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Marijuana: How feds can stop one 7-Eleven from being Colorado's money-laundering capital

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Photos and more below.
Last week, a Justice Department rep told a Senate committee the federal government was working on a solution that would allow marijuana businesses in Colorado to legally use the banking system -- something that's been officially forbidden up until now.

Among the Colorado agencies lobbying for such a fix is the Denver Auditor's Office, which would rather have shops deal with standard financial institutions than employ less secure ways of handling cash -- such as ones involving a particular convenience store.

"There's a 7-Eleven on the corner, right across the street from the Webb Building, and the joke around here is that it's the money-laundering capital of Colorado," says Denis Berckefeldt, director of communication for Denver Auditor Dennis Gallagher. "That's because these guys may go in there and buy money orders rather than hauling boatloads of cash over here."

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Denver Auditor Dennis Gallagher.
Actions like these are necessitated by the disparity between federal and Colorado state law when it comes to marijuana. While Amendment 64 allows adults 21 and over to use and possess small amounts of cannabis in Colorado, weed remains illegal under federal statutes -- and since the financial system is federally regulated, pot shops that use banks are technically violating regulations put in place to prevent money laundering by drug dealers. Berckefeldt acknowledges that some businesses have found ways to get around such edicts -- a risky tack, to put it mildly. Others, though, operate entirely as cash businesses, and in Berckefeldt's view, this approach may have even more drawbacks.

"Anytime you do this much business in cash, it's a target for crime -- and it's pretty apparent that's been going on here over the last couple of years," he maintains. "And you can't account for this money. How much have you sold? Are you paying the taxes you're supposed to be paying? How much is hidden? If you don't have a paper trail, you can't track it, and all the seed-to-sale systems in the world won't solve the problem."

Gallagher tackled this topic in a letter to U.S. Attorney General Eric Holder, sent in the days prior to last week's Senate Judiciary Committee hearing on marijuana; see it below. He shipped the same document to Senator Patrick Leahy, the committee's chairman, as well as the chairman of the Federal Deposit Insurance Corporation and the Comptroller of the Currency.

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U.S. Attorney General Eric Holder.
Here's an excerpt:
Businesses which can only operate on a cash basis are not only a magnet for crime and criminal activity -- a serious threat to public safey -- but are virtually unaccountable from a regulatory or taxation standpoint. As the Auditor for the City and County of Denver, I am aware, firsthand, of this serious problem, for that is exactly what we face in Denver and throughout Colorado. We have businesses growing, producing and selling marijuana and marijuana products for medical purposes, and soon, businesses that will also grow, produce and sell what is termed "recreational" or "retail" marijuana for non-medial reasons to individuals over the age of 21.

Because these duly licensed businesses cannot establish a banking relationship, they are forced to do all their financial transactions on a cash basis. In Denver, those transactions have amounted to millions of dollars annually for medical marijuana alone. Those amounts are likely to increase exponentially next year, when non-medical retail sales begin.

At the hearing itself, Deputy Attorney General James Cole, who authored a memo announcing that the Justice Department wouldn't sue to stop Amendment 64 and a similar policy passed in Washington state last November, appeared to be on the same page as Gallagher. As we reported, he acknowledged that the inability of cannabis businesses to use banks was something "we need to deal with" and the Justice Department is "working on it" in collaboration with federal banking regulators.

While these sentiments cheered Berckefeldt, he stresses that words aren't enough.

"We're happy with the fact that the federal government says, 'We've got to solve this problem,'" he notes. "But the proof is in the pudding: They need to really resolve these issues. I don't think anyone expects them to decriminalize marijuana on a federal level anytime soon, but the banking issue is huge, and has been for a long time."

Continue for more about marijuana and banking, including Dennis Gallagher's letter to Attorney General Eric Holder.



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12 comments
ganjadite1
ganjadite1

I am glad to hear that the Feds are finally addressing the banking restrictions for the cannabis industry. I hope they do something soon, cuz it could really blow up in their faces. If you want to check out some really dank recipes please check out ganjalicious.com

Thanks for keeping us informed.

Danny Gillam
Danny Gillam

Feds and Fix should never be in the same sentence

Doug Hubka
Doug Hubka

FYI: The biggest laundry operation in the US is Western Union. No matter M J or Drugs. If the feds were going to ix that, they would have a long time ago.

LindaLee Law
LindaLee Law

OH no, the Feds have decided someone is making money and they don't have a piece of the action now they want in I would suggest they do an act that is physically impossible ( except if you work for Cirque du solei

Robert Barnhart
Robert Barnhart

It has more to do with the state seeing some of the money instead of safety. Government officials could care less about our safety. If they really cared they wouldn't put growers and smokers of cannabis in jails/prisons with rapists and murderers.

dkessler4
dkessler4

The federal government does not want dispensaries to look like normal businesses.  Their actions provide price supports for the drug cartels.  They would rather force patients to deal with violent gang bangers or cartel members rather than to go to a legitimate business and use a card to pay for purchases. They are afraid that if marijuana looks too legitimate that we will not want to continue to fund this war on medical marijuana patients and people of color

Monkey
Monkey

People selling weed are complaining about cash, and want the financial institute to allow them a paper trail? What a crazy world we live in.

michael.roberts
michael.roberts moderator editortopcommenter

@Danny Gillam Funny post, Danny. Thanks.

michael.roberts
michael.roberts moderator editortopcommenter

@Doug Hubka Interesting. Thanks for posting, Doug.

Monkey
Monkey

@Cognitive_Dissident Electronic money scares me, but so does the federal reserve printing paper. But because the feds hate bitcoins so much, I'd go along with your idea.

Cognitive_Dissident
Cognitive_Dissident topcommenter

@Monkey @Cognitive_Dissident The FRNs scare me a whole lot more than anything, and add to that the ability to be robbed (by thugs with or without badges.) There's no harm/no foul for transacting in it and paying the necessary fee to recover some other form of money if they're scary to keep. 

Using them in that way will protect you from taking it in the shorts on any given day (as would keeping them, since they're higher than they've been for the vast majority of their history, and keep going up, on the average day.) I'm sure you recognize that FRNs are "electronic money" and the worst part is that the piece of linen in your pocket devaluates while it's in your pocket--guaranteed--virtually every day.

It was difficult for me to wrap my head around bitcoin at first, but I'm comfortable with the arguments that it's a better investment than FRNs and that it's more useful in many ways than silver and gold, which I also have ("junk silver" for spending money when FRNs are worthless.)

I guess I could point out that I invested moderately in bitcoin at around $10 each and wish I'd invested heavily, but I'm already pretty-well rewarded for having invested what I have. The continued use of the bitcoin, regardless of what governments try to do about it, will be a force for freedom when times get really dark, and that's the "good deed" I believe I've been rewarded for by investing.

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