How Uncle Sam Launders Marijuana Money

Under federal law marijuana remains a Schedule I controlled substance.


Thirty states and the District of Columbia currently have laws broadly legalizing marijuana in some form. The herb has been shown to have significant therapeutic value for a wide range of medical conditions, including cancer, Alzheimer’s disease, multiple sclerosis, epilepsy, glaucoma, lung disease, anxiety, muscle spasms, hepatitis C, inflammatory bowel disease and arthritis pain. The community of Americans who rely on legal medical marijuana was estimated to be 2.6 million people in 2016 and includes a variety of mainstream constituency groups like veterans, senior citizens, cancer survivors and parents of epileptic children. Unlike patented pharmaceuticals, which are now the leading cause of death from drug overdose, there have been no recorded deaths from marijuana overdose in the U.S. By comparison, alcohol causes 30,000 deaths annually, and prescription drugs taken as directed are estimated to kill 100,000 Americans per year.

Under federal law, however, marijuana remains a Schedule I controlled substance—a “deadly dangerous drug with no medical use and high potential for abuse”—and its possession remains a punishable offense.

On the presidential campaign trail, Donald Trump said the issue of marijuana legalization should be “up to the states,” continuing the “hands off” policy established under President Obama. Under the 2013 Cole memorandum, the Department of Justice said it would not prosecute individuals and companies complying with robust and well-enforced state legalization programs. But on January 4, Attorney General Jeff Sessions rescinded that memo and gave federal prosecutors the authority to pursue marijuana cases at their own discretion, even in places where the herb is legal under state law. The action has made banks even more afraid to take marijuana cash, which can be prosecuted as money laundering, an offense that can incur stiff criminal penalties.

The Government Has “Unclean Hands”

As explained by Dr. Richard Rahn, author of “The End of Money and the Struggle for Financial Privacy”:

Money laundering is generally understood to be the practice of taking ill-gotten gains and moving them through a sequence of bank accounts so they ultimately look like the profits from legitimate activity. Institutions, individuals, and even governments who are believed to be aiding and abetting the practice of money laundering can be indicted and convicted, even though they may be completely unaware that the money being transferred with their help was of criminal origin.

The law has focused on banks, but all sorts of businesses accept money without asking where it came from or being required to report “suspicious activity.” As Rahn observes, even governments can be indicted for and convicted of money laundering. Strictly construed (as Sessions insists when interpreting the law), that means the U.S. government itself could be indicted.

In fact, the U.S. government is the largest launderer of marijuana cash in the nation. The IRS accepts this tainted money in the payment of taxes, turning it into “clean” money; and it is not an unwitting accomplice to the crime. Estimates are that marijuana business owners across the U.S. will owe $2.8 billion in taxes to the federal government in 2018.

The government makes a massive profit off the deal, snatching up to 70 percent of the proceeds of the reporting businesses, as opposed to the more typical rate of 30 percent. It does this by branding marijuana businesses criminal enterprises, which are not entitled to deduct their costs when reporting their income.

This is not only a clear case of the unequal protection of the laws but is a clear admission by the government that it is knowingly accepting illegal funds. The government is a principal beneficiary of a business the government itself has made illegal.

Under those circumstances, both marijuana businesses and banks should be able to raise the “unclean hands” defense. As summarized in Kendall-Jackson Winery, Ltd. v. Superior Court (1999):

The defense of unclean hands arises from the maxim, “He who comes into Equity must come with clean hands.” The doctrine demands that a plaintiff act fairly in the matter for which he seeks a remedy. . . . The defense is available in legal as well as equitable actions. . . . The doctrine promotes justice by making a plaintiff answer for his own misconduct in the action. It prevents a wrongdoer from enjoying the fruits of his transgression.

The government is enjoying the fruits of money it considers “dirty.” It has unclean hands and should not be allowed to prosecute others for the same crime.

Should “Money Laundering” Even Be a Crime?

