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Editorial: Marijuana money a conundrum for Feds, states

Thu., Sept. 12, 2013

Perhaps the biggest challenge in establishing a workable system in which marijuana can be grown, processed and sold is what to do with the money. Currently, you can’t take it to banks because they’re federally chartered and fear prosecution for handling proceeds from transactions that are deemed illegal by the feds.

This is a problem that has dogged medical marijuana businesses, and now it’s threatening to complicate the sale of recreational pot, which is legal in Washington and Colorado. People in the marijuana business cannot open financial accounts, which makes it an all-cash business.

While it may be entertaining to watch Walter White on “Breaking Bad” bury barrels of bills in the desert, this is a serious matter in the real world. With all of that cash, people in the pot business would become targets for thieves. Plus, it would be difficult to audit such businesses or monitor for tax compliance.

The good news is that Congress is now acknowledging the problem, and the Justice Department is talking about finding a reasonable accommodation. On Tuesday, the Senate Judiciary Committee held a hearing on the issue, inviting Deputy Attorney General James Cole to answer some questions.

Two years ago, Cole issued a directive about medical marijuana, stating: ‘‘Those who engage in transactions involving the proceeds of such activity may also be in violation of federal money laundering statutes and other federal financing laws.’’ A month before that, American Express announced it would stop processing medical marijuana transactions, according to the Associated Press.

But Cole was in a more conciliatory mood on Tuesday, saying the Justice Department is working on a way to deal with the conundrum of states legalizing marijuana while it remains illegal on the federal level. Perhaps that’s because the public’s attitude on pot has shifted, with a majority of Americans saying they favor legalization, according to recent polls. Several states are poised to launch bids to do just that.

The Senate hearing comes on the heels of the U.S. Justice Department’s August announcement that it won’t block Washington and Colorado as those states implement systems for marijuana sales. Committee Chairman Patrick Leahy, D-Vt., is a former prosecutor, but he has long said law enforcement should be more focused on violent crimes.

The top Republican on the panel, Sen. Charles Grassley of Iowa, is worried about the feds “giving the green light” to illegal activity. However, Congress is to blame for the outsized fear of pot and the vast amounts of money wasted on enforcement and incarceration. At present, marijuana is deemed a Schedule I drug, meaning it has no medicinal value and is as dangerous as heroin. Leahy acknowledges that outdated view, but he isn’t optimistic Congress will soon change the classification.

Recreational pot is set to go on sale in January in Colorado and in June in Washington. The feds should work with those states to figure out how those transactions can proceed smoothly.