.Out of Pocket

Former drug czars oppose removing legal liability from banks that want to do business with pot companies in legal states

As states continue to legalize cannabis, and as Congress continues on its excruciatingly slow path toward inevitable legalization, pot prohibitionism seems increasingly quaint and often outright hilarious.

That doesn’t mean it’s not a problem of course. But however much the people who are so weirdly fixated on the free use of the devil’s lettuce might try to stand athwart history yelling “stop hitting that bong!” their arguments have already been soundly rejected.

One wouldn’t know that from watching them, though. Last week, a coven of the federal government’s former “drug czars” (yep, including William Bennett, more on him below) sent a letter to the leaders of the Senate committee that is considering the proposed SAFE Banking Act, which would remove legal liability from banks that want to do business with pot companies in legal states.

It’s a wacky little artifact, this letter. It warns—with zero basis or genuine explanation—that “drug cartels” will somehow take advantage of the SAFE Act to launder their dirty money. “Because cash made from the sale of marijuana looks the same regardless of what it was used to pay for, it will be extremely difficult for banks to know whether large bundles of cash presented for deposit were made from the sale of marijuana rather than from the sale of heroin, fentanyl, or methamphetamine,” says the letter.

That is technically true. But first, there’s nothing in the SAFE Act that would make it easier for anyone to deposit proceeds from illicit activities. And second, the logical conclusion from that paragraph is that cash businesses of all kinds should be disallowed from making deposits, at least in “huge bundles.” Even in this increasingly cashless society, that would include a lot of businesses: gas stations, convenience stores, the taxi industry.

The “czars” acknowledge that, sort of, this way: “While banks know how much cash to expect from other cash-intensive businesses like dry cleaners or convenience stores, it will be very difficult to figure out when a marijuana dispensary is participating in a money laundering scheme.” 

But won’t they know what to expect from dispensaries, etc., after just a few months of working with them? There are regulations in place for monitoring deposits to root out money laundering. The letter’s signatories don’t explain why those regulations wouldn’t work just as well for pot businesses.

Pot is a “cash business” mostly because banks hesitate to offer services to the industry. That leads to burglaries and robberies in and around dispensaries, which is the main reason for the SAFE Act. Ludicrously, the letter declares with no evidence that if the law “offered the opportunity to pay in credit, many customers will choose to pay cash to avoid being tracked within state seed-to-sale tracking systems.”

For some reason, the letter also refers to the Black Market Peso Exchange, a money-laundering technique used by global drug cartels. It has nothing to do with legal cannabis, and the letter writers don’t even try to make a connection.

In all respects, the letter, sent to Senate Banking Committee chairperson Sherrod Brown (OH) and ranking member Tim Scott (SC), is weirdly lazy, even for its ilk, and it’s highly unlikely to be taken seriously by anyone in Congress. It was, not surprisingly, commissioned by the prohibitionist group Smart Approaches To Marijuana and its CEO, Kevin Sabet. 

The signers were former “drug czars” R. Gil Kerlikowske (appointed as director of the National Office of Drug Control Policy by President Barack Obama), John P. Walters (appointed by President George W. Bush), Gen. Barry R. McCaffrey (Bill Clinton), Robert Martinez (George H.W. Bush) and William J. Bennett (George H.W. Bush).

Bennett is the most notorious member of that group. A lifelong moral scold, Bennett once said it would be “morally plausible” to behead drug dealers, and that accused dealers should not have habeas corpus rights. That is, he thinks the cops should be able to bust people without evidence. He also has a history as a degenerate gambler, and he once said that if Black babies were aborted, crime rates would fall.

The representatives considering banking reform likely have access to better sources of advice on pending legislation. Let’s hope so.

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