This document summarizes a law review article about the challenges faced by marijuana businesses in obtaining banking services due to federal anti-money laundering laws. It provides background on how federal laws prevent banks from handling proceeds from drug trafficking, even as some states have legalized marijuana. This creates problems for marijuana businesses that have to operate as cash-only businesses. The summary discusses security, accounting and tax issues that arise from a lack of banking access. It analyzes the ramifications of banks enforcing federal laws against money laundering on marijuana businesses.

1. VOLUME 2 │ NUMBER 2
459
Savannah
Law Review
Bank on Marijuana: A Legitimate Industry
Warranting Banking Access
Deborah L. Dickson
ABSTRACT
This Note criticizes federal anti-money laundering laws that create a
gridlock with states’ drug laws legalizing the distribution of medical or
recreational marijuana. This federalism dilemma denies marijuana businesses
equal access to banking. Consequently, marijuana businesses face an impossible
situation without such access. The implications arising from this problem result
in more than just an unbanked class of businesses, but severe consequences flow
from stigmatizing marijuana businesses as criminal. Marijuana businesses face a
deprivation of property and, in some cases, even a loss of liberty. The triggering
event to these consequences is when banks have unfettered discretion to report
any and all marijuana businesses to federal authorities. While the federal
government has attempted to alleviate the situation by creating a special
reporting standard for banks servicing marijuana businesses, this attempt merely
solidifies underlying issues already in place that unfairly alienate marijuana
businesses from banking altogether as an unbanked class of businesses. This Note
proposes a different approach to remove banks’ discretion over reporting
marijuana businesses by placing such discretion squarely upon state agencies,
*
Juris Doctor Candidate, Savannah Law School, December 2015; Bachelor of
Business Administration, Marketing, Terry College of Business, University of Georgia,
2002. I would like to thank Professor Elizabeth Berenguer for helping to form this topic
and mentoring me throughout my progression, Alison Slagowitz for her tireless support,
Amy M. Crossin for her meticulous attention to detail throughout the editing process,
and the staff of Savannah Law Review for their editorial assistance. Additionally, I would
like to thank the following individuals for their invaluable insight and critical feedback:
Professor Caprice Roberts of Savannah Law School; Professor Brannon P. Denning of
Samford University; Professor Benjamin M. Leff of American University Washington
College of Law; and Professor Mark W. Osler of the University of St. Thomas. Finally, I
dedicate this Note in memory of my grandparents, Mr. and Mrs. John F. M. Ranitz II.

2. Savannah Law Review [Vol. 2:2, 2015]
460
which are ultimately responsible for vetting legitimate marijuana businesses from
those that truly wish to skirt the law.
There’s a public safety component to this [problem]. . . . Huge amounts of
cash—substantial amounts of cash just kind of lying around with no place for
it to be appropriately deposited—is something that would worry me just from
a law enforcement perspective.1
-Former Attorney General Eric Holder Jr.
I. Introduction
To demonstrate the legal complications marijuana retailers face without
equal access to banking, consider the hypothetical of John Doe in La Verte,
Colorado, where both state-licensed medical and recreational marijuana retailers
are legal under state law. John has a stellar background as an upstanding citizen
with an excellent credit record, a pedigree education, and a history of community
activism. John opened a holistic drug store called The Green Tea Shoppe in a
strip mall just down the road from La Verte City Park, a major attraction
surrounded by thriving businesses, schools, and churches. John registered for his
business license and federal tax identification number. Then, he leased and
remodeled the unit in the strip mall for his store’s grand opening.
Nevertheless, credit card merchants would not open an account for John, so
John’s customers have to pay him exclusively in cash. Additionally, John has not
been able to find a bank willing to work with him. He had a business bank account,
but the bank refused to do business with him after several months of depositing
cash on a daily basis. The next bank did the same thing, treating John like a
common criminal and commenting that “the money smelled funny.” Between
bank accounts, John has opted to store his money onsite in a large safe. John has
become paranoid because there have been several attempted robberies at the
store to break into the safe. The police are unable to help with the situation.
Unfortunately, employee turnover is high because of the stressful situation with
the store’s security.
Because John cannot write checks or use online banking, John can only issue
payments in cash for weekly payroll and government taxes. Additionally, for his
federal tax return, John has to pay draconian taxes because he cannot deduct most
of his expenses from his gross profit to mitigate his overall business taxes. Being
between banks, John has had a difficult time managing his cash flow onsite,
making the store’s accounting difficult from a logistical standpoint.
In the meantime, John is now under review from the federal government. He
received a notice from both his landlord, evicting him, and the federal
government, both stating that he has to relocate to another area more than 1,000
feet away from a list of certain types of places such as parks, schools, and
1
David Ingram, U.S. to Adjust Rules to Let Banks Handle Marijuana Money—Holder,
Reuters (Jan. 23, 2014), http://www.reuters.com/article/2014/01/24/usa-marijuana-
banking-idUSL2N0KY03D20140124 (proposing access to banking for marijuana business
in states legalizing marijuana).

3. Bank on Marijuana
461
churches. John will not be able to get a business loan from the bank to help with
the move because banks are refusing any business loans to marijuana retailers.
Also, the Internal Revenue Service (IRS) came by to do an audit when John was
between banks. The store’s accounting was not yet updated completely or
accurately. John may face possible forfeiture of his entire store and business
assets, as well as substantial fines for inaccurate tax reporting.
While John’s experience with his store illustrates a regulatory parade of
horribles, this example highlights some of the consequences state-licensed
marijuana retailers may face when financial institutions turn them away: (1)
security concerns with having large amounts of cash onsite; (2) logistical
concerns with accounting accuracy and transparency without a consistent bank
account; (3) inaccurate tax reporting that has severe tax implications with the
IRS and possible forfeiture; and, ultimately, (4) criminal prosecution by the
federal government. Worse, in this situation, Colorado will provide John neither
a remedy nor protection, even though Colorado sanctioned his business.
The legal complications for marijuana retailers within the financial industry
begin when financial institutions refuse business from marijuana retailers because
of federal anti-money laundering laws.2
While financial institutions play a pivotal
role in businesses’ profitability, financial institutions serve as the means for
businesses to manage their cash flow: to receive income and pay expenses. On
the other hand, financial institutions can undermine states’ progressive drug
2
The culmination of federal anti-money laundering laws has been an organic process
interweaving various acts since 1970. Anti-Drug Abuse Act of 1988 (Drug Kingpin Act),
Pub. L. No. 100-690, 102 Stat. 4181 (1988) (codified as amended in 21 U.S.C.A. § 848
(2004)) (recognized as repealed by United States v. Stitts, 552 F.3d 345 (4th Cir. 2008));
Intelligence Reform & Terrorism Prevention Act of 2004, Pub. L. No. 108–458, 118 Stat.
3638 (2004) (codified as amended in scattered sections of 50 U.S.C.); Uniting and
Strengthening America by Providing Appropriate Tools to Restrict, Intercept and
Obstruct Terrorism Act (USA PATRIOT Act) of 2001, Pub. L. No. 107-56, §§ 301–377,
115 Stat. 272, 296–342 (2001) (codified as amended at 18 U.S.C. §§ 2339A(a),
2339B(a)(1)) (referring to Title III as International Money Laundering Abatement and
Antiterrorist Financing Act of 2001); Money Laundering and Financial Crimes Strategy
Act of 1998, Pub. L. No. 105-310, 112 Stat. 2941 (1998) (codified as amended in scattered
sections of 31 U.S.C.); Money Laundering Suppression Act of 1994, Pub. L. No. 103-325,
108 Stat. 2243 (1994) (codified to 31 U.S.C. § 5301); Annunzio-Wylie Anti-Money
Laundering Act of 1992, Pub. L. No. 102-550, 106 Stat. 4044 (1992) (codified as amended
in scattered sections of 12 U.S.C., 18 U.S.C., and 31 U.S.C.); Money Laundering Control
Act of 1986, Pub. L. No. 99-570, 100 Stat. 3207-18 (1986) (codified as amended in
scattered sections of 18 U.S.C. & 31 U.S.C.); Bank Secrecy Act of 1970, Pub. L. No. 91-
508, 84 Stat. 1118 (1970) (codified as amended in scattered sections of 12 U.S.C., 18
U.S.C., and 31 U.S.C.) [hereinafter Bank Secrecy Act of 1970]. See generally Charles
Doyle, Cong. Research Serv., RL33315, Money Laundering: An Overview of 18 U.S.C.
1956 and Related Federal Criminal Law 32–37 (2012), available at
http://www.fas.org/sgp/crs/misc/RL33315.pdf (detailing the money laundering
enforcement regime that intertwines criminal and banking regulations); History of Anti-
Money Laundering Laws, Fin. Crimes Enforcement Network, http://www.
fincen.gov/news_room/aml_history.html (last visited Nov. 30, 2015) (discussing the
history of laws created to money laundering) [hereinafter AML History]; The federal anti-
money laundering laws within this footnote will be referred to generally as anti-money
laundering laws for the remainder of this Note.

4. Savannah Law Review [Vol. 2:2, 2015]
462
policies when enforcing anti-money laundering laws and reporting marijuana
businesses carte blanche to federal governmental authorities.3
Primarily, financial institutions facilitate and profit from businesses’
economic growth by offering basic services that are integral in business operations
today.4
Some of the primary reasons businesses utilize financial institutions are to:
(1) make daily deposits; (2) issue payments to vendors (i.e., write checks); (3)
utilize online banking; (4) link business bank accounts to online government
websites; (5) ensure compliance with state and federal regulations (i.e., sales,
payroll, and business taxes); (6) establish employee direct deposit for payroll
purposes; (7) set up merchant accounts (i.e., accept payments by credit cards such
as Visa, MasterCard, and American Express); and (8) secure business loans.5
In
3
See, e.g., Richard Clough, Pot Dispensers Forced into Banking Shadows, Orange
Cnty. Reg. (May 23, 2013), http://www.ocregister.com/articles/marijuana-509695-
banks-business.html; John Ingold, Colorado Marijuana Dispensary Owner, Eleven Others
Indicted on Seventy-one Charges, Denver Post (June 19, 2013, 11:11:25 AM), http://
www.denverpost.com/breakingnews/ci_23493035/colorado-marijuana-dispensary-
owner-11-others-indicted-71; Greg Lamm, Federal Bank Rules Leave Pot Businesses with No
Place to Put Proceeds, Puget Sound Bus. J. (Apr. 5, 2013, 5:00 AM), http://www
.bizjournals.com/seattle/news/2013/04/05/federal-bank-rules-leave-pot.html?page=all;
Jonathan Martin, Medical-Marijuana Dispensaries Run into Trouble at the Bank, Seattle
Times (Apr. 29, 2012, 8:00 PM), http://seattletimes.com/html/localnews/2018103547
_maribanking30m.html; John B. Stephens, Pot Shops Shunned by Banks Haul in the Cash,
USA Today (Aug. 31, 2014, 7:30 AM), http://www.usatoday.com/story/money/
business/2014/08/31/pot-marijuana-industry/13628491/; Alison Vekshin, Marijuana
Dispensaries Put Colorado Banks in a Bind, Bloomberg Businessweek (June 6,
2013), http://www.businessweek.com/articles/2013-06-06/marijuana-dispensaries-put-
colorado-banks-in-a-bind; Medical Cannabis Dispensaries Losing Bank Accounts Over Large,
Frequent Cash Deposits, Marijuana Bus. Daily (June 5, 2013), http://mmjbusiness
daily.com/2013/06/05/cannabis-dispensaries-losing-bank-accounts-over-large-frequent-
cash-deposits; Alison Vekshin, Pot Shops Can’t Take American Express or Deposit in Banks,
Bloomberg (May 12, 2013, 8:00 PM), http:// www.bloomberg.com/news/2013-05-
13/pot-shops-can-t-take-american-express-or-deposit-in-banks.html; Exclusive: Medical
Marijuana Dispensaries No Longer Able to Accept Visa, MasterCard as of July 1,
Marijuana Bus. Daily (June 18, 2012), http:// mmjbusinessdaily.com/exclusive-
medical-marijuana-dispensaries-no-longer-able-to-accept-visa-mastercard-as-of-july-1/.
4
See infra Part III.C.1.
5
See supra note 3; Sam Kamin, Marijuana at the Crossroads: Keynote Address, 89
Denv. U. L. Rev. 977, 984–86 (2012); How to Shop for a Bank, Wall St. J. (Sept.
11, 2008, 11:00 PM), http://guides.wsj.com/small-business/funding/how-to-shop-for-a-
bank/tab/print/; Gwendolyn Bounds, Banks Expand Services, Perks for Small Firms,
Wall St. J. (Mar. 8, 2005, 11:59 PM), http://online.wsj.com/news/articles/
SB111023518024272709#printMode; Retail Banking vs. Corporate Banking,
Investopedia, http://www.investopedia.com/articles/general/071213/retail-banking-
vs-commercial-banking.asp (last visited Nov. 30, 2015). See generally Fed. Fin. Inst.
Examination Council, Bank Secrecy Act/Anti-Money Laundering
Examination Manual 178–292 (2010) [hereinafter BSA/AML Manual],
available at http://www.ffiec.gov/bsa_aml_infobase/documents/BSA_AML_Man_
2010.pdf (regulating various banking products and services).

