On 1 January 2014, the sale of marijuana for recreational purposes was legalised in Colorado and Washington. (Twenty states already permit its sale for medical use, but these two are the first to allow it for fun.) Putting aside the many and various views on legislation of drugs, failed prohibition of substances and so on, the actions of these two states has reignited a legal dilemma in the US. Under federal law, the use, sale, and possession of marijuana is illegal. However, the federal government has announced that if a state wants to pass a law to decriminalise the drug for recreational use they can do so, but they need to have a regulation system in place – and this both Colorado and Washington have done. As put rather succinctly in an article in the Economist: “Because marijuana is more dangerous than chocolate or chips, it needs to be subject to more stringent safety checks than food. As with alcohol, anybody who wants to produce it for sale, or sell it, should be licensed, as they will be in Colorado. It should carry clear labels showing its tetrahydrocannabinol (THC) content, just as cans of beer display their alcoholic strength – consumers should know what they are smoking. Colorado seems to be handling this well: labels are clear, safety rules stringent.”
Rather less clear cut (small drug-related joke there) is the issue of what to do with the money. Under federal law, selling marijuana is illegal, and so banking the proceeds from such trade would be, of course, money laundering – anywhere in the US. Pot shops in Colorado are already reporting difficulties in opening bank accounts, as banks take the view that they’re not worth the risk. Without a banking presence, Colorado’s new pot shops – along with medical marijuana businesses in many states – will find that they have to purchase stock, pay employees and conduct sales entirely in cash, requiring elaborate and expensive security measures and putting them at a high risk of robbery. And, let us not forget, a cash-based business is much harder to monitor for tax purposes… With perhaps this last point uppermost in his mind (although I am curious about why this was not foreseen and sorted before 1 January), US Attorney General Eric Holder announced on 23 January 2014 that his government will soon issue regulations designed to open banking services to state-sanctioned marijuana businesses (both medical and recreational). Adding that new “source of funds” option to the customer take-on form should be fun.
I hate money laundering 
well, hurrah for Colorado and Washington, and hurrah for the joined up thinking leading to the associated amendment of banking regulations.
I rather suspect, however, that despite the legislative green light, those pot shops will STILL fall foul of those overzealous bank compliance departments (aka “Department of Business Prevention”). once these professional box-tickers have got that “all drugs are bad” mentality, then it’s far easier to just reject potential customers outright than actually go to the trouble of understanding their needs and the context in which they operate.
this all comes back to the globalisation and depersonalisation of banking services, these days staffed by minimally qualified and/or experienced personel, ideally from the depths of some shanty town not particularly near you. and programmed on pain of dismissal to rigidly follow procedures and checklists administered by faceless nobodies in remote head offices. back in the good old days we had old fashioned bank managers with no need for prescribed “Know Your Client” procedures because…guess what? they actually – er…KNEW their clients. and assessed risk with sound judgement and a heathly dose of commonsense.
now of course, like it or not, geographical barriers have been all but removed witht the advent of the internet era. so the role of said old-school bank manager would inevitably be subject to change. but surely the answer would have been in the upskilling of what we already had? whereas in fact, we’ve collectively slammed into reverse and created this monster of an industry in its place which quite obviously, is no longer fit for purpose.
my advice to those enterprising pot shop owners (not that they’re asking, actually) would be to look to the specialist banking service providers of other above-board-but-deeply-unfashionable sectors of the economy who too are shunned by those snooty blue-chip financial service providers, e.g. egaming perhaps.
hey, wonder if the Bank of Vices are hiring…
Anyone like to take Nikki up on her comments about “professional box-tickers” and “faceless nobodies in remote head offices”?!
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