If the government itself is profiting handsomely from this laundered money, the question arises whether money laundering should even be a crime. Rahn thinks it should not. It became a criminal activity in the U.S. only in 1986, and in many countries it still is not a crime. Banks operating in the U.S. must now collect and verify customer-provided information, check names of customers against lists of known or suspected terrorists, determine risk levels posed by customers and report suspicious persons, organizations and transactions. The reporting requirements are so burdensome and expensive that they have caused many smaller banks to sell out to larger banks or close their doors. Moreover, they have not been cost-effective in deterring crime. According to Rahn, in an article titled “Why the War on Money Laundering Should Be Aborted”:

[I]t has failed to produce the advertised results and, in fact, has not been cost effective, has resulted in wholesale violations of individual civil liberties (including privacy rights), has violated the rights of sovereign governments and peoples, has created new opportunities for criminal activity, and has actually lessened our ability to reduce crime. …

Banks are required to supply the government with not only Currency Transaction Reports but also Suspicious Activity Reports. These reports impose huge regulatory costs on banks and require bank employees to operate as police officers. As a result, the total public and private sector costs greatly exceed $10,000,000 per conviction. This whole effort not only does not make any economic sense, but is clearly incompatible with a free society. The anti-money laundering laws allow almost complete prosecutorial discretion.

One small banker complained that banks have been turned into spies secretly reporting to the federal government. If they fail to comply, they can face stiff enforcement actions, whether or not actual money-laundering crimes are alleged. In 2010, one small New Jersey bank pleaded guilty to conspiracy to violate the Bank Secrecy Act and was fined $5 million for failure to file suspicious-activity and cash-transaction reports. Another small New Jersey bank closed its doors after it was hit with $8 million in fines over its inadequate monitoring policies. The cost of compliance and threat of massive fines for not complying have been major factors in the collapse of the community banking sector. The number of community banks has fallen by 40 percent since 1994 and their share of U.S. banking assets has fallen by more than half, from 41 percent to 18 percent.

“Regulation is killing community banks,” Treasury Secretary Stephen Mnuchin said at his confirmation hearing in January 2017. If the process is not reversed, he warned, we could “end up in a world where we have four big banks in this country.” That would be bad for both jobs and the economy. “I think that we all appreciate the engine of growth is with small and medium-sized businesses,” said Mnuchin. “We’re losing the ability for small and medium-sized banks to make good loans to small and medium-sized businesses in the community, where they understand those credit risks better than anybody else.”

If the goal of the anti-money laundering statutes is to identify and deter criminal activity, strictly enforcing the law could actually backfire in the case of state-legalized marijuana businesses. As noted in a Jan. 9 article in The Daily Beast:

Marijuana businesses have to register and incorporate in states and that puts them on the IRS radar. … Sky-high federal taxes on top of state taxes can make it almost impossible to operate a legal business. … If the government fails to cut businesses a break, legal marijuana could be sold on the black market to dodge taxes.

On the black market, cash proceeds can be dispersed in a way that avoids banks and makes the money hard either to trace or to tax.

Federal Law Needs to Change

With more than half the states legalizing marijuana for medical purposes, Congress needs to acknowledge the will of the people and remove this natural herb from the Schedule I classification that says it is a deadly dangerous drug with no health benefits. The Tenth Amendment gives the federal government only those powers specifically enumerated in the Constitution, and regulating medical practice is not one of them. Federal courts have held that the federal Controlled Substances Act does not allow the federal government to usurp states’ exclusive rights (pursuant to their inherent police powers) to regulate the practice of medicine.

H.R. 1227, the Ending Federal Marijuana Prohibition Act, sponsored by Virginia Republican Thomas Garrett and 15 cosponsors, would remove marijuana from Schedule I and eliminate federal penalties for anyone engaged in marijuana activity in a state where it is legal. Congress just needs to pass it.

In its zeal for eliminating burdensome, costly and ineffective regulations, the Trump administration should also consider lightening the heavy reporting burden that is killing community banks and the local businesses that have traditionally relied on them for affordable credit. On Tuesday, a bipartisan coalition of state attorneys general sent a letter to leaders in Congress requesting advancement of legislation such as the Secure and Fair Enforcement (SAFE) Banking Act to “provide a safe harbor” for banks that provide financial products or services to state-legal marijuana businesses. If the government can accept marijuana money in the payment of taxes, banks should be able to accept it, keep track of it and prevent the crimes associated with storing and transporting large sums of cash.