5. Bank on Marijuana
463
essence, access to banking leaves a paper trail that ensures transparency for
businesses and fosters compliance with government regulations.6
In contrast, federal laws automatically implicate money laundering when
marijuana businesses attempt to use financial institutions for business purposes.
Financial institutions are subject to anti-money laundering laws that prohibit
financial institutions from handling any proceeds from drug trafficking.7
Hence,
financial institutions function as a backdoor approach to enforce the federal
government’s prohibition on marijuana in states that are legalizing marijuana.8
But, denying marijuana businesses equal access to banking hinders transparency
and accurate reporting rather than fostering legitimacy in a controlled, regulated
environment for an emerging marijuana industry.
The federal government reinforces a stigma on marijuana businesses by
enforcing banking regulations that criminalize money laundering before
marijuana businesses ever face prosecution for money laundering—if they are
ever prosecuted. As a result, this stigma materializes into a loss of income and
severe consequences because marijuana businesses do not have equal access to
banking like other state-licensed entrepreneurial enterprises. Simply put, marijuana
businesses are afforded neither the same opportunities nor the same protection
to operate legitimately as other state-licensed businesses.
Part II establishes the threshold issue that marijuana businesses face unequal
access to banking because the Controlled Substances Act of 1970 interlocks with
the Bank Secrecy Act of 1970 to prevent money laundering from drug trafficking.
While the emerging marijuana industry reflects a shift in public policy, the
increase in legislation supporting marijuana as a legitimate industry fails to
address the issue of equal access to banking for marijuana businesses. Beneath
the gaze of federal oversight, financial institutions are unable to differentiate
between criminals and non-criminals under state law; financial institutions are
subject to federal laws and marijuana businesses remain illegal under federal law.
Part III analyzes the ramifications of financial institutions enforcing federal
anti-money laundering laws as quasi-prosecutors, regardless of whether
6
See BSA/AML Manual, supra note 5, at 71–73, 309; Douglas Leff, Money
Laundering and Asset Forfeiture: Taking the Profit Out of Crime, 81 FBI L.
Enforcement Bull. 4, 23 (2012), available at http://leb.fbi.gov/2012/april/leb-
april-2012; Peter E. Meltzer, Keeping Drug Money from Reaching the Wash Cycle: A Guide to
the Bank Secrecy Act, 108 Banking L.J. 230, 231–32 (1991); AML History, supra note
2. See generally President’s Comm’n on Organized Crime, Interim Rep.
to the President & the Att’y Gen., The Cash Connection:
Organized Crime, Financial Institutions, & Money Laundering 8–
10 (1984) [hereinafter The Cash Connection], available at https://www.ncjrs.gov/
pdffiles1/Digitization/166517NCJRS.pdf (establishing the connection between money
laundering and drug trafficking within the financial industry).
7
See infra Part II.B.2.
8
See infra Part II.A.1; cf. Conant v. Walters, 309 F.3d 629, 644–45 (9th Cir. 2002)
(Kozinski, J., concurring). See generally Daniel Mulligan, Comment, Know Your Customer
Regulations and the International Banking System: Towards a General Self-Regulatory
Regime, 22 Fordham Int’l L.J. 2324, 2327–66 (1999) (discussing an overview of
anti-money laundering laws and banks’ Know Your Customer Policies to combat drug
trafficking).

6. Savannah Law Review [Vol. 2:2, 2015]
464
marijuana retailers are ever prosecuted. Currently, marijuana businesses lack
protection from the federal government when federal money laundering laws
deputize financial institutions to refuse their business. Facing the stigma of
criminal conviction, marijuana businesses are struggling to find banking services
to adequately maintain their cash flow operations and, ultimately, stay in
business. Legitimate marijuana businesses are caught in the crossfire during this
process and cast aside as criminals instead—with neither a valid, legal status nor
a legal remedy.
Part IV proposes a public-private banking partnership between state
governments and financial institutions, creating a controlled safe-harbor
environment for financial institutions to provide banking services to marijuana
businesses. This solution features how states can extend greater protection to
marijuana businesses than the U.S. Constitution, regardless of the federal
government’s position on marijuana. Fiscal transparency is the key to
transforming the marijuana industry into a legitimate industry while still holding
accountable those who truly wish to skirt the law and stay in the dark.
II. Marijuana Businesses’ Proceeds are Still ‘Dirty Money’
As states struggle with the issues of federalism and marijuana, the conflict
inevitably bleeds over into the issue of federal anti-money laundering laws
denying marijuana businesses equal access to banking. The Controlled
Substances Act of 1970 (Controlled Substances Act) 9
interlocks with the
framework of money laundering laws under the Bank Secrecy Act of 1970 (Bank
Secrecy Act),10
denying marijuana businesses equal access to banking. Thus,
states legalizing the commercial supply of marijuana trigger a major gridlock that
prevents legal access to banking for marijuana businesses.
Financial institutions employ banking policies that comply with federal
authorities and mitigate the risk of money laundering by: (1) filing a Currency
Transaction Report for all cash deposits in excess of $10,000 to the IRS;11
(2)
enforcing Know Your Customer policies (i.e., Customer Identification Program);12
9
Comprehensive Drug Abuse Prevention and Control Act of 1970, Pub. L. No. 91-
513, 84 Stat. 1236 (1970) (as codified as amended in 21 U.S.C. §§ 801–865 (2012))
[hereinafter Controlled Substances Act] (stating legislative intent to (1) research, prevent,
treat, and rehabilitate persons suffering drug abuse and dependency; and (2) strengthen
law enforcement against field of drug abuse).
10
Bank Secrecy Act of 1970, Pub. L. No. 91–508, 84 Stat. 1118 (1970) (codified as
amended in scattered sections of 12 U.S.C., 18 U.S.C., and 31 U.S.C.); 31 U.S.C. §§
5311–5332 (2012); 12 U.S.C. §§ 1829b, 1951–1959 (2012); 18 U.S.C. §§ 1956–1957, 1960
(2012).
11
31 U.S.C. § 5325 (2012) (reporting transactions for monetary instruments for
$3000 or more); 31 U.S.C. § 5331 (2012) (reporting cash transactions for $10,000 or
more per incident); 31 C.F.R. § 1010.100(ff)(2)(i) (2012); 31 C.F.R. § 1010.410 (2013);
Doyle, supra note 2; BSA/AML Manual, supra note 5, at 71–72, 309. This analysis
pertains to domestic currency only.
12
The Know Your Customer provision was mentioned in the legislative history of the
Bank Secrecy Act but never explicitly enacted. H.R. Rep. No. 91-975, 91st Cong., 2d
Sess. (1970), reprinted in 1970 U.S.C.C.A.N. 4394, 4401–02. Later, the phrase “Know

7. Bank on Marijuana
465
and (3) remitting Suspicious Activity Reports 13
to the Financial Crimes
Enforcement Network.14
As fiduciaries, financial institutions internalize the risk
of dealing with customers, who may implicate financial institutions in illegal
transactions. Yet, financial institutions indemnify themselves through a robust
system of reporting depositor activities to the federal government. This reporting
regime empowers financial institutions to refuse and report marijuana businesses
that are in violation of federal anti-money laundering laws despite state laws that
sanction marijuana businesses to sell and distribute marijuana.15
Thus, state legislators legalizing the use, possession, and distribution of
marijuana ignored a basic threshold issue for marijuana retailers: equal access to
banking. Equal access to financial services16
for marijuana businesses17
serves as
the cornerstone for creating a legitimate industry. A stable, legal environment for
marijuana businesses is, ultimately, a safer environment for marijuana consumers
and non-consumers.18
However, equal access to banking may also be the Achilles
heel to states’ experimental drug reforms using marijuana businesses.
Your Customer” was coined, within the financial industry. See Genci Bilali, Know Your
Customer—or Not, 43 U. Tol. L. Rev. 319, 322–23 (2012). Know Your Customer bank
policies are now synonymous with compliance requirements to screen customers. Being
the arbiter of monetary transactions, banks routinely perform risk assessment and
customer due diligence to determine whether to accept new business. 31 U.S.C. § 5318
(2012) (codifying the Know Your Customer policy as maintaining identification records of
customers); see BSA/AML Manual, supra note 5, at 52–66. But see Money
Remittances Improvement Act of 2014, Pub. L. No. 113-156, § 2(b), 128 Stat 1829, 1829–
30 (2014) [hereinafter Money Remittances Improvement Act], available at
https://beta.congress.gov/113/bills/hr4386/BILLS-113hr4386enr.pdf (deferring
examination of reporting requirements by non-bank financial institutions to “a State
supervisory agency of a category of financial institution, if the Secretary determines that
the category of financial institution is required to comply with this chapter and section 21
of the Federal Deposit Insurance Act”).
13
31 U.S.C. § 5318(g) (2012); 12 C.F.R. § 21.11 (2014); 12 C.F.R. § 208.62 (2014);
12 C.F.R. § 211.5(k) (2014); 12 C.F.R. § 211.24(f) (2014); 12 C.F.R. § 225.4(f) (2014); 12
C.F.R. § 353.1 (2014); 12 C.F.R. § 748 (2014); 12 C.F.R. § 563.180 (2014); 31 C.F.R. §
103.18 (2014); see BSA/AML Manual, supra note 5, at 53–85.
14
31 U.S.C. § 5331 (2012); 31 C.F.R. § 1010.330 (2014) (requiring all trades or
businesses alike to report to both the IRS and Financial Crimes Enforcement Network all
incidences of receiving currency greater than $10,000); see Meltzer, supra note 6, at 232;
see also The Cash Connection, supra note 6.
15
See supra note 2 and accompanying text; see also infra Part III.B.
16
James Marvin Pérez, Blacklisted: The Unwarranted Divestment of Access to Bank
Accounts, 80 N.Y.U. L. Rev. 1586, 1595–96 (2005).
17
Paul Shukovsky, House Bill Would Bring Banking to Legalized Purveyors of Pot,
BNA’s Banking Rep. No. 6, at 230–32 (Aug. 6, 2013).
18
Compare City of Oakland v. Holder, 961 F. Supp. 2d 1005, 1013–16 (N.D. Cal.
2013) (citing Leiva-Perez v. Holder, 640 F.3d 962, 968–70 (9th Cir. 2011))
(acknowledging marijuana retailers do remove the fear of buying marijuana from street
dealers where dangers of being robbed, mugged, or arrested may still loom over the
transaction), with People ex rel. Lungren v. Peron, 70 Cal. Rptr. 2d 20, 28–29 (Cal. Ct.
App. 1997) (rejecting that dispensaries created a safe environment to procure medical
marijuana).

8. Savannah Law Review [Vol. 2:2, 2015]
466
These progressive drug reform efforts may be in vain because access to
banking is the lifeblood of business enterprises whether they are legal or illegal.
For marijuana businesses, liquidity of capital and ease of transferring capital
within the financial system is paramount to running a sustainable, profitable
business within a regulated framework. But if financial institutions continue to
enforce anti-money laundering laws and deny business from marijuana
businesses,19
they will fundamentally impair the overall future sustainability of a
legitimate marijuana industry.20
A. The Status Quo Leaves Marijuana Businesses in a Stalemate
Marijuana lies at the center of much legal controversy because the federal
government has maintained the marijuana prohibition—for over four decades—
under the Controlled Substances Act.21
While many arguments lie on both sides,
the issue of legalization is beyond the scope of this Note.22
More importantly, the
marijuana controversy is appropriately recast as a federalism issue when a state
has exercised its power to enact laws for the benefit of its people through
legalization of marijuana.23
This federalism dilemma leaves marijuana businesses
exposed to greater risks that amount to more than just the cost of doing business.
1. Marijuana Businesses Become the States’ Weapon of Choice
Coined as President Nixon’s War on Drugs, the Controlled Substances Act
has received many criticisms. Primarily, the federal government has effectively
criminalized substance abuse instead of removing crime from drug trafficking or
deterring recidivism.24
While the marijuana prohibition may be a federal drug
policy, states have ultimately borne the lion’s share of the costs from enforcing
this marijuana prohibition. More specifically, Americans as taxpayers bear the
costs. Additionally, other factors supporting this pro-marijuana legalization trend
include, but are not limited to, the following:
(1) a perceived failure of the federal drug policy from the War on
Drugs;
(2) a waning stigma on marijuana over the last forty years;
19
See supra note 3.
20
See Pérez, supra note 16, at 1586.
21
21 U.S.C. §§ 801–865 (2012).
22
The Author further discusses states’ progressive drug policies on marijuana in a
companion Comment to this Note. See Deborah L. Dickson, Marijuana—Justifying a
Legitimate Industry Beyond the Gray Market (Oct. 27, 2014) (unpublished comment) (on
file with author).
23
See id. (discussing the structural issues in the federalism dilemma regarding
marijuana leading states to serve as redress against the marijuana prohibition).
24
Pew Research Ctr., America’s New Drug Policy Landscape:
Two-Thirds Favor Treatment, Not Jail, for Use of Heroin,
Cocaine 1–4, 10 (2014), available at http://www.people-press.org/files/legacy-pdf/04-
02-14%20Drug%20Policy%20Release.pdf (“About three-quarters of Americans (76%) say
that if marijuana use is not legalized, those who are convicted of possessing small amounts
of marijuana should not serve jail time.”).

9. Bank on Marijuana
467
(3) a shift in public policy favoring marijuana legalization;
(4) a consistent, growing demand for marijuana since 1970;
(5) the deleterious impact of illegal marijuana trafficking on other
countries;
(6) a disparate racial impact from criminalizing marijuana; and
(7) the burdensome social costs from criminalizing marijuana (i.e.,
conserving judicial resources and reducing overcrowding in jails).25
Those criticisms, and changing conditions, have led to the rising trend of
states contravening the marijuana prohibition under the Controlled Substances
Act. Some states are ending the marijuana prohibition altogether on a state level
in the face of a stagnant Congress and recalcitrant President. As of this Note’s
publication, Alaska, Colorado, Oregon, Washington, and the District of
Columbia had legalized the recreational use of marijuana.26
Additionally, twenty-
three states and the District of Columbia had legalized medical marijuana. The
graph below charts the trend for legalizing medical marijuana from 1996 to 2014:27
Ultimately, the right to use marijuana is dependent upon a supply of legal
marijuana.28
As a growing trend, sixteen states and the District of Columbia
(33.3%) allow marijuana retailers (for medical marijuana), more commonly known
as dispensaries.29
By a tour de force among the various retailer-supply-models that
25
See generally Dickson, supra note 22 (discussing the rationales for the failure of the
marijuana prohibition).
26
See infra Table 1.
27
Id.
28
See People ex rel. Lungren v. Peron, 70 Cal. Rptr. 2d 20, 32 (Cal. Ct. App. 1997)
(Kline, J., concurring).
29
This Note defines marijuana businesses as brick-and-mortar retail stores that
supply marijuana legally under state law to persons legally allowed to possess and use
marijuana. For medical marijuana, normally doctors recommend the use of marijuana.
The patient must then register with the state before purchasing medical marijuana. Chris
Lindberg, Room for Abuse: A Critical Analysis of the Legal Justification for the Marijuana
Storefront “Dispensary”, 40 Sw. L. Rev. 59, 63–65 (2010). For recreational marijuana,
one simply must be over the age of 21. The Note author uses marijuana businesses,
0%
50%
100%
Rising Trend of States & the District of Columbia
Legalizing the Medical Use of Marijuana as of
December 2014
States Legalizing Medical Use of Marijuana Marjuana Remains Illegal

