Justice working with banks on how to do business with pot sellers

The Justice and Treasury departments are talking with banking regulators about how banks can legally work with businesses that sell marijuana.

Deputy Attorney General James Cole on Tuesday alerted a Senate panel to the discussions as part the DOJ’s decision not to sue states that have legalized the use, sale and trafficking of small quantities of marijuana.

Senate Judiciary Committee Chairman Patrick LeahyPatrick Joseph LeahyOvernight Energy & Environment — Presented by the American Petroleum Institute — Democrats address reports that clean energy program will be axed Overnight Health Care — Presented by Carequest — Colin Powell's death highlights risks for immunocompromised On The Money — Democrats tee up Senate spending battles with GOP MORE (D-Vt.) and several other Democrats on the panel raised the issue in an attempt to get more answers about how the banking industry should operate and what, if any, changes Congress needs to make to the tax code to bring approved pot dealers into the federal fold.

Leahy said many banks are refusing to do business with marijuana dispensaries that are legitimate businesses in states like Washington and Colorado, which recently passed laws legalizing the use and sale of small amounts of marijuana, out of fear that they would be targeted by authorities for violating federal laws.

As a result, the lawmakers said, legal pot dealers are being forced to operate as cash-only businesses, which makes tax evasion easier and makes the marijuana businesses more prone to robberies, effectively endangering the public’s safety.

“I would hope that this gets cleared up because I don’t want to see a shootout somewhere and have innocent people or law enforcement endangered by that,” said Leahy at the Senate’s first hearing since the department issued its memo declining to prosecute Washington and Colorado.

“I think there should be specific guidance to the financial services industry.”

Cole acknowledged that there are security worries and that the DOJ was in active talks with the Treasury’s Financial Crimes Enforcement Network, or FinCEN, in an attempt to iron out the discrepancies between state and local laws.

“There is a public safety concern when businesses have a lot of cash sitting around; there is a tendency that there are guns associated with that, so it’s important to deal with that kind of issue,” said Cole.

Cole added, “We’re, at the present time, talking with FinCEN, and they’re talking about bringing in bank regulators to discuss ways that this could be dealt with in accordance with the laws that we have on the books today.”

Leahy also raised the concern that armored car companies could refuse to do business with marijuana stores out of a similar fear that they could be prosecuted under federal law. Cole said that before the DOJ issued its memo, less than two weeks ago, the Drug Enforcement Agency (DEA) asked armored car businesses about how they operate with legal state marijuana businesses.

Cole also said that he does not believe there has been any attempt by the DEA to stop the armored car companies from doing business with the pot dealers.

Sen. Richard Blumenthal (D-Conn.) pressed Cole on whether the DOJ was moving to advise marijuana businesses, sanctioned under state law, on how to operate legally within the federal tax laws.

But Cole passed the buck back to Capitol Hill, saying the tax issue was a matter for Congress to take up.

“We have not taken a position on change of legislation. We think that’s something that the United States Congress should probably, in its wisdom, take up and debate and determine what the appropriate course of action should be,” said Cole.

“Our memorandum is really focused on what the federal enforcement will be of the Controlled Substances Act. There are, obviously, other issues that spin off of that, that do need to be dealt with, and I think those are the kinds of things that the Senate and the House can debate and determine if there’s an appropriate policy change to be made.”