 

 

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Vermont Legalizes Marijuana, and Makes History Along the Way

Let’s hear it for the Green Mountain State.


Vermont made history this past weekend as Gov. Phil Scott (R) signed a marijuana legalization bill into law. With his signature, Vermont becomes the first state to have freed the weed via the legislative process, as opposed to through a voter initiative.

The new law, House Bill 511, legalizes the possession of up to two ounces of pot and the cultivation of up to six plants (four immature and two mature) as of July 1, but does not legalize the taxed and regulated commercial production and sale of marijuana.

Whether and when the state might open up legal marijuana commerce is up in the air for now. The bill calls for a task force appointed by the governor to study the issue and recommend “legislation on implementing and operating a comprehensive regulatory and revenue system for an adult marijuana market” by December 31. Then lawmakers would have to go to work again to get that passed.

All eight states that have already legalized marijuana have created taxed and regulated legal markets, although Vermont’s New England neighbors Maine and Massachusetts have yet to implement theirs. Like Vermont, however, the District of Columbia legalized weed without legalizing sales.

New Hampshire could be the next New England state to go green, and like Vermont and D.C., it could be without allowing legal, taxed, and regulated sales. Last week, the House voted to approve House Bill 656, which would legalize the possession of up to three-quarters of an ounce of pot and allow individuals to grow up to three plants. The vote came after the House amended the bill to remove provisions allowing for legal, taxed sales. That measure now goes to the state Senate.

New Jersey is another candidate to be the next state to legalize it at the state house. New Gov. Phil Murphy (D) campaigned on a pledge to pass legalization in his first 100 days, and legalization proponents have already filed the measures that would do that, Senate Bill 380 and its House counterpart Assembly Bill 1348.

Those bills would allow for a system of legal sales, but would not allow for personal cultivation. Of the nine states that have now legalized weed, only Washington state has gone down that path, and Washington lawmakers there are now reconsidering the ban on home grows.

Legalization bills are likely to pop up in a couple of dozen state legislatures this year, but that doesn’t mean they’ll pass. There are probably only a handful of states where there’s even an outside chance of state house legalization this year. Other than New Hampshire and New Jersey, they include Connecticut, Delaware, Illinois, and New York.

But Vermont was the first. Let’s hear it for the Green Mountain State. 

 

 

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Tom Petty’s Family Publicly Releases Cause of Death to Help Forward Opioid Crisis Discussion


The rocker’s death was confirmed as an accidental overdose.


Legendary rocker Tom Petty’s cause of death was confirmed to be an accidental drug overdose, according to a new statement from his family. Petty was 66 years old at the time of his death.

“Our family sat together this morning with the Medical Examiner – Coroner’s office and we were informed of their final analysis that Tom Petty passed away due to an accidental drug overdose as a result of taking a variety of medications,” the family’s statement read.

Following a pattern familiar to families throughout the country, Petty’s overdose coincided with a pain-related medical issue. Fentanyl, a synthetic opiate prescribed for pain, was identified by name in the statement.

“As a family we recognize this report may spark a further discussion on the opioid crisis and we feel that it is a healthy and necessary discussion and we hope in some way this report can save lives. Many people who overdose begin with a legitimate injury or simply do not understand the potency and deadly nature of these medications,” the statement continued.

If you or a loved one may be experiencing addiction to prescription or recreational drugs, immediately inform your health care provider or call the free National Helpline for a referral at 1-800-662-HELP (4357).


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PHOENIX — Gov.Doug Ducey, true to his pledge, now has a plan he hopes will stop the preponderance of opioids and reduce addiction rates. How? By giving bad doctors a slap on the wrist and locking up addicts. Ducey called for an end to Arizona’s opioid epidemic in his 2018 State of the State address, promising […]

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Mixing These Drugs With Marijuana Can Be Dangerous

On prescription pills and consume marijuana? Read this and then go have a talk with your doctor.