10. Savannah Law Review [Vol. 2:2, 2015]
468
have evolved, marijuana businesses quickly became these states’ weapon of
choice to create a self-sustaining, regulatory regime for marijuana with over 70%
of the states that have allowed such retailers.30
Hence, the retailer-supply-model
is an effective means to distinguish criminal from non-criminal activity in these
states.
In response to this trend, then-Attorney General Eric Holder Jr. announced
in 2014 that marijuana businesses would soon have access to banking in states
legalizing marijuana. 31
The federal government unveiled its proposal to the
marijuana banking dilemma through a modified reporting regime for financial
institutions still at risk for servicing marijuana businesses.32
But this proposal falls
short. Any issuing of these new regulations may not be retroactive for marijuana
businesses already subject to federal interference, already in this battle over state
regulation of marijuana.33
In the early stages of cooperative federalism,34
the marijuana industry will be
sensitive to changes in the legal environment on both the state and federal level.
marijuana retailers, and dispensaries interchangeably, which also encompasses other
organizations such as dispensary, cooperative, collective, cannabusinesses, and so forth.
30
See generally Dickson, supra note 22 (analyzing features of states’ drug policies on
marijuana).
31
Fin. Crimes Enforcement Network, FIN-2014-G001, Guidance
on BSA Expectations Regarding Marijuana-Related Businesses
(Feb. 14, 2014) [hereinafter FinCen Guidance on Marijuana Banking],
available at http://www.fincen.gov/statutes_regs/guidance/pdf/FIN-2014-G001.pdf.
32
Id.
33
Federalism is defined as the U.S. Constitution allocating power between the federal
and state government creating a dual sovereignty to “enhanc[e] democratic rule by
creating governments more responsive to their constituents, prevent[] tyranny by
diffusing power between the federal and state levels of government, and encourag[e]
policy innovation among states.” Huyen Pham, The Constitutional Right Not to Cooperate?
Local Sovereignty and the Federal Immigration Power, 74 U. Cin. L. Rev. 1373, 1396–97
(2006); U.S. Const. art. VI, cl. 2 (declaring the federal government’s authority as “the
Supreme Law of the Land”); U.S. Const. amend. X (reserving powers to the states
that were not delegated or prohibited by the U.S. Constitution). The anti-commandeering
rule governs the principle that the federal government may issue regulation encouraging
states to emulate federal policies with similar legislation, but the federal government may
not commandeer the states’ processes to do so accordingly. New York v. United States,
505 U.S. 144, 175–88 (1992) (“The Federal Government may not compel the States to
enact or administer a federal regulatory program.”). See generally Todd Grabarsky,
Conflicting Federal and State Medical Marijuana Policies: A Threat to Cooperative
Federalism, 116 W. Va. L. Rev. 1, 2–31 (2013) (outlining the federalism issues
surrounding marijuana such as commandeering, uncooperative federalism, and
preemption).
34
Cooperative federalism is when the federal government “allows the States, within
limits established by federal minimum standards, to enact and administer their own
regulatory programs, structured to meet their own particular needs.” Hodel v. Va.
Surface Min. & Reclamation Ass’n, Inc., 452 U.S. 264, 289 (1981). Additionally,
cooperative federalism usually occurs when both the federal and state governments issue
regulation coterminous with one another showing parallelism, collaboration, and
interdependence regarding certain regulatory issues. Grabarsky, supra note 33, at 7–24.
Often, the states will voluntarily comply and assist the federal government because the

11. Bank on Marijuana
469
These changes may not safeguard marijuana businesses operating legally under
state law in this new, uncertain regulatory environment. Meanwhile, the federal
government reserves the right to enforce federal law should this grudging
tolerance for marijuana prove to be too strenuous in the future.35
Marijuana
remains illegal under federal law regardless of whether the federal government
enforces the law.36
For now, the Department of Justice is slowly responding to
these states’ experimentation with marijuana. This cautious response may usher
in a new era of cooperative federalism, or may merely signal a white flag in this
stalemate.37
The Controlled Substances Act derives its authority from the Commerce
Clause, which allows the federal government to exercise preemption over state
laws.38
Accordingly, federal law can regulate all marijuana trafficking that affects
federal government may impose conditions onto the states as a prerequisite to receiving
federal resources (i.e., funds). Id. at 11.
35
U.S. Const. art. II, § 3 (ordering the President to “take Care that the Laws be
faithfully executed”); Steven G. Calabresi & Saikrishna B. Prakash, The President’s Power
to Execute the Laws, 104 Yale L.J. 541, 665 (1994) (discussing the textual meaning of
the Take Care Clause); Memorandum from James M. Cole, Deputy Att’y Gen. on
Guidance Regarding Marijuana Related Fin. Crimes to All U.S. Att’ys, U.S. Dep’t of
Justice 3 (Feb. 14, 2014) [hereinafter Cole Memo III], available at http://www.dfi.wa.
gov/banks/pdf/dept-of-justice-memo.pdf (“[T]his memorandum is intended solely as a
guide to the exercise of investigative and prosecutorial discretion. This memorandum
does not alter in any way the Department’s authority to enforce federal law, including
federal laws relating to marijuana, regardless of state law.”). The President does have
wide discretion to enforce laws, such as overseeing execution with limited resources and
funding, but this rationale arguably fails under the state action doctrine when federal law
deputize financial institutions to enforce law enforcement prerogatives over state
prerogatives under the guise of conflict preemption. See Zachary S. Price, Enforcement
Discretion and Executive Duty, 67 Vand. L. Rev. 671, 757–59 (2014); infra Part III.
36
21 U.S.C. § 802(16) (2012) (defining marihuana as “all parts of the plant Cannabis
sativa L.”); 21 U.S.C. § 812 (2012) (naming marihuana as a Schedule I controlled
substance). Marihuana, marijuana, “Mary Jane,” “pot,” “weed,” or cannabis all refer to
the same plant Cannabis sativa L. and may be used interchangeably in this Note. See also
Price, supra note 35; Robert A. Mikos, Medical Marijuana and the Political Safeguards of
Federalism, 89 Denv. U. L. Rev. 997, 1003 (2012) (“Enforcement of any law requires
the ongoing appropriation of fiscal and political capital, both of which are in short
supply.”).
37
See Mikos, supra note 36, at 1002–06 (discussing the difficulty of enforcing federal
laws due to limited resources).
38
U.S. Const. art. I, § 8, cl. 3 (authorizing Congress “[t]o regulate Commerce
with foreign Nations, and among the several States”). The Supreme Court has construed
Congress’s authority through the Commerce Clause’s reach to regulate and protect the
following categories: (1) the use of interstate commerce channels; (2) instrumentalities of
interstate commerce; (3) persons or objects in interstate commerce; and (4) activities that
are substantially related to or affect interstate commerce. United States v. Morrison, 529
U.S. 598, 609 (2000). Under the Commerce Clause, the “substantial effects” test
permits Congress to regulate conduct if that conduct substantially influences price and
market conditions in the aggregate. Wickard v. Filburn, 317 U.S. 111, 128 (1942). For
example, if selling medical marijuana touches interstate commerce, then marijuana
retailers would be subject to the Commerce Clause, and the courts may exercise federal
preemption under the Controlled Substances Act to criminalize the “manufacture,

12. Savannah Law Review [Vol. 2:2, 2015]
470
interstate commerce.39
Hence, the Controlled Substances Act40
may preempt
state laws that regulate the domestic cultivation, distribution, or use of marijuana
for medical purposes between intrastate growers and users of medical
marijuana—unless that state creates a comprehensive legislative framework to
withstand attacks that the entire field has been federally preempted.41
This issue
distribution, or possession of marijuana.” Gonzales v. Raich, 545 U.S. 1, 10–15 (2005)
(analogizing home production of marijuana to growing wheat in that both are fungible
commodities which impact the interstate market, in the aggregate, regardless of the
legality of the good).
39
For federal preemption, courts must determine whether Congress’s reach under
the Controlled Substances Act, through the Commerce Clause, is constitutional. Here,
the rational basis standard of judicial review applies: Congress must have a rational basis
for determining that the regulated conduct impacts interstate commerce. Louis C.
Shansky, Gonzales v. Raich: Political Safeguards Up in Smoke?, 56 DePaul L. Rev.
759, 760–69 (2007). Compare Raich, 545 U.S. at 10–15, 18–33 (affirming that intrastate
cultivation, possession, distribution, or use of marijuana falls squarely within the conduct
that Congress may regulate through the Commerce Clause under the “substantial
effects” test), with Shansky, supra at 780–85 (arguing that the Court’s economic analysis
in Raich of the marijuana black market was un-analogous, unsubstantiated, and unjustified
as a premise to allow Congress to use the Controlled Substances Act to preempt intrastate
regulation of medical marijuana).
However, federal preemption is temporarily deferred when the federal government
declines to enforce federal law in an era of so-called cooperative federalism. See supra
notes 34–35 and accompanying text. Meanwhile, the federal government continues
making concessions to the rising number of states legalizing marijuana. FinCen
Guidance on Marijuana Banking, supra note 31; Alex Kreit, The Federal
Response to State Marijuana Legalization: Room for Compromise?, 91 Or. L. Rev. 1029,
1031–40 (2013); Mikos, supra note 36; see also Fed. Deposit Ins. Corp., DSC
Risk Mgmt. Manual of Exam. Pol’y, Bank Secrecy Act, Anti-Money
Laundering, and Office of Foreign Assets Control § 8.1 at 1–20, 35–
48, 55 (2004) [hereinafter BSA Examiner’s Guide], available at https://www.fdic.
gov/regulations/safety/manual/section8-1.pdf (last updated on Feb. 2, 2005).
40
See supra note 36 and accompanying text.
41
The “substantial effects” test under the Commerce Clause has received criticism
that it leads to Congress’s overreach and regulation of non-commercial conduct—that is,
that Congress criminalizes conduct within the states’ jurisdiction to define and enforce
criminal law. U.S. Const. art. I, § 8, cl. 3; Raich, 545 U.S. at 42–45 (O’Connor, J.,
dissenting); United States v. Lopez, 514 U.S. 549, 558–59 (1995); Engle v. Isaac, 456 U.S.
107, 128 (1982) (“The States possess primary authority for defining and enforcing the
criminal law. . . . Federal intrusions into state criminal trials frustrate both the States’
sovereign power to punish offenders and their good-faith attempts to honor constitutional
rights.”); Susan R. Klein, Independent-Norm Federalism in Criminal Law, 90 Cal. L.
Rev. 1541, 1589–90 (2002). Because Congress uses the Commerce Clause to justify its
regulation of marijuana (an object in the stream of commerce), by way of the Controlled
Substances Act, one could posit that the Controlled Substances Act is void for
overbreadth. The Commerce Clause, arguably, becomes an inadvertent means of
regulating noneconomic, criminal conduct (illicit drug trafficking), which falls squarely
within a state’s plenary police power (i.e., public welfare and criminal law enforcement).
See U.S. Const. amend. X; Morrison, 529 U.S. at 564–68. But see Susan R. Klein &
Ingrid B. Grobey, Debunking Claims of Over-Federalization of Criminal Law, 62 Emory
L.J. 1, 24–26 (2012) (justifying the federal exercise of jurisdiction over drug trafficking
under the Controlled Substances Act in that drug trafficking is a national and
international concern, requiring the federal government’s resources to prosecute offenses

13. Bank on Marijuana
471
arguably remains undecided by the Supreme Court.42
Under the Controlled Substances Act, the federal government may still
exercise federal preemption over state laws—or reserves the right to do so.43
Nevertheless, federal preemption may seem moot at first blush when the federal
government declines to enforce federal law under the stance of cooperative
federalism.44
That is, until one of the regulatory parade of horribles is triggered
and leaves marijuana entrepreneurs unprotected without a remedy. In 2013, the
federal government initiated the beginning stages of cooperative federalism on a
conditional basis, which is a move toward legitimizing the marijuana industry.
The federal government will not enforce federal law against state laws
legalizing marijuana as long as states implement a strict regulatory regime over
the use and distribution of marijuana. 45
But the result is an odd form of
effectively).
Because one of the primary goals of the Controlled Substances Act is “to control the
supply and demand of controlled substances in both lawful and unlawful drug markets,”
the government’s failure to control the supply and demand of marijuana over the last
forty years demonstrates a prime example of Congress’s overreach regulating criminal
conduct in the states. Raich, 545 U.S. at 19; see Mary Emily O’Hara, Legal Pot in the US is
Crippling Mexican Cartels, VICE News (May 8, 2014), https://news.vice.com/article/
legal-pot-in-the-us-is-crippling-mexican-cartels (touting the effectiveness of undercutting
the criminal element by legalizing marijuana). In short, perfect, formalistic logic that
supports the federal preemption of marijuana regulation, through the Controlled
Substances Act, defies reality when states defect from the federal government’s
prohibition of marijuana—in the interests of fairness to rectify serious injustices that have
occurred as a result of the War on Drugs. See generally Robert A. Mikos, Preemption Under
the Controlled Substances Act, 16 J. Health Care L. & Pol’y 5, 7–37 (2013)
(analyzing the reach of the Controlled Substances Act).
42
See Robert A. Mikos, On the Limits of Supremacy: Medical Marijuana and the States’
Overlooked Power to Legalize Federal Crime, 62 Vand. L. Rev. 1421, 1436–55 (2009)
(“The Supreme Court has never squarely addressed the preemption issue . . . .”).
Additionally, the issue of federal conflict preemption is a heavily factual analysis, which
may vary between states as they experiment with different regulatory regimes for
marijuana.
43
United States v. Oakland Cannabis Buyers’ Co-op., 532 U.S. 483, 486 (2001);
Raich, 545 U.S. at 10–15; City of Oakland v. Holder, 961 F. Supp. 2d 1005, 1013–1016
(N.D. Cal. 2013); Marin Alliance for Med. Marijuana v. Holder, 866 F.Supp.2d 1142,
1153–61 (N.D. Cal. 2011); United States v. Randall, 104 Daily Wash. L. Rep. 2249, 2252–
54 (D.C. Super. Ct. Dec. 28, 1976) (on file with the Savannah Law Review) (discussing a
party having raised the common law doctrine of necessity as a defense to possessing
marijuana for medical use); cf. United States v. Jin Fuey Moy, 241 U.S. 394, 402 (1916)
(construing as void for vagueness and unconstitutionally overbroad federal statutes that
policed contraband by taxing registries for both users and suppliers of contraband).
44
See supra notes 33–35 and accompanying text.
45
Brady Dennis, Obama Administration Will Not Block State Marijuana Laws, if
Distribution is Regulated, Wash. Post (Aug. 29, 2013), http://www.washingtonpost.
com/national/health-science/obama-administration-will-not-preempt-state-marijuana-
laws--for-now/2013/08/29/b725bfd8-10bd-11e3-8cddbcdc09410972_story.html?wpisrc=
al_comboPN.

