Marijuana: How feds can stop one 7-Eleven from being Colorado's money-laundering capital
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.
Photos and more below.
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."
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.
Denver Auditor Dennis Gallagher.
"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.
Here's an excerpt:
U.S. Attorney General Eric Holder.
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.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.
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.
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.