Medical students do not get an education in the endocannabinoid system, which is a shame. Most doctors have a firm understanding about pharmaceuticals and other traditional Western medicinal therapies. You might get lucky and have a personal physician who has a basic knowledge about holistic medicine, herbal therapies and other integrative health techniques. Sadly, this lack of information puts patients at risk and encourages some to self-diagnose and self-medicate. If you are consuming cannabis — for medicinal, recreational, spiritual, wellness or any other purpose — it is vitally important to share this information with your doctor. While cannabis is a safe drug, you need to be careful when you mix these drugs with marijuana.

Don’t be afraid to share; there is a thing called doctor-patient confidentiality. Besides, eight states have already legalized recreational marijuana and 29 states allow some form of medicinal use.

Why is it vital? Even though cannabis is considered to be a fairly safe psychoactive substance — and there has never been a documented case of fatal overdose — there can be medical issued when mixed with some prescription medications.

According to Dr. Sarah T. Melton, associate professor of Pharmacy Practice at the Gatton College of Pharmacy at East Tennessee State University:

“Marijuana has potentially serious drug interactions with prescription and over-the-counter medications. By sharing details of marijuana use, the prescriber can best make decisions about medication choices and educate the patient about any potential contraindications or need for monitoring.”

Since science regarding the interaction of pharmaceuticals and cannabis — still a Schedule I drug, which means research is difficult — there is no definitive list of what medications are unsafe to use in combination with marijuana. To be clear, this is true for most herbal medications, which are tested by the FDA under a different protocol than pharmaceuticals.

According to the Mayo Clinic, cannabis may adversely interact with:

  • anabolic steroids
  • barbiturates
  • benzodiazepines
  • central nervous system depressants
  • corticosteroids
  • dopamine antagonists
  • nicotine
  • nonsteroidal anti-inflammatories
  • opioid receptor antagonists
  • pain relievers
  • phytoestrogens

Another trusted source is Drugs.com, an independent medicine information site that provides “independent, objective, comprehensive and up-to-date information for both consumers and healthcare professionals.”

According the Drugs.com, definitely check with your physician before combining cannabis and these pharmaceutical medicines:

Benztropine

Using cannabis together with benztropine can increase nervous system side effects such as dizziness, drowsiness, and difficulty concentrating. Some people may also experience impairment in thinking and judgment.

Buprenorphine and cannabis

Using buprenorphine together with cannabis can lead to serious side effects such as respiratory distress, coma, or even death. You may need a dose adjustment or more frequent monitoring by your doctor to safely use both medications.

Levomethadyl acetate

Using levomethadyl acetate together with cannabis may increase side effects such as drowsiness, dizziness, lightheadedness, confusion, depression, low blood pressure, slow or shallow breathing, and impairment in thinking, judgment, and motor coordination.

Propoxyphene

First some good news: Propoxyphene hasn’t been on the market since 2o1o after the FDA issued a warning. If you come across some in the back of your medicine closet, toss him out.

Using propoxyphene together with cannabis may increase side effects such as dizziness, drowsiness, confusion, and difficulty concentrating. Some people, especially the elderly, may also experience impairment in thinking, judgment, and motor coordination. You should take propoxyphene exactly as prescribed by your doctor.

Sodium oxybate

Using sodium oxybate together with cannabis may increase side effects such as drowsiness, dizziness, lightheadedness, confusion, depression, low blood pressure, slow or shallow breathing, and impairment in thinking, judgment, and motor coordination.

SSRIs

Using cannabis together with SSRI’s such as escitalopram may increase side effects such as dizziness, drowsiness, confusion, and difficulty concentrating. Some people, especially the elderly, may also experience impairment in thinking, judgment, and motor coordination. You should avoid or limit the use of alcohol while being treated with these medications.

Alcohol

Using cannabis  together with alcoholic beverages may increase side effects such as dizziness, drowsiness, confusion, and difficulty concentrating. Some people may also experience impairment in thinking, judgment, and motor coordination. You should avoid or limit the use of alcohol while being treated with cannabis. Do not use more than the recommended dose of cannabis, and avoid activities requiring mental alertness such as driving or operating hazardous machinery until you know how the medication affects you.

Yes, booze and buds can be a dangerous concoction. If you enjoy a craft beer with your joint or a chardonnay with your vape, use caution and know your limit!

This is not a complete list. It is vitally important for you to have the conversation with your doctor. And do a little homework on your own. It’s better to be safe than sorry.

 

 

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