14. Savannah Law Review [Vol. 2:2, 2015]
472
federalism: selective federalism. 46
More than mere uncooperative federalism, 47
selective federalism occurs when the federal government sets forth conditional
acceptance and tolerance, yet still imposes its regulatory policy onto state
governments in a coercive and sporadic fashion that may have underlying
arbitrary and discretionary motives. 48
The federal government’s conditional
acceptance and tolerance may really be selective federalism masked as
cooperative federalism.49
With the federal government’s grudging tolerance, more states have
legalized marijuana for either medical use, recreational use, or both. The federal
government has acknowledged that state regulation of marijuana would replace
“an illicit marijuana trade that funds criminal enterprises with a tightly regulated
market in which revenues are tracked and accounted for.” 50
Nevertheless,
46
The author coins the phrase selective federalism to describe the situation when the
federal government unfairly employs coercive measures, whether directly or indirectly, to
impose its policies contrary to state policies, that then escalate into arbitrary law
enforcement (or overreaching). Various forms of the government conduct may include,
but are not limited to: (1) misrepresenting to the public mandatory compliance with
federal laws as selective or conditional (i.e., for further investigatory purposes); (2)
economizing law enforcement decisions that are improperly motivated by a benefit-
detriment analysis to one’s pecuniary and penal interests (i.e., pecuniary interests that
shape unethical prosecutorial discretion, or disparate enforcement among similarly
situated individuals); (3) targeting third parties as a backdoor approach to impose federal
policies contrary to state policies (i.e., private actors in the medical or financial industry);
and (4) failing to disclose the federal government’s pecuniary interests in, or fiscal
interdependence on, enforcing such regulations (i.e., the interrelationship between
criminalizing money laundering and forfeiture as a profitable venture). See Mulligan,
supra note 8; supra notes 33–37 and accompanying text; infra Part III.A–B.; cf. Conant v.
Walters, 309 F.3d 629, 643–47 (9th Cir. 2002) (Kozinski, J., concurring).
47
Marijuana has been the center of much legal controversy because of the federal
government’s stoic position against marijuana, creating a major gridlock between the
federal government and states legalizing marijuana. The federal government imposes its
own drug policy by continually targeting constituents in these states during an era of
uncooperative federalism, defined as the situation when federal enforcement resources are
not prioritized or synchronized according to state policy and regulations. Grabarsky, supra
note 33, at 20–25. See generally Jessica Bulman-Pozen & Heather K. Gerken,
Uncooperative Federalism, 118 Yale L.J. 1256, 1260–92 (2009) (detailing a normative
account of when cooperative federalism fails and dissenting states gain greater
autonomy).
48
See supra note 46 and accompanying text.
49
Ultimately, the issue is also one of ethical prosecution within the Executive
Branch’s discretion to enforce the law. See Alex Kreit, Reflections on Medical Marijuana
Prosecutions and the Duty to Seek Justice, 89 Denv. U. L. Rev. 1027, 1029–33 (2012);
Maria Collins Warren, Ethical Prosecution: A Philosophical Field Guide, 41 Washburn
L.J. 269, 269–73 (2002).
50
Memorandum from James M. Cole, Deputy Att’y Gen. on Guidance Regarding
Marijuana Enforcement to All U.S. Att’ys, U.S. Dep’t of Justice 3 (Aug. 29, 2013)
[hereinafter Cole Memo II], available at http://www.justice.gov/iso/opa/resources/
3052013829132756857467.pdf; see also Memorandum from James M. Cole, Deputy Att’y
Gen. on Guidance Regarding the Ogden Memo in Jurisdictions Seeking to Authorize
Marijuana for Med Use to U.S. Att’ys, U.S. Dep’t of Justice (June 29, 2011) [hereinafter
Cole Memo I], available at http://www.justice.gov/oip/docs/dag-guidance-2011-for-

15. Bank on Marijuana
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federal interference looms over the marijuana industry as federal prosecutors still
possess a multitude of weapons in their arsenal and continue to enforce
compliance with the Controlled Substances Act on a selective basis.51
Moreover, the judiciary is not able to exercise executive discretion, but,
instead, must follow the existing law. Primarily, in federal courts of states
legalizing marijuana, federal law typically preempts52
state law in cases regarding
marijuana.53
The federal courts usually afford marijuana businesses no legal
medical-marijuana-use.pdf.
51
See Anti-Drug Abuse Act of 1986, Pub. L. No. 99-570, §§ 1351–1402, 100 Stat.
3207, 18–40 (1986) (restricting banking activities with anti-money laundering laws); 18
U.S.C. § 981(a)(1) (2012) (requiring the forfeiture of real or personal property traceable
to a violation of anti-money laundering laws or the Controlled Substances Act); 21 U.S.C.
§ 812 (2012) (stating that supplying marijuana is a felony under the Controlled
Substances Act); 21 U.S.C. § 860 (2012) (preventing marijuana retailers from opening up
locations within 1,000 feet of “real property comprising a public or private elementary,
vocational, or secondary school or a public or private college, junior college, or university,
or a playground, or housing facility owned by a public housing authority, or within 100
feet of a public or private youth center, public swimming pool, or video arcade facility”);
I.R.C. § 280E (2012) (prohibiting tax deductions or credit from any trade or business that
“consists of [or is connected to] trafficking in controlled substances”); Kamin, supra note
5, at 985–88 (enumerating difficulties besides the risk of facing incarceration such as
struggling with maintaining bank accounts, obtaining business lending, facing forfeiture
from government seizures, being evicted by landlords, and keeping business contracts
that are void against public policy); Press Release, U.S. Dep’t of Agric., U.S. Att’ys
Announce Final Statistics on Operation Mountain Sweep Targeting Illegal Marijuana
Cultivation on Public Lands, Forest Serv. (Sept. 5, 2012), available at http://www.fs.
usda.gov/detail/r5/news-events/?cid=STELPRDB5389385; Memorandum from David
W. Ogden, Deputy Att’y Gen. to Selected U.S. Att’ys on Investigations and Prosecutions
in States Authorizing the Med. Use of Marijuana, U.S. Dep’t of Justice 1–2 (Oct. 19,
2009) [hereinafter Ogden Memo], available at http://www.justice.gov/opa/documents/
medical-marijuana.pdf.
52
The Supremacy Clause gives Congress the authority to preempt state laws, but
usually a strong presumption against preemption prevails if a federal law trumps state law
that has been reserved under state police power historically. U.S. Const. art. VI, cl. 2;
U.S. Const. amend. X; Qualified Patients Ass’n v. City of Anaheim, 115 Cal. Rptr. 3d
89, 105–06 (Cal. Ct. App. 2010). Federal preemption is either express or implied. Express
preemption is when the federal statute explicitly states that Congress intended to
preempt state law. Implied preemption is when the federal statute does not explicitly
preempt state law, but the courts must determine whether federal law preempts state law
under two tests: (1) field preemption; or (2) conflict preemption. Qualified Patients Ass’n,
115 Cal. Rptr. at 105–06. Because the Controlled Substances Act does not apply express
preemption, or field preemption, by statute, the preemption analysis falls under conflict
preemption, which consists of either impossibility or obstacle preemption. See id.; 21
U.S.C. § 903 (2012). Impossibility preemption is when one is simultaneously unable to
comply with both state and federal law, hence the state law creates an affirmative burden
that is in direct violation of federal law or vice versa. Qualified Patients Ass’n, 115 Cal.
Rptr. at 106–07. Obstacle preemption is a factual inquiry based on the intent behind
federal law and whether state law achieves a similar result or undermines the overall
objective of that federal law. Id. at 108–10.
53
See, e.g., Gonzales v. Raich, 545 U.S. 1, 23 (2005); United States v. Oakland
Cannabis Buyers’ Co-op., 532 U.S. 532, 489–95 (2001); United States v. Landa, 281 F.
Supp. 2d 1139, 1145 (N.D. Cal. 2003); Emerald Steel Fabricators, Inc. v. Bureau of Labor

16. Savannah Law Review [Vol. 2:2, 2015]
474
remedy from government actors who enforce federal law contrary to state law.54
Thus, the marijuana industry is built on an illegal foundation, and cooperative
federalism may be no more than fickle display by the federal government.
Moreover, this status quo perpetuates a stigma against marijuana and those
associated with it. As a form of social control, a stigma is nonverbal stimuli that
triggers cognitive shortcuts of relating to one another. Stigma defines one’s
perceived identity as an individual and among a collective group of individuals
(i.e., society at large). Stigma operates as one of society’s means of self-
organization: whether to include or exclude others based on a shared set of
beliefs, “endorsements of those beliefs, and status associated with those
beliefs.”55
This stigma materializes into real, legal consequences for marijuana
businesses. For example, marijuana businesses may struggle with maintaining a
bank account, procuring business loans, enforcing contracts, or obtaining
commercial space—in addition to facing possible prosecution, forfeiture, and
incarceration by the federal government. 56
Unlike other state-licensed
businesses, marijuana businesses internalize the costs of (1) a criminalized
activity (i.e., government seizures, prosecution, and incarceration);57
(2) state
& Indus., 230 P.3d 518, 521–22, 525–34 (Or. 2010); see also Klein & Grobey, supra note 41,
at 50–52 (discussing issue of jury nullification with federal prosecution in states legalizing
marijuana, and noting that enforcement is difficult when juries comprise “of citizens who
voted to decriminalize medical marijuana use in the first place”), Kristina Davis, Plea
Deal Reached in Med Pot Case, San Diego Union-Trib. (Oct. 15, 2013, 5:28 PM),
http://www.utsandiego.com/news/2013/oct/15/plea-guilty-medical-marijuana-federal-
chang/. But see Ter Beek v. City of Wyoming, 846 N.W.2d 531, 536–41 (Mich. 2014);
White Mountain Health Center, Inc. v. County of Maricopa, No. 2012-053585, 2012 WL
6656902, at *4–*11; Qualified Patients Ass’n, 115 Cal. Rptr. at 105–10; Cnty. of San Diego
v. San Diego NORML, 81 Cal. Rptr. 3d 461, 475–83 (Cal. Ct. App. 2008); Mikos, supra
note 36.
54
See infra Part III.C.; Richard H. Fallon, Jr., The Linkage Between Justiciability and
Remedies—And Their Connections to Substantive Rights, 92 Va. L. Rev. 633, 640 (2006)
(“[T]he central standing question is whether particular plaintiffs possess [legal] rights
under particular statutory and constitutional provisions [for redress].”); Caprice L.
Roberts, Teaching Remedies from Theory to Practice, 57 St. Louis U. L.J. 713, 722
(2013) (theorizing “remedies shape substantive rights”). See generally James Leonard,
The Shadows of Unconstitutionality: How the New Federalism May Affect the Anti-
Discrimination Mandate of the Americans with Disabilities Act, 52 Ala. L. Rev. 91, 96,
99–114 (2000) (discussing that plaintiffs seeking vindication from discrimination are
unlikely to have a remedy under rational basis standard of judicial review). Congress is
more effective to craft a remedy when regulating conduct that imposes a burden to act or
not act. See Leonard, supra, at 142 (opining that the judiciary is limited in its capability to
fashion a remedy because the courts are “confined to relief that restores plaintiffs to the
position they would have occupied had the wrongful conduct not occurred”).
55
See generally Dickson, supra note 22 (expounding upon the socio-psychological
framework of stigma rooted in the criminalization of marijuana).
56
See Kamin, supra note 5, at 984–86.
57
Aside from the costs of prosecution, seizures, and incarceration, marijuana
retailers also have to pay taxes on their gross income (instead of their net income like
other legal businesses). Distributing a Schedule I controlled substance is still a taxable
event according to the IRS. I.R.C. § 280E (2012). This provision is known as a draconian

17. Bank on Marijuana
475
regulation and taxation;58
and (3) a high barrier of entry into the legitimate
marijuana industry.59
Subsequently, these costs are passed to users in the form of higher prices for
marijuana. 60
Overregulation of marijuana businesses may price marijuana
retailers out of the marijuana industry and inhibit their ability to pay sin taxes,
thus undermining states relying on them to create a self-sufficient regulatory
framework for marijuana.61
This retailer-supply-model has the ability to create a
solid foundation for marijuana as a legitimate industry, but, unless further
safeguards are put in place, marijuana businesses will struggle to remain
competitive in a gray and black market.62
At the heart of the matter, marijuana
businesses are neither afforded the same opportunities nor protections as other
state-licensed businesses.63
2. Money Laundering Laws Hold Back Marijuana Businesses
The implications of this status quo go far beyond safe access to marijuana
when the effects trickle down into an essential service like banking—a service
that is ubiquitous. As a country founded upon capitalism, a freeman is defined by
his ability “to adopt such calling, profession, or trade as may seem to him most
conducive to that end . . . [which] is a man’s property and right.”64
But now,
“[t]he ability to thrive in America’s mainstream financial economy is
tax because business owners have to pay taxes on both their gross income and business
expenses (i.e., money that is already spent towards the operation of the business). This tax
significantly increases the costs of doing business. Benjamin M. Leff, Tax Planning for
Marijuana Dealers, 99 Iowa L. Rev. 523, 530 (2014). But see Small Business Tax Equity
Act of 2013, H.R. 2240, 113th Cong. § 2 (2013) (proposing to amend I.R.C. § 280E
(2012) by adding an exception for marijuana businesses). However, if the dispensary
provides caregiving services, the labor costs for caregiving may be bifurcated and
deducted from the gross revenue as a taxable deduction. Californians Helping to Alleviate
Med. Problems, Inc. v. C.I.R., 128 T.C. 173, 182–83 (2007).
58
See Jeffrey A. Miron & Katherine Waldock, The Budgetary
Impact of Ending Drug Prohibition, Cato Institute 7–12 (2010),
available at http://object.cato.org/sites/cato.org/files/pubs/pdf/DrugProhibitionWP
.pdf.
59
Elezar David Melendez, Marijuana Dispensaries Becoming Exclusive Domain of the
One Percent, Huffington Post (May 5, 2013, 12:10 PM), http://www.huffingtonpost
.com/2013/06/25/marijuana-dispensaries_n_3496588.html?view=print&comm_ref=
false.
60
Marc Bilodeau, Legalizing and Taxing Commerce in Marijuana: A More Efficient
Policy Designed to Reduce Both Consumption and Crime, UNUS PRO OMNIBUS (Aug.
24, 2011), http://unusproomnibus.blogspot.com/2011/08/legalizing-and-taxing-
commerce-in.html.
61
See generally Dickson, supra note 22 (analyzing the supply and demand economics
behind the marijuana industry).
62
For states legalizing marijuana, the marijuana gray market is defined as the legally
obtained marijuana under state law that is sold outside of authorized channels. According
to the federal government, all marijuana is sold illegally on the black market. See generally
Dickson, supra note 22 (discussing gray and black market economics).
63
See Kamin, supra note 5, at 984–86.
64
Slaughter-House Cases, 83 U.S. 36, 116 (1872) (Bradley, J., dissenting).

