Editorial: To protect pot proceeds, banks need federal action

Last Friday, the Obama administration issued another look-the-other-way advisory to federal officials in states where marijuana has been legalized. This one asked U.S. attorneys not to pursue banks that accept profits from the marijuana trade.

This is a huge concern in Washington and Colorado, which have legalized recreational pot, and in the 20 states and District of Columbia that permit the sale of medical marijuana. Pot purveyors have had to deal in cash – large piles of it – because marijuana is illegal under federal law.

In fact, federal law considers it to be as dangerous as heroin and more dangerous than cocaine and meth, which, of course, is absurd.

A recent New York Times article spotlighted the owner of a medical marijuana business in Seattle paying his tax bill by delivering $51,321 in a brown paper bag to a Department of Revenue office. He couldn’t write a check because no bank would allow him to open an account. Banks fear, with good reason, that doing so would violate money-laundering laws and other federal regulations.

This is dangerous business, as Attorney General Eric Holder acknowledged last month, because customers and businesses are forced into cash-only transactions. Executive branch officials or Congress need to act before someone becomes a fatality in a robbery.

The American Banking Association said it appreciated the Obama administration gesture, but maintained that banks are not going to open accounts for those in the marijuana trade until they get a firmer assurance from regulators. An unofficial waiver from one administration can be swiftly reversed by another.

Meanwhile, in Olympia, Sen. Bob Hasegawa, D-Seattle, is pushing a bill that would open a state bank to handle marijuana proceeds. However, it’s not clear how that would supersede or avert the same federal restrictions.

Either of two federal actions would provide the cleanest solution.

Congress can rewrite the Nixon-era Controlled Substances Act, or the administration can downgrade marijuana from its Schedule 1 status. The Drug Enforcement Administration, which can reclassify drugs, has twice changed the status of Marinol, a synthetic drug in pill form derived from THC, the substance in marijuana that produces a high. Since 1999, Marinol has been a Schedule 3 drug, like codeine. If marijuana plants had the same status, pot purveyors could access the banking system.

Judging from the reaction to other Obama administrative orders, a rule change would be the more controversial path. A mere 18 members of the House of Representatives signed on to a recent letter urging executive action. It needs stronger support than that.

Ideally, Congress would hold public hearings on the medicinal merits and relative dangers of marijuana, then update the law. But if it doesn’t, the administration must do more than assure banks that law enforcement will look away.

Paper bags and cash registers full of cash are dangerous enticements to criminals. Law and regulations that keep that money out of bank vaults are going to get somebody hurt.