The government is in talks with bank regulators to see whether financial institutions in states that have approved recreational marijuana use can do business with drug dispensaries there, a top Justice Department official said Tuesday.
The announcement came nearly two weeks after the Justice Department decided it won’t take legal action against Colorado and Washington, which approved recreational marijuana use last year.
Banks, worried they could be violating federal laws, have been hesitant to provide services to state-authorized marijuana dispensaries, forcing the dispensaries to become mostly cash-only enterprises. And “that’s a prescription for problems,” potentially including armed robberies, according to the chairman of the Senate Judiciary Committee.
“I don’t want to see a shootout somewhere and have innocent people or law enforcement endangered by that,” Sen. Patrick Leahy, D-Vt., said during a committee hearing Tuesday.
The Justice Department’s number two agreed, saying it’s “an issue that we need to deal with.”
“Obviously there is a public safety concern when businesses have a lot of cash sitting around,” Deputy Attorney General Jim Cole told the committee. “There is a tendency that there are guns associated with that, so it’s important to deal with that issue.”
Cole said offices within the Treasury Department, namely the Financial Crimes Enforcement Network, are “bringing in bank regulators to discuss ways that this can be dealt with in accordance with the laws that we have on the books today.” And subsequently, Cole said, the Justice Department is in talks with the Treasury Department about the efforts.
The banking industry’s reluctance to do business with marijuana dispensaries in Colorado and Washington, based primarily on federal money-laundering laws, was an issue governors from both states raised with Attorney General Eric Holder when he informed them Aug. 29 that the federal government would not be filing lawsuits against the states’ recent marijuana laws, according to Cole.
Marijuana use remains illegal under the federal Controlled Substances Act, which describes marijuana as a dangerous drug. But, as Holder told Gov. John Hickenlooper, D-Colo., and Gov. Jay Inslee, D-Wash., federal prosecutors are now operating under new enforcement guidance, aggressively pursuing prosecutions only in eight “priority areas.”
Among other things outlined in a memorandum from Cole two weeks ago, the new Justice Department guidance tells federal prosecutors to focus on preventing marijuana from getting into the hands of children, preventing gangs or cartels from making money through marijuana, preventing marijuana from being exported to other states, and preventing “drugged driving.”
“We are going to aggressively enforce the Controlled Substances Act when it implicates any of the right priorities,” Cole said Tuesday, “and I think that’s a pretty fulsome list of priorities and important public safety issues that are present and associated with marijuana.”
Cole said his department “has not historically devoted our finite resources to prosecuting individuals whose conduct is limited to the possession of marijuana for personal use on private property.” And, he insisted, the department is not “giving immunity” to anyone or “abdicating our responsibilities.”
Leahy said he was “encouraged” by the Justice Department’s recent move.
“You can’t begin to prosecute all the laws that are on the books, you don’t have the resources,” he said. “The question is what resources should we use and where… I really don’t think [the Justice Department] should be devoting them to pursuing low-level users of marijuana who are complying with the laws of their states.”
But the Senate Judiciary Committee’s top Republican rejected that thinking, arguing Colorado’s and Washington’s marijuana laws “flatly contradict our federal law.”
“And the response of the Department of Justice isn’t to sue to strike down the laws or to prosecute illegal drug traffickers, but just let these states do it,” Sen. Charles Grassley, R-Iowa, said. “Prosecutorial discretion is one thing, but giving the green light to an entire industry predicated on breaking federal law is quite another.”
Grassley raised particular concern over whether Colorado, for example, can be trusted to regulate recreational marijuana use when it is “already struggling” to regulate medical marijuana use.
He noted that over the past several years in Colorado, after marijuana was legalized for medical use, there has been a “sharp increase” in marijuana exposure to young children, seizures of marijuana heading to states outside of Colorado, and fatal car accidents involving drivers who tested positive for marijuana — all areas cited by the Justice Department as among its “priority areas” for enforcement.
Grassley also cited a recent audit by Colorado’s internal watchdog that concluded the state’s system “does not sufficiently oversee physicians who make medical marijuana recommendations.”
Cole said Grassley raised “valid issues” and called the recent audit in Colorado “disappointing.”
He reiterated that the Justice Department reserves the right to bring a lawsuit against Colorado or Washington at a later time, and that it is up to the states to create systems and processes for enforcing the federal government’s “priority areas.” The department will keep tabs on the states under a “trust but verify” approach.
“Our hope is that with this [new guidance] and with the engagement of the states, telling them that they are ‘trust but verify,’ they will have an incentive to actually put in a robust scheme that will in fact address a lot of these issues,” he said.
Currently 21 states and the District of Columbia have legalized marijuana use for medical purposes.