18. Savannah Law Review [Vol. 2:2, 2015]
476
inter[t]wined with the ability to maintain a bank account.”65
As the spokes on the
wheels of commerce, the banking industry is essential in today’s economy, where
equal access to banking is inextricably tied to legitimate business operation.66
Thus, marijuana businesses’ legitimacy is tethered to the ability to use a bank
account during the normal course of business.
The contention between clashing state and federal laws unfolds when
financial institutions prevent marijuana businesses67
from depositing money.68
As an effective strategy to bolster the War on Drugs, anti-money laundering laws
hook through the Controlled Substances Act’s prohibition on marijuana, thus
creating a gridlock for marijuana businesses to access financial services. This
gridlock hinders the cash flow from marijuana businesses and prevents illegal
proceeds from entering the stream of commerce through financial institutions.69
Coincidentally, the United States is one of the world’s major money
laundering countries—despite having a robust regulatory regime in place to
combat money laundering proceeds from organized crime. 70
Within the
framework of banking regulations under the Bank Secrecy Act,71
the Money
Laundering Control Act of 1986 criminalized money laundering and culminated
into a series of interlocking anti-money laundering laws that apply to depositors
and financial institutions alike.72
Anti-money laundering laws apply to various
types of financial institutions,73
but, more specifically, to all financial institutions
serving dual roles as depository institutions (banks).74
65
See Pérez, supra note 16, at 1586–90.
66
Id. at 1588.
67
See supra note 3 and accompanying text.
68
12 U.S.C. § 1813(l) (2012).
69
See The Cash Connection, supra note 6.
70
Internationally, anti-money laundering laws comply with the United Nations
Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances of 1988
in a worldwide prohibition of drug trafficking. See International Narcotics Control Act of
1988, Pub. L. No. 100-690, 102 Stat. 4261 (1988); Bureau for Int’l Narcotics
and Law Enforcement Affairs, U.S. Dep’t of State, Int’l
Narcotics Control Strategy Rep., Volume II: Money Laundering
and Financial Crimes Report 1–19 (Mar. 2012), available at http://www.state.
gov/documents/organization/184329.pdf.
71
See Mulligan, supra note 8, at 2334–47 (reviewing the regulatory regime that
developed to buttress the Bank Secrecy Act of 1970).
72
Money Laundering Control Act of 1986, Pub. L. No. 99-570, 100 Stat. 3218 (1986)
(codified as amended in 18 U.S.C. §§ 1956–1957 (2012)).
73
Compare 12 U.S.C. § 4742 (1996) (defining financial institutions as “any federally
chartered or State-chartered commercial bank, savings association, savings bank, or credit
union”), with 31 U.S.C. § 5312 (2012) (enumerating financial institutions to businesses
well beyond the scope of depository institutions). Moreover, the Anti-Drug Abuse Act of
1988 expanded the definition of financial institutions to target large currency transactions
by including a variety of businesses such as casinos, car dealerships, and real estate firms.
Bank Secrecy Amendments, Pub. L. No. 100-690, 102 Stat. 4354 (1988); see, e.g., 31
U.S.C. §§ 5325–5326 (2012).
74
In this Note, the term banks will entail the traditional depository institution model
subject to FDIC oversight with either a state or federal charter. But, the analysis of
marijuana retailers making deposits applies to any financial institution that provides

19. Bank on Marijuana
477
Moreover, all banks are required to establish either a state or federal charter
for authorization to conduct business operations.75
Regardless of whether a bank
has a state or federal charter, all banks are either regulated or supervised by the
Federal Deposit Insurance Corporation, Inc. (FDIC).76
Still, a majority of banks
are FDIC-insured for all deposits up to $250,000. 77
Thus, in theory, full
compliance with federal regulations ensures that banks will keep their charters
and continue receiving FDIC Deposit Insurance Coverage.78
The Money Laundering Control Act prohibits illegal proceeds from entering
the stream of commerce through financial institutions. Consequently, the federal
government also targets banks opting to service marijuana retailers.79
Because
marijuana businesses are considered illegal under the Controlled Substances Act,
marijuana businesses’ proceeds presumably remain illegal. For banks that accept
deposits of these proceeds, money laundering penalties threaten to revoke a
bank’s charter,80
forfeit FDIC Insurance Coverage,81
and hold directors (or
depository banking services and requires federal oversight. 12 U.S.C. §§ 1752 (2006),
1786(q) (2011), 1813(c) (2011), 1817(b) (2012), 1818(s) (2011), 1829(b) (2011). Compare 12
U.S.C. 1786(q) (2011) (regulating federally insured credit unions), and 12 U.S.C. § 1831
(2014) (supervising private depository institutions that are not FDIC-insured), with 12
U.S.C. 1818(s) (2011) (regulating federally insured depository institutions).
75
Sarah Pei Woo, Regulatory Bankruptcy: How Bank Regulation Causes Fire Sales, 99
Geo. L.J. 1615, 1623 (2011) (“[B]anks, which must obtain a banking charter, from
government agencies to operate, are supervised by both state and federal regulators.”).
The Office of Comptroller of the Currency under the Department of Treasury regulates
federal bank charters while states regulate state bank charters. 12 U.S.C. §§ 1–16, 21–27
(2012).
76
See 12 U.S.C. §§ 266, 330, 1820 (2012). Amending the Banking Act of 1933, the
Federal Deposit Insurance Act of 1950 created the FDIC, overseeing financial
institutions’ deposits and insuring deposits. Federal Deposits Insurance Act, Pub. L. No.
112-215, 64 Stat. 873 (2012).
77
Today, the FDIC insures deposits up to $250,000. 12 U.S.C. §§ 1811–1835a
(2014). On average, at least three of every five financial institutions are FDIC-insured
financial institutions. Statistics at a Glance as of June 30, 2012, FDIC (2012),
http://www.fdic.gov/bank/statistical/stats/2013jun/industry.pdf (reporting that at the
end of the second quarter in 2012 and 2014, FDIC-insured financial institutions
comprised of 61.4% and 61.3% of the total financial institutions respectively); Fed. Deposit
Ins. Corp. Inst. Directory, FDIC, http://www2.fdic.gov/idasp/ (last visited Nov. 30,
2015) (reporting 6,892 FDIC-insured institutions as of October 24, 2013, and 6,578
FDIC-insured institutions as of November 6, 2014).
78
See generally Michael P. Malloy, Principles of Bank Regulation
41–74 (2d ed. 2003) (explaining the role of FDIC insurance and bank charters maintaining
bank solvency).
79
18 U.S.C. §§ 1956–1957 (2012).
80
See, e.g., 12 U.S.C. § 93 (2012) (revoking charter for national banks); 12 U.S.C. §
1820 (2012) (outlining administrative proceedings for bank examinations that may
escalate to revoking a bank’s charter).
81
12 U.S.C. § 1818 (2012) (terminating FDIC insurance for depository institutions).
The Depository Institution Money Laundering Amendments of 1990 enacted “death
penalty” provisions for financial institutions implicated in money laundering or reporting
offenses: (1) imposing personal liability on negligent bank employees, directors, and
officers; (2) revoking the bank’s charter; and (3) terminating the bank’s FDIC-insurance.
S. Res. 2327, 101st Cong. (1990) (enacted); H.R. Rep No. 101–446 (1990) (reporting

20. Savannah Law Review [Vol. 2:2, 2015]
478
officers), who are involved in money laundering, personally liable.82
With anti-
money laundering laws looming over the financial industry, banks still risk
disciplinary action, severe penalties, or insolvency when servicing marijuana
businesses.
B. Marijuana Businesses Resort to Money Laundering
Dispensaries are caught in the crossfire between the state and federal
government. The state sanctions dispensaries as legitimate marijuana businesses.
The federal government, however, criminalizes and stigmatizes dispensaries in
the same category as the Mexican cartels for the same offense of money
laundering. 83
In contrast to organized crime, dispensaries are using their
proceeds to grow as a legitimate business rather than promulgate an empire of
crime. Arguably, out of necessity, many of the legitimate dispensaries have
engaged in money laundering since 2013. Department of Justice enforcement
guidelines have shunned dispensaries, warning financial institutions of money
laundering penalties from servicing dispensaries.84
Despite the banking guidance
issued by Financial Crimes Enforcement Network in 2014, banks are still not
offering banking services as expected, leaving dispensaries in a lurch.85
In 2011, Deputy Attorney General James M. Cole issued a memo in response
to the growing number of dispensaries operating openly in violation of the
Controlled Substances Act within states that legalized medical marijuana. The
memo served as guidance for prosecutors to exercise discretion and priorities
the legislative history for H.R. 3848, 101st Cong. (1990), which is the companion bill to S.
Res. 2327, 101st Cong. (1990)).
82
See, e.g., 12 U.S.C. § 93 (2012) (civil penalties for directors of national banks); 12
U.S.C. §§ 501a–506 (2012) (civil penalties for banks and bank employees within the
Federal Reserve banking system); 12 U.S.C. § 1833a (2012) (civil penalties for banks and
bank employees under the FDIC); 18 U.S.C. §§ 1956–1957, 3351–3585 (2012) (criminal
penalties for bank and bank employees). The Author loosely uses the term bank employees
to refer to any institution-affiliated party, or more specifically “any director, officer,
employee, or controlling stockholder (other than a bank holding company or savings and
loan holding company) of, or agent for, an insured depository institution.” 12 U.S.C. §
1813 (2012).
83
The Mexican cartels are the largest suppliers of imported marijuana on the black
market in the United States. Celina B. Realuyo, Woodrow Wilson Int’l
Ctr. for Scholars, It’s All about the Money: Advancing Anti-
Money Laundering Efforts in the U.S. and Mexico to Combat
Transnational Organized Crime 3–20 (2012), available at http://www.
wilsoncenter.org/sites/default/files/Realuyo_U.S.-Mexico_Money_Laundering_0.pdf.
84
Cole Memo II, supra note 50; see also 12 U.S.C. § 93 (2012) (forfeiture of banking
charter); 12 U.S.C. § 1818 (2012) (loss of FDIC insurance); 18 U.S.C. § 3571 (2012)
(fines); 31 U.S.C. §§ 5321–5322, 5324 (2012) (civil and criminal penalties); United States
v. Beusch, 596 F.2d 871, 878 (9th Cir. 1979).
85
See FinCen Guidance on Marijuana Banking, supra note 31; Cole
Memo III, supra note 35, at 2; Cole Memo II, supra note 50; Brian Kindle, Op-Ed., SAR
Data Reveals Few Institutions Willing to Bank the Marijuana Industry, Despite FinCEN and
DOJ Guidance, Ass’n of Certified Fin. Crim. Specialists (Aug. 13, 2014),
http://www.acfcs.org/sar-data-reveals-few-institutions-willing-to-bank-the-marijuana-
industry-despite-fincen-and-doj-guidance/.

21. Bank on Marijuana
479
when charging marijuana offenses. The memo directly threatened banks
servicing dispensaries as “[t]hose who engage in transactions involving the
proceeds of such activity may also be in violation of federal money laundering
statutes and other federal financial laws.”86
As a result, banks sharply reacted by
turning away dispensaries as a class of businesses.87
In 2013, Deputy Attorney General Cole issued a second memo that switched
gears regarding marijuana laws. The federal government entered into an era of
cooperative federalism, but this new stance is conditional upon a state’s strict
regulation of marijuana within its borders.88
The federal government continued
to remain silent regarding the assimilation of dispensaries into the financial
industry. On February 14, 2014, Deputy Attorney General Cole issued a third
memo, addressing financial institutions servicing dispensaries: providing
financial services to dispensaries remains illegal under federal law. Hence,
financial institutions wishing to service dispensaries do so at their own risk—with
blanket reporting requirements on all dispensaries’ banking transactions.89
Furthermore, the Department of Justice reserves the right to prosecute
according to the enumerated priorities set forth in the third memo.90
Whether
the proposed framework under the Obama administration will operate as a
Trojan horse in the future is uncertain. This relaxed stance could serve as a
pretext to gather intelligence on all marijuana businesses before concentrating
efforts against them under a new administration.91
86
See Cole Memo I, supra note 50, at 2.
87
See supra note 3 and accompanying text. But see Avinash Tharoor, Banks Launder
Billions of Illegal Cartel Money While Snubbing Legal Marijuana Businesses, Huffington
Post (Jan. 17, 2014, 3:53 pm), http://www.huffingtonpost.com/avinash-tharoor/banks-
cartel-money-laundering_b_4619464.html (reporting banks who are servicing drug
cartels but not marijuana businesses operating legally under state law).
88
See Cole Memo II, supra note 50, at 3.
89
See Cole Memo III, supra note 35, at 2; see also FinCen Guidance on
Marijuana Banking, supra note 31.
90
Cole Memo III, supra note 35, at 1 (“Preventing the distribution of marijuana to
minors; [p]reventing revenue from the sale of marijuana from going to criminal
enterprises, gangs, and cartels; [p]reventing the diversion of marijuana from states where
it is legal under state law in some form to other states; [p]reventing state-authorized
marijuana activity from being used as a cover or pretext for the trafficking of other illegal
drugs or other illegal activity; [p]reventing violence and the use of firearms in the
cultivation and distribution of marijuana; [p]reventing drugged driving and the
exacerbation of other adverse public health consequences associated with marijuana use;
[p]reventing the growing of marijuana on public lands and the attendant public safety and
environmental dangers posed by marijuana production on public lands; and [p]reventing
marijuana possession or use on federal property.”).
91
18 U.S.C. 3282 (2012) (“[N]o person shall be prosecuted, tried, or punished for
any offense, not capital, unless the indictment is found or the information is instituted
within five years next after such offense shall have been committed.”); see Vijay Sekhon,
Comment, Highly Uncertain Times: An Analysis of the Executive Branch’s Decision to Not
Investigate or Prosecute Individuals in Compliance with State Medical Marijuana Laws, 37
Hastings Const. L.Q. 553, 561–62 (2010) (“The imprimatur of the Executive
Branch with respect to medical marijuana also provides individuals with a false sense of
security in relying upon compliance with state medical marijuana laws given the
possibility of a change to such enforcement policy by the Executive Branch during or after

