes who continue to prop them up.

 

Your failure to resist fascism renders you unfit to serve a second term.  People who use cannabis read, think, and vote.  I for one am done with the kind of political expediency which has allowed the Greater and Lesser Fascist Parties to control our private lives.  To whatever extent you are motivated by pragmatism, please consider that my contention that millions of your core voters will simply not accept your retreat from respecting states' medical cannabis laws may be true.

 

 

Sincerely,

 

Robert Chase, Founder of the Colorado Coalition for Patients and Caregivers

 

copatientsandcaregivers@gmail.com

 

[The FBI, which has a long history of violating civil rights for expressly political ends, must of course be added to the list of criminal gangs ranged against the People of the United States, and any pretense of reform within that organization will be swept away by the fascist assault on medical cannabis.  We will need another Deep Throat to reveal the abuses to be committed against us.

P.S. David, there should not be any "drug czar" of the United States, now or ever again.  He is something like a Loyalist heading a hired band of counterrevolutionary thugs, in the field on July 5, 1776.  His lies offend Americans' sense of right.]

Sounds more like Communism

Sounds more like Communism than a democracy to me, how about u?

Very much said! Highly

Very much said! Highly politically motivated
 

http://www.occent.com

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