22. Savannah Law Review [Vol. 2:2, 2015]
480
1. Washing out Marijuana as Dirty Money
Without equal access to banking, anti-money laundering laws are forcing
dispensaries to operate on a cash-and-carry basis and launder their own money—
just to keep the doors open—while maintaining compliance with state laws.92
Conversely, money laundering is a serious issue in the United States: financial
institutions serve as the breeding ground for organized crime to interject the
proceeds of their endeavors into the stream of commerce and build upon an
empire of crime. 93
If the Controlled Substances Act is the sword attacking
organized crime from drug trafficking, then the Bank Secrecy Act94
is the shield
against concealing or promoting illicit proceeds from drug trafficking within the
financial industry.95
Even after all these years, money laundering remains elusive
to authorities because organized crime primarily uses cash in criminal
transactions to avoid detection by omitting or manipulating records of those
transactions.96
Money laundering is a rinse-and-repeat cycle that yields exponential gains
from illicit proceeds—or dirty money—through three stages: placement, layering,
and integration.97
The placement stage is when the dirty money enters into the
financial system for the first time.98
The simplest way to place money99
into the
the expiration of the term of President Obama.”); Ingram, supra note 1; Serge F.
Kovaleki, U.S. Issues Marijuana Guidelines for Banks, N.Y. Times, Feb. 14, 2014, http:
//www.nytimes.com/2014/02/15/us/us-issues-marijuana-guidelines-for-banks.html?_
r=0.
92
Cash-and-carry refers to a business dealing only in cash without other means of
accepting payment for transactions such as accepting checks, credit cards, and alternative
forms of payment. See supra note 5 and accompanying text; Pérez, supra note 16, at 1588–
90.
93
See Doyle, supra note 2, at 4–8; BSA/AML Manual, supra note 5, at 7–14;
The Cash Connection, supra note 6, at iii, 3–6; Leff, supra note 6, at 23–31; Patrick
T. O’Brien, Tracking Narco-Dollars: The Evolution of a Potent Weapon in the Drug War, 21
U. Miami Inter-Am. L. Rev. 637, 638–43 (1990).
94
See Bank Secrecy Act of 1970, Pub. L. No. 91–508, 84 Stat. 1118 (1970); see also
BSA Examiner’s Guide, supra note 39.
95
See The Cash Connection, supra note 6, at x; Realuyo, supra note 83.
96
H.R. Rep. No. 91–975 (1970), reprinted in U.S.C.C.A.N. 4394, 4396; see State v.
McAllister, 875 A.2d 866, 874 (N.J. 2005) (holding that keeping records of sensitive
financial information outside of a bank or intermediary forces the government to obtain
adequate process before conducting a search).
97
U.S.S. Caucus on Int’l Narcotics Control, 113th Cong., The
Buck Stops Here: Improving U.S. Anti-Money Laundering Practices
16–19 (2013) [hereinafter AML Report] available at http://www.feinstein.senate.
gov/public/index.cfm/files/serve/?File_id=311e974a-feb6-48e6-b302-0769f16185ee.
98
Id. at 16.
99
18 U.S.C. § 1956(c)(5) (2012) (defining monetary instruments as “(i) coin or
currency of the United States or of any other country, travelers’ checks, personal checks,
bank checks, and money orders; or (ii) investment securities or negotiable instruments, in
bearer form or otherwise in such form that title thereto passes upon delivery”); see
Meltzer, supra note 6, at 239–41.

23. Bank on Marijuana
481
financial system is by depositing it into a bank account. 100
Governmental
regulation focuses on the placement phase by hypothesizing that creating a paper
trail early in the cycle will lead to an earlier detection of money laundering.101
In the layering phase, the dirty money funnels through a variety of financial
transactions among various financial institutions and commercial enterprises.
These transactions dilute the original source of the funds with apparently
legitimate sources. After the final rinse, the dirty money emerges as clean money
from legitimate sources in the integration stage. Typically, these funds are used
to further promote or conceal illegal or legal business ventures that ultimately
befuddle the paper trail in the process.102
Then, rinse and repeat.103
A cash-and-carry dispensary meets the most friction during the placement
stage. With several theories underpinning the premises for criminalizing money
laundering, the two major theories that apply to dispensaries are the promotion
theory and the concealment theory. 104
The promotion theory focuses on
reinvesting money in criminal activities to further those activities, regardless of
whether the source of the funds derived from criminal activities.105
In contrast,
the concealment theory focuses on moving money derived from criminal
activities with the intent to “disguise the nature, the location, the source, the
ownership, or the control of the proceeds.”106
State-licensed dispensaries use these funds and banking services simply in
the normal course of doing business pursuant to state law. But, these
transactions, unfortunately, further the illegal distribution of marijuana under
federal law according to federal authorities. In effect, many dispensaries—unlike
other similarly situated businesses—are forced to conceal funds when making
innocuous payments toward taxes, payroll, overhead expenses, liabilities, legal
counsel, and other similar obligations. Thus, dispensaries may fall under both the
promotion and concealment theory for money laundering by default.
100
Duncan E. Alford, Anti-Money Laundering Regulations: A Burden on Financial
Institutions, 19 N.C. J. Int’l L. & Com. Reg. 437, 439 (1994) (“The simple method
of changing small denominations of bills into larger denominations eases the physical
transport of the money.”).
101
Id. at 439; see BSA/AML Manual, supra note 5, at 71–73, 309; Meltzer, supra
note 6, at 231–32.
102
See Leff, supra note 6, at 23–24; AML Report, supra note 97, at 16–23.
103
See Alford, supra note 100, at 437–40.
104
18 U.S.C. § 1956 (a)(1)(A)–(B) (2012); see Leff, supra note 6, at 23–24.
105
See Leff, supra note 6, at 23–24. But, the promotion theory meets a ceiling when
crime is not committed for a profit, but for the sake of committing an atrocity such as
terrorism in reverse money laundering that uses clean money to promote terrorism. See
Jimmy Gurulé, Does “Proceeds” Really Mean “Net Profits”? The Supreme Court’s Efforts to
Diminish the Utility of the Federal Money Laundering Statute, 7 Ave Maria L. Rev.
339, 379–87 (2009).
106
18 U.S.C. § 1956 (a)(1)(B)(i) (2012); see Leff, supra note 6, at 23–24.

24. Savannah Law Review [Vol. 2:2, 2015]
482
2. A Statutory Analysis of the Money Laundering Control Act of 1986
Under the Money Laundering Control Act of 1986,107
money laundering
itself is a crime rather than an act dependent on the commission of another crime
(similar to the crime of conspiracy). Initially, the overall goal was to ameliorate
the deleterious effects of drug trafficking: (1) the abuse (or misuse) of drugs; and
(2) related crime (or hardship) that ensued from the distribution of illegal drugs
on the black market.108
The legislative intent behind the criminalization of money
laundering boils down to this proscribed harm: injecting blood money into the
stream of commerce.109
Realistically, this backdoor approach stigmatizes dirty money and prohibits
organized crime from profiting from wrongdoing. The Money Laundering
Control Act strictly prohibits tainted proceeds110
from any Specified Unlawful
Activity.111
Dirty money may not enter the stream of commerce under the guise
of clean money from legal sources. This “dirty money” stigma rears its ugly head
107
18 U.S.C. §§ 1956–1957 (2012). Civil and criminal forfeiture was also introduced
as a consequence to Bank Secrecy Act violations. 18 U.S.C. §§ 981–982 (2012). For
dispensaries, this Note will not focus on aspects of money laundering that involve wiring
funds outside of the United States.
108
United States v. Majors, 196 F.3d 1206, 1212 (11th Cir. 1999); supra notes 12–14,
18, 47, and accompanying text. However, this goal falls short of some key steps in the
logic: (1) the very person abusing or misusing drugs is usually her own victim too; (2) not
all users of drugs abuse drugs; (3) substance abuse is usually specific to the user and not
the drug itself—that is, not all drugs are addictive instantaneously because of
physiological and psychological factors; and (4) not all drug transactions create violence.
109
In this context, blood money refers to money that remains stained by egregious
criminal activity, or by the harm inflicted on another for one’s own financial gain (or
greed). As more than just dirty money from criminal proceeds, blood money comes from
one drawing blood of another either literally, or in a figurative manner of speaking.
Historically, blood money was money that one paid to the victim of one’s wrongdoing as a
matter of restitution to diffuse and resolve the blood feud (i.e., if one took the blood of
another, a fine was paid to the victim or the victim’s family to avoid their vengeful
retaliation). Here, blood money implies the moral stance that one should not profit from
one’s wrong. See Wex S. Malone, Ruminations on the Role of Fault in the History of the
Common Law of Torts, 31 La. L. Rev. 1, 1–8 (1971); Blood Money Definition,
Merriam-Webster, http://www.merriam-webster.com/dictionary/blood%20money
(last visited Nov. 30, 2015) (defining blood money as “money obtained at the cost of
another’s life”); cf. Stephen G. Gilles, The Judgment-Proof Society: “As the System
Currently Operates, Liability Is, for Wrongdoers . . . Voluntary”, 63 Wash. & Lee L.
Rev. 603, 605–07, 665–69 (2006). The legislature defined the harms of drug-related
crime and substance abuse, implying that profiting from those harms is equally prohibited
as the harm itself. Thus, blood money reinforces a stigma on one who benefits financially
from causing another’s demise.
110
Courts differed over the meaning of proceeds when dealing with organized crime or
legitimate businesses, and whether to construe proceeds as gross profits or net profits
respectively. Now, proceeds are defined as the gross receipts of a predicate crime.
Doyle, supra note 2, at 4–8; see United States v. Santos, 553 U.S. 507, 519–21 (2008);
United States v. Scialabba, 282 F.3d 475, 475–78 (7th Cir. 2002). But see 18 U.S.C. §
1963(a) (2012); 21 U.S.C. § 853(a) (2009); People v. Gutman, 959 N.E.2d 621, 631–32
(Ill. 2011).
111
18 U.S.C. § 1956(c)(7) (2012).

25. Bank on Marijuana
483
when federal authorities and banks refuse state-licensed dispensaries access to
banking services, casting aside dispensaries and their money as dirty.
In relation to the marijuana industry, anti-money laundering laws define the
manufacture, sale, and distribution of any controlled substance under the
Controlled Substances Act as a Specified Unlawful Activity. 112
Because
marijuana is a controlled substance under Schedule I of the Controlled
Substances Act,113
dispensaries’ gross profits are considered tainted proceeds
from a Specified Unlawful Activity that automatically implicate dispensaries—
as a class of businesses—in money laundering by default. In turn, banks may be
prosecuted for any of the following: concealing the Specified Unlawful Activity
proceeds by accepting dispensaries’ deposits; facilitating Specified Unlawful
Activity proceeds through commercial banking activities or lending to
dispensaries;114
or conducting routine transactions when the dispensary might be
depositing or comingling Specified Unlawful Activity proceeds.
Under Title 18 of the U.S. Code, Sections 1956 and 1957 codified money
laundering into the design provision and the access provision, respectively.115
The
design provision defines money laundering as knowingly engaging or attempting
to engage in the willful promotion or concealment of proceeds from a Specified
Unlawful Activity in a financial transaction (of any dollar amount).116
In turn, the
access provision defines money laundering as knowingly conducting, or
attempting to conduct, a monetary transaction with a financial institution117
that
112
18 U.S.C. § 1956(c)(7)(B)(i) (2012).
113
21 U.S.C. § 812 (2012).
114
Vincent M. Di Lorenzo, Equal Economic Opportunity: Corporate Social
Responsibility in the New Millennium, 71 U. Colo. L. Rev. 51, 67–68 (2000).
115
The terms design and access relate to the overall criminal nature of each provision
to reference the role of the funds in an overall scheme and the physical movement of the
money respectively. The design provision pertains to the promotion theory, concealment
theory, or both, which has no threshold dollar limit. The access provision pertains to the
movement theory of money (i.e., the physical movement of funds from a Specified
Unlawful Activity) limited to a threshold dollar amount. The other distinguishing element
is the degree of knowledge required. The design provision is willful, whereas the access
provision is volitional and intentional.
116
18 U.S.C. § 1956 (2012); United States v. Santos, 553 U.S. 507, 519–21 (2008)
(establishing knowledge as a prima facie element proven by circumstantial evidence); see
Leff, supra note 6, at 24 (explaining circumstantial evidence is sufficient to (1) show the
launderer treated the proceeds differently from an innocent transfer, and (2) prove the
launderer’s knowledge that she believed the money was dirty instead of requiring specific
knowledge of the Specified Unlawful Activity). Commercial lending to dispensaries falls
under the promotion theory of money laundering subjecting bank loans to forfeiture and
freezing access to credit cards. Thus, lending activities to dispensaries would not comport
with the Controlled Substances Act because lending would promote and facilitate
dispensaries’ businesses and the distribution of marijuana within the stream of
commerce. Furthermore, clean money used to facilitate a Specified Unlawful Activity
would constitute money laundering as well, impacting investors of dispensaries.
117
31 U.S.C. § 5312 (2012) (subjecting various businesses to reporting requirements
and reserving the right to regulate “any [] business designated by the Secretary whose
cash transactions have a high degree of usefulness in criminal, tax, or regulatory
matters”).

26. Savannah Law Review [Vol. 2:2, 2015]
484
involves the physical movement of more than $10,000 worth of property derived
from any Specified Unlawful Activity. 118
While knowledge implicates both
depositors and banks alike in money laundering, the element of knowledge pivots
on the willfulness requirement, distinguishing the mens rea for the design and
access provisions accordingly.119
The mens rea element in the design provision requires willfulness, which is
defined as one knowing the act is unlawful. Direct or circumstantial evidence of
the actus reus—concealing or facilitating the proceeds from a Specified Unlawful
Activity—allows one to draw an inference of the suspect’s willfulness.120
Willful
blindness will not excuse any bank, or bank employee, from money laundering121
because “[a] deliberate effort to avoid guilty knowledge is all the guilty
knowledge the law requires.”122
In contrast, the mens rea element in the access
provision requires only voluntary and intentional acts when conducting routine
monetary transactions with tainted funds, regardless of whether the infraction is
willful.123
But, when tainted proceeds are commingled with other funds from
legitimate sources, courts are divided on whether there is a presumption of
money laundering because only some of the funds are tainted.124
Moreover, money laundering is not considered a continuing offense because
the tainted funds become too obfuscated to distinguish from legitimate funds
within the cyclical nature of money laundering. 125
Each incident of money
laundering constitutes a separate offense126
with serious penalties,127
especially
for “violations [that] are [not] isolated events and [are] part of a common or
systematic scheme.”128
But, various incidents of money laundering may be linked
118
18 U.S.C. § 1957(a) (2012); United States v. Gregg, 179 F.3d 1312, 1315 (11th Cir.
1999).
119
United States v. Sokolow, 91 F.3d 396, 407–09 (3d Cir. 1996).
120
United States v. Bank of New England, N.A., 821 F.2d 844, 854 (1st Cir. 1987)
(establishing prima facie element of willfulness as a mental state “by drawing reasonable
inferences from the available facts”); United States v. Majors, 196 F.3d 1206, 1211–14
(11th Cir. 1999).
121
Willful blindness occurs when “the professional money launderer, aware of a high
probability that the laundered funds were profits, deliberately avoids learning the truth
about them.” Santos, 553 U.S. at 521; Trans World Airlines, Inc. v. Thurston, 469 U.S.
111, 126–27 (1985); see Meltzer, supra note 6, at 243.
122
United States v. Giovannetti, 919 F.2d 1223, 1228 (7th Cir. 1990).
123
Sokolow, 91 F.3d at 408–09.
124
See John K. Villa, A Critical View of Bank Secrecy Act Enforcement and the Money
Laundering Statutes, 37 Cath. U. L. Rev. 489, 497 (1988). But see United States v.
Johnson, 971 F.2d 562, 569–70 (10th Cir. 1992); United States v. Yagman, 502 F. Supp.
2d 1084, 1087 (C.D. Cal. 2007). Commingling of dirty and clean funds may reduce the
amount implicated in money laundering.
125
See Leff, supra note 6, at 25; see also AML Report, supra note 97, at 16–19.
126
See Leff, supra note 6, at 25; see also United States v. Conley, 826 F. Supp. 1536,
1540–44 (W.D. Pa. 1993).
127
But see supra note 95.
128
United States v. Dickinson, 706 F.2d 88, 92 (2d Cir. 1983).

27. Bank on Marijuana
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through conspiracy to increase the severity of the penalty for depositors and
banks.129
Incidentally, anti-money laundering laws use a bilateral approach, penalizing
both depositors and banks receiving tainted proceeds, 130
because depositing
money into a bank account is defined as a “monetary transaction . . . affecting
interstate or foreign commerce.”131
For depositors, the degree of knowledge is
determined on an individual basis according to the willful or intentional mens rea
for the design and access provisions respectively. This analysis also depends on
whether the depositor is actually handling tainted proceeds, which may be more
obfuscated in nature due to the nature of money laundering. Hence, dispensaries
automatically fall under the design provision by default when engaging a bank to
deposit business proceeds. Whether the access provision applies to dispensaries
depends on whether the transaction involved $10,000 or more with a financial
institution.
For banks, corporate liability is a two-tiered liability scheme that imputes the
aggregate knowledge of its employees to the bank’s collective knowledge, holding
banks accountable for its employees’ actions as well as their failure to act.132
Both
the bank and the bank’s employees will be held responsible for maintaining
tainted accounts.133
Banks generally fall under the design provision from insider
abuse by directors, officers, or employees who are colluding with the depositor.134
Notwithstanding whether a wayward bank employee actively cooperates with a
129
18 U.S.C. § 1956(h) (2012); see Doyle, supra note 2, at 18–22; Leff, supra note
6, at 25.
130
Compare 18 U.S.C. § 1956(c)(3) (2012) (defining transaction as “a purchase, sale,
loan, pledge, gift, transfer, delivery, or other disposition, and with respect to a financial
institution includes a deposit, withdrawal, transfer between accounts, exchange of
currency, loan, extension of credit, purchase or sale of any stock, bond, certificate of
deposit, or other monetary instrument, use of a safe deposit box, or any other payment,
transfer, or delivery by, through, or to a financial institution, by whatever means
effected”), and 18 U.S.C. § 1956(c)(4) (2012) (defining financial transaction as “(A) a
transaction which in any way or degree affects interstate or foreign commerce (i)
involving the movement of funds by wire or other means; or (ii) involving one or more
monetary instruments; or (iii) involving the transfer of title to any real property, vehicle,
vessel, or aircraft; or (B) a transaction involving the use of a financial institution which is
engaged in, or the activities of which affect, interstate or foreign commerce in any way or
degree”), with 18 U.S.C. § 1957(f)(1) (2012) (defining monetary transaction as “the
deposit, withdrawal, transfer, or exchange, in or affecting interstate or foreign commerce,
of funds or a monetary instrument . . . by, through, or to a financial institution . . .
including any transaction that would be a financial transaction”).
131
18 U.S.C. § 1957(f)(1) (2012) (emphasis added).
132
United States v. Bank of New England, N.A., 821 F.2d 844, 855–56 (1st Cir.
1987).
133
12 U.S.C. §§ 93(c), 1818, 3105 (2012); Annunzio-Wylie Anti-Money Laundering
Act of 1992, Pub. L. No. 102-550, § 1502–1503, 106 Stat. 3672, 4045–4051 (1992)
(codified as amended in scattered sections of 12 U.S.C. and 18 U.S.C.); see Meltzer, supra
note 6, at 243–44, 255; see supra note 95.
134
Fed. Deposit Ins. Corp., DSC Risk Mgmt. Manual of Exam.
Pol’y, Bank Secrecy Act, Bank Fraud and Insider Abuse § 9.1 2–4, 14–
16 (2005), available at https://www.fdic.gov/regulations/safety/manual/section9-1.pdf.

28. Savannah Law Review [Vol. 2:2, 2015]
486
dispensary or turns a blind eye under the design provision, a lackadaisical bank
employee may undoubtedly implicate a bank in money laundering by maintaining
dispensaries’ bank accounts under the access provision.135
Consequently, the access provision is highly problematic for banks because
customers may pose a serious risk without the bank’s knowledge. If a bank
employee suspects the funds are tainted but proceeds with the transaction
anyway, that bank is in violation of Title 18, Section 1957 of the U.S. Code. If
depositors operate at arm’s length with the bank and remain discreet in their
affairs, then banks may become unwitting accomplices in money laundering that
is equally punishable.136
Thus, the access provision imposes strict liability on
banks and penalizes financial institutions for merely handling tainted funds
(when conducting routine monetary transactions) and perceiving the funds as
tainted. For deposits exceeding $10,000, the bank employees’ aggregate
perception of tainted funds is the baseline for imposing criminal liability. This
imputed knowledge under corporate liability infects banks exercising discretion
as to whether to accept deposits from dispensaries.
Under the Money Laundering Control Act, dispensaries’ gross profits are de
facto illegal. In short, banks may violate this statute by default when receiving
dispensaries’ proceeds if a bank employee possesses the knowledge that the
business is a dispensary but continues with the transaction.137
Fearing reprisal
from the federal government or forfeiture, many banks will not risk dealing with
dispensaries because “it is a crime to do any business at all with one who deals in
the proceeds of illegal activity . . . [and] those who are merely suspected of crimes
will find that they cannot engage in everyday commerce.”138
C. The Rise of Know Your Customer Banking Policies
Public regulation over banks serves the dual role of consumer protection and
economic stability. Banks create the legal foundation to the United States’
payments system based on the banks’ contractual obligation to repay depositors’
funds.139
Following the Great Depression, most banks are now insured by the
FDIC because government regulation of banks is necessary to ensure that
customers have access to their available funds.140
The government oversees the
135
31 U.S.C. § 5322 (2012).
136
See Alford, supra note 100, at 439–40.
137
18 U.S.C. § 1957 (2012).
138
Villa, supra note 124, at 500.
139
See Eniola O. Akindemowo, A Deposit Substitute for Post Dodd-Frank Regulatory
Policy Assessments of Emergent Payments: A Taxonomical Approach, 18 B.U. J. Sci. &
Tech. L. 1, 2–13 (2012); Ana I. Fernández et al., How Institutions and Regulation Shape
the Influence of Bank Concentration on Economic Growth: International Evidence, 30 Int’l
Rev. L. & Econ. 28, 28–31 (2010).
140
See Philip F. Bartholomew, U.S. Cong. Budget Office,
Reforming Federal Deposit Insurance viii-xxiv (1990), http://www.cbo.gov
/sites/default/files/cbofiles/ftpdocs/96xx/doc9663/1990_09_reformingfederaldeposit.p
df; Fed. Deposit Ins. Corp., Dep’t of Treas., The First Fifty Years:
A History of the FDIC 1933–1983, at 3–9 (1984), available at https://www.fdic
.gov /bank/analytical/firstfifty/chapter1.pdf; Bilali, supra note 12, at 354–56; John Steele

29. Bank on Marijuana
487
banking industry “to ensure the integrity of the subject interbank operations; to
check the monopolistic abuses that tend to arise in connection with large
centralized ventures; to protect the interbank ventures from free riders and moral
hazard; and to avoid negative externalities that might invite governmental
regulation of the interbank disciplinarians.”141
Thus, a public-private partnership142
between the federal government and the
financial industry creates a symbiotic relationship143
in a joint effort to detect and
prevent money laundering, which threatens the integrity of the interbank
systems.144
From the federal government’s perspective on money laundering, the
Bank Secrecy Act requires financial institutions to report and record transactions
to the Department of Treasury because “certain reports or records . . . have a
high degree of usefulness in criminal, tax, or regulatory investigations or
proceedings.”145
The Bank Secrecy Act is designed to create an environment
Gordon, Op-Ed., A Short Banking History of the United States, Wall St. J. (Oct. 10,
2008), http://online.wsj.com/article/SB122360636585322023.html. But see Lois R.
Lupica, The Consumer Debt Crisis and the Reinforcement of Class Position, 40 Loy. U.
Chi. L.J. 557, 599–610 (2009); Arthur E. Wilmarth, Jr., The Dodd-Frank Act: A Flawed
and Inadequate Response to the Too-Big-to-Fail Problem, 89 Or. L. Rev. 951, 958–59
(2011).
141
David G. Oedel, Private Interbank Discipline, 16 Harv. J.L. & Pub. Pol’y 327,
331 (1993).
142
A public-private partnership is a term to describe contractual relations between a
public agency and a private entity “to deliver a facility or service for the use of the general
public.” Julia Paschal Davis, Public-Private Partnerships, 44 Procurement Law, Fall
2008, at 9. As a form of privatizing public services, a public-private partnership is formed
when the government (1) lacks the resources to efficiently implement the infrastructure
for a regulatory regime, and (2) enlists private companies to help execute the correlating
policy or project. Public-private partnerships create unique contractual expectations that
benefit and burden both parties. Private companies can leverage their existing business
more efficiently than public agencies to provide the goods, services, or facility needed for
a government project or program. However, the private entity bears the majority of the
costs upfront but receives compensation in the form of “public grants, subsidies, and tax
credits available to private entities but not to the public.” Id. at 11. The public agency may
be limited in its ability to provide financing for the public service or facility but creative
financing alternatives do exist to help private entities offset the upfront costs to providing
public services or facilities. More importantly, private entities are also subject to the same
“restrictions of laws and regulations applicable to public contracts.” Id. at 9. Hence, the
private nature of private entities do not exempt “them from laws and regulations
applicable to the public sector.” Id.
143
A symbiotic relationship between a public agency and a private party is defined as
“when a private entity’s actions are tangentially beneficial to both itself and the
government.” Cf. Luke A. Boso, The Unjust Exclusion of Gay Sperm Donors: Litigation
Strategies to End Discrimination in the Gene Pool, 110 W. Va. L. Rev. 843, 867 (2008)
(discussing the state action doctrine within the context of reifying a stigma on gay men).
144
See Joan Kane, The Constitutionality of Redlining: The Potential for Holding Banks
Liable as State Actors, 2 Wm. & Mary Bill Rts. J. 527, 547–50 (1993) (outlining the
symbiotic relationship analysis within banking).
145
See 31 U.S.C. § 5311 (2014); see also 12 U.S.C. § 1829b (2014); 12 C.F.R. § 219.21
(2014).

30. Savannah Law Review [Vol. 2:2, 2015]
488
where “financial institutions deny sanctuary to drug and rackets money . . . [so
that] criminal enterprises will be less profitable and more frequently detected.”146
Without access to banking during the normal course of business,
dispensaries usually resort to storing large amounts of cash onsite or engaging in
money laundering discreetly. This banking dilemma for dispensaries illustrates
the public-private partnership between the federal government and banks, and
exposes the interdependence between the federal government and banks to
effectively monitor money laundering.147
Utilizing Know Your Customer banking
policies, banks have created major traction for dispensaries in the placement
stage of money laundering by publicly refusing dispensaries. This section
explores how the Bank Secrecy Act has shaped banks as private entities by
charting banking policies that mirror federal government initiatives. This
entanglement of policies allows banks discretion to effectively report and exclude
dispensaries from banking as an entire class of businesses.
1. Banks’ Regulatory Framework for Reporting Marijuana Businesses
Banks serve as the gatekeepers for dispensaries to access financial services
by enforcing anti-money laundering laws through Know Your Customer policies.
Bank employees may file either (1) a Currency Transaction Report (for bulk cash
deposits made in excess of $10,000); (2) a Suspicious Activity Report; or (3)
both.148
Consequently, all bank filings of Currency Transaction Reports and
Suspicious Activity Reports are uploaded to the “[Financial Crimes
Enforcement Network]’s Gateway system [that] enables federal, state, and local
law enforcement agencies to have direct, online access to records filed under the
[Bank Secrecy Act].” 149
Once federal authorities receive bank filings on
dispensaries, banks may receive instructions to exclude dispensaries and refuse
their business.150
Thus, the federal government and banks may form a seemingly
impenetrable brigade, denying dispensaries equal access to banking services
contrary to state law.
Targeting the placement stage of money laundering, the Bank Secrecy Act
laid a foundation to track anomalies within the financial industry and create a
paper trail requiring individuals, banks, and other financial institutions to: (1)
146
The Cash Connection, supra note 6, at 4.
147
See supra note 3 and accompanying text.
148
See generally BSA/AML Manual, supra note 5, at 52–142, 161 (building upon
the customer identification program to create a robust risk management program that
incorporates Know Your Customer policies by using due diligence to verify customers and
their assets as legitimate).
149
Fin. Crimes Enforcement Network, U.S. Dep’t of Treas., A
Report to the Congress in Accordance with Section 359 of the
Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001, at 7 (2002),
available at http://www.fincen.gov/news_room/rp/files/hawalarptfinal11222002.pdf; see Cal.
Bankers Ass’n v. Shultz, 416 U.S. 21, 96–97 (1974) (Douglas, J., dissenting) (“[T]he Act’s
recordkeeping requirement feeds into a system of widespread informal access to bank records
by Government agencies and law enforcement personnel.”).
150
See infra Part III.B.3.

31. Bank on Marijuana
489
record all financial transactions that involve monetary instruments or
transmittals in excess of $3,000;151
(2) file a Currency Transaction Report for all
cash transactions exceeding $10,000;152
and (3) verify the identity of account
holders conducting transactions under the Know Your Customer provision.153
The enforcement regime of anti-money laundering laws emerged from the Bank
Secrecy Act through various acts of federal legislation intertwining key practices
that banks employ to comply with federal regulations.154
2. Currency Transaction Reports Fall Prey to Structuring
Structuring, or smurfing, occurs when a depositor regularly deposits funds
below $10,000 to evade Currency Transaction Report filings (and usually at
multiple bank locations or different banks by various individuals).155
Dispensaries
151
See 31 U.S.C. § 5325 (2012) (reporting transactions for monetary instruments for
$3,000 or more); see also 31 C.F.R. § 1010.410(f) (2013) (requiring detailed account
information for transmittals of $3,000 or more for “[a]ny transmittor’s financial
institution or intermediary financial institution located within the United States”).
152
31 U.S.C. § 5313 (2012) (authorizing the Secretary of the Treasury to require
domestic financial and depository institutions to report cash transactions); 31 U.S.C. §
5331 (2012) (reporting cash transactions for $10,000 or more per incident); 31 C.F.R. §
1010.410(a)–(d) (2013) (recording credit loans, that are not secured with real property,
and all transfers of cash or monetary instruments to or from another financial institution,
person, account, or place); BSA/AML Manual, supra note 5, at 71–72 (recording
transactions from $3,000 to $10,000 by banks is a normal practice to assess transactions,
in the aggregate, and detect money laundering); Doyle, supra note 2, at 32–37. This
analysis pertains to domestic currency and transactions only for marijuana businesses.
153
Compare H.R. Rep. No. 91-975, 91st Cong., 2d Sess. (1970), reprinted in 1970
U.S.C.C.A.N. 4394, 4400–4404 (requiring banks to document “the identity of each
person having an account with the bank and of each individual authorized to sign checks,
make withdrawals, or otherwise act with respect to any such account”), and 31 C.F.R. §
1010.312 (2013) (requiring banks’ verification of customers’ “specific identifying
information (i.e., the account number of the credit card, the driver’s license number, etc.)
. . . [to] be recorded on the report. . . [but] the mere notation of ‘known customer’ or
‘bank signature card on file’ on the report is prohibited”), with Bilali, supra note 12, at
319–21 (“[T]he requirement for banks and other financial institutions to monitor, audit,
collect, and analyze relevant information about their customers (or potential customers)
before engaging in financial business with them.”).
154
See 31 U.S.C. §§ 5311–5332 (2012) (preventing criminals from using financial
institutions to conceal or launder illicit funds from criminal endeavors); supra note 2.
155
Meltzer, supra note 6, at 255 (defining smurfing as a series of cash transaction that
are all below $10,000 while the aggregate amount exceeds $10,000 to (1) prevent banks
from reporting a currency transaction report, or (2) conceal “the actual movement of the
currency or the identities of the parties involved”); Doyle, supra note 2, at 34–36.
However, courts differ as to whether the aggregate deposits at different banking
institutions violate the Bank Secrecy Act’s anti-structuring provision. Compare United
States v. Meros, 866 F.2d 1304, 1311 (11th Cir. 1989) (holding that structuring deposits at
different financial institutions on the same day does not violate the Bank Secrecy Act),
and Villa, supra note 124, at 495–96 (imposing a duty on depositors to inform banks of a
reportable transaction would violate “the fair warning requirements of the due process
clause of the fifth amendment”), with United States v. Bank of New England, N.A., 821
F.2d 844, 850 (1st Cir. 1987) (stating that aggregate transactions exceeding $10,000 by a
customer in a single day at the same financial institution mandates a reportable

32. Savannah Law Review [Vol. 2:2, 2015]
490
who structure funds to avoid detection may mask money laundering effectively
given the sheer volume of Currency Transaction Reports.156
As of 2011, Currency
Transaction Report filings comprised approximately 6 out of every 7 reports filed
to the Department of Treasury under the Bank Secrecy Act. Over 1.2 million
Currency Transaction Reports were filed per month, which is double the amount
of Currency Transaction Report filings over twenty-five years ago.157
Today, banks employ software that use algorithms to detect abnormal
depositor patterns by viewing aggregate amounts close to $10,000 spanned over
a specific time period.158
But, the difficulty remains for a computer algorithm to
discern between legitimate transactions, which may resemble structuring, and
actual money laundering. Thus, an algorithm alone is not as effective as human
intelligence on the front line to discern between legitimate and illegitimate
transactions. The government relies upon the banks’ personal interaction with
depositors to distinguish between routine, legitimate business, and structuring.159
transaction under the Bank Secrecy Act), and United States v. Thompson, 603 F.2d 1200,
1203–04 (5th Cir. 1979) (holding that executing multiple loans under $10,000 “by the
same borrower, on the same day, in the same bank . . . at the same time and place”
amounts to structuring).
156
See AML Report, supra note 97, at 9; I.R.S., Crim. Investigation,
Fiscal Year 2012: National Operations Annual Business Report 24
(2012), available at http://www.irs.gov/pub/foia/ig/ci/REPORT-fy2012-ci-annual-
report-05-09-2013.pdf; Fin. Crimes Enforcement Network, U.S. Dep’t of
Treas., Fiscal Year 2011: Annual Report 8 (2011), available at http://www.
fincen.gov/news_room/rp/files/annual_report_fy2011.pdf; see also infra Table 2.
157
See infra Table 2. But see Alford, supra note 100, at 440 (reporting that “the U.S.
government [] receive[d] over 600,000 [Currency Transaction Report]s per month” in
1988).
158
Christoph Blodig et al., Detecting Gains from Service Criminal Activities Using
Generic Algorithms for Money Laundering Detection, in Managing Modern
Organizations Through Information Technology 563, 563–66 (Info.
Res. Mgmt. Ass’n Int’l, ITP5251, 2005), available at http://www.irma-
international.org/viewtitle/32662/; see BSA/AML Manual, supra note 5, at 72–73.
159
See BSA/AML Manual, supra note 5, at R-4 to 5. For depositors, the
Secretary of the Department of Treasury does allow exemptions for individual businesses
from Currency Transaction Report filings. In theory, exemptions were created in
response to the “vast flow of currency in the legitimate conduct of banking and retail
business operations . . . [giving rise to the] need for the free flow of currency in legitimate
business operations without the impediment of huge numbers of [Currency Transaction
Report]s.” See Meltzer, supra note 6, at 235–36. In reality, banks do not really use this
feature. From 2003-2011, banks filed requests for this exemption less than 1% of the time
compared to other reports filed annually with the Department of Treasury. See Thomas
D. Grant, Toward a Swiss Solution for an American Problem: An Alternative Approach for
Banks in the War on Drugs, 14 Ann. Rev. Banking L. 225, 233–35 (1995); infra Table
2.
Additionally, the Secretary of the Department of Treasury reserves the right to
revoke the exemption status at any point and time, and expressly foreclosed this
possibility for marijuana dispensaries. The Secretary may grant exemptions from banking
requirements and regulations without requiring an act of Congress to approve such
exemptions, but the federal government reserves the right to revoke such exemptions. In
reality, the process for businesses obtaining an exemption status is thorough and time
consuming because businesses have to validate the legitimacy of the business, responding

33. Bank on Marijuana
491
Despite advances in technology to track depositors’ patterns, money launderers
still elude detection from Currency Transaction Reports.
Thus, money launderers—and dispensaries—inevitably fall through the
cracks as Currency Transaction Report filings increasingly become more
automated and proliferous, watering down their impact on detecting money
laundering over time. Because Currency Transaction Reports are routinely filed
within fifteen days of each transaction in excess of $10,000,160
these reports have
been more useful as an ad-hoc investigatory tool, rather than preventing money
laundering. Hence, dispensaries actively engage in smurfing to avoid banks filing
Currency Transaction Reports, even for legitimate business transactions.161
3. Know Your Customer Bank Policies Disarm Marijuana Businesses
When banks publicly discriminate against dispensaries, they rely on their
Know Your Customer policies that conflate private discrimination with
compliance under anti-money laundering regulations. First and foremost, these
policies express banks’ private discrimination toward existing or prospective
customers, allowing bank employees wide discretion to accept or refuse business.
More than just a compliance tool, Know Your Customer policies guide bank
employees to assess the overall risk that a new or prospective customer may
present to a bank from both a pecuniary and penal standpoint.162
The Know Your Customer policies initiate the processes that track
dispensaries electronically through a bank’s database, rendering dispensaries’
financial information confidential but not private.163
Today, banks seamlessly
leverage existing technology to “know their clients through their databases” as
an internal control to track compliance with the Bank Secrecy Act.164
Each bank’s
database may share dispensaries’ banking information with law enforcement
agencies, various interbank database systems, and credit reporting agencies.165
to detailed questioning and documentation requirements. 12 U.S.C. § 1829b (2012); 31
U.S.C. § 5318 (2012); H.R. Rep No. 101-446 § 13 (1990); see Cal. Bankers Ass’n v.
Shultz, 416 U.S. 21, 22 (1974) (Douglas, J., dissenting); O’Brien, supra note 993, at 677;
BSA/AML Manual, supra note 5, at 95–96. In relation to the proliferous Currency
Transaction Report filings, exemptions are actually used sparingly in practice and have
decreased over the years. See infra Table 2.
160
I.R.C. § 6050I (2012); 31 U.S.C. § 5324 (2012); FAQs Regarding Reporting Cash
Payments of Over $10,000 (Form 8300), Internal Rev. Serv. (Apr. 20, 2015),
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Form-8300-and-
Reporting-Cash-Payments-of-Over-10000.
161
See, e.g., Letter from Dep’t of Treas. Fin. Crimes Enforcement Network Office of
Law Enforcement Support (Nov. 2, 2012) (on file with author).
162
See Villa, supra note 124, at 501–02 (criticizing Congress for delegating discretion
to financial institutions “to decide whether a particular customer obtains his funds from
illegal sources”).
163
United States v. Miller, 425 U.S. 435, 442–43 (1976).
164
See Bilali, supra note 12, at 319–21.
165
31 C.F.R. § 1010.540 (2013); USA PATRIOT Act, Pub. L. No. 107-56, 2001
U.S.C.C.A.N. (115 Stat.) 272, 307-08 (2001); Pérez, supra note 16, at 1593, 1602–04.

34. Savannah Law Review [Vol. 2:2, 2015]
492
Under the caveat venditor principle, 166
banks are required to make certain
disclosures regarding financial transactions. But, banks are not required to
disclose procedures regarding proprietary Know Your Customer banking policies
that may turn against the dispensaries’ pecuniary and penal interests even though
dispensaries operate pursuant to state laws.
The Know Your Customer provision emerged from the legislative history of
the Bank Secrecy Act, serving as the foundation for banks’ Know Your Customer
policies that merely collected customer identification for internal proprietary
purposes.167
As part of an overall risk-management strategy for both banks and
the government alike, banks’ Know Your Customer policies evolved to comply
with both internal and external compliance requirements by: (1) ascertaining
customers’ identity; (2) reviewing the source of customers’ funds as lawful; and
(3) monitoring the use of customers’ funds to ensure funds are used for lawful
activity.168
Since 1970, banks’ Know Your Customer policies have evolved to absorb
government policies as a measure to ensure compliance and maintain solvency.169
As a means of private regulation, banks are required to develop internal policies,
procedures, and controls to detect money laundering by: (1) designating a
compliance officer; (2) developing and maintaining an employee anti-money
laundering training program; and (3) utilizing independent auditing to test banks’
effectiveness in detecting money laundering.170
Essentially, banks’ Know Your
Customer policies now serve as a risk management tool for employees to police
unusual banking activity and avoid illegal transactions.
While Know Your Customer policies lay the framework for employees’ early
detection of money laundering, 171
the federal government deputizes banks
166
In commercial dealings, caveat venditor refers to “seller beware,” meaning that
the seller should, in good faith, disclose to the buyer all material facts related to the
business transaction; more importantly, the seller may be required to do so by state or
federal regulations in “a market that institutionalize[s] both trust and distrust.” Robert E.
Mensel, “A Diddle at Brobdingnag”: Confidence and Caveat Emptor During the Market
Revolution, 38 U. Mem. L. Rev. 97, 111-34 (2007) (“Merchants were caught between
their need to trust those with whom they did business, and the inconsistent but troubling
admonitions of the law that they should trust at their peril. There was . . . skepticism and
a need to verify, if possible, the fidelity of the other.”); see, e.g., Johnson v. Davis, 480 So.
2d 625, 628 (Fla. 1985) (“The law appears to be working toward the ultimate conclusion
that full disclosure of all material facts must be made whenever elementary fair conduct
demands it.”). See generally Nicola W. Palmieri, Good Faith Disclosures Required During
Precontratual Negotiations, 24 Seton Hall L. Rev. 70, 80–120, 213 (1993) (defining
the historical context of caveat venditor as good faith in commercial transactions when a
seller discloses to the buyer all known details related to the transaction).
167
See supra note 153 and accompanying text.
168
The Money Laundering Suppression Act of 1994 initiated risk management
practices tethered to Know Your Customer policies. Pub. L. No. 103-325, 108 Stat. 2160
(1994) (codified as amended in 31 U.S.C. § 5318 (2012)); see BSA/AML Manual,
supra note 5, at 22–31.
169
See Mulligan, supra note 8, at 2360–62.
170
31 U.S.C. § 5318(h) (2012).
171
See BSA/AML Manual, supra note 5, at 52–96 (identifying over twenty main
signs for money laundering activities). Compare Meltzer, supra note 6, at 239–40 (using

35. Bank on Marijuana
493
through their Know Your Customer policies and relies upon banks as the first line
of defense to money laundering. 172
Now, banks may interlope dispensaries’
financial information under the discretionary risk-assessment tool of Know Your
Customer policies.173
Thus, the federal government shapes banks’ Know Your
Customer policies, masking this tool of private discrimination into one of
compliance to enforce anti-money laundering laws.
4. Suspicious Activity Reports Scout for Marijuana Businesses
Know Your Customer policies enable banks to utilize Suspicious Activity
Reports within thirty days of detecting money laundering174
based upon the
subjective judgment of bank employees and their working relationships with their
customers.175
Suspicious Activity Reports have evolved into a more important
policing tool for detecting money laundering than Currency Transaction
Reports. Suspicious Activity Reports are not limited by a dollar amount, only by
one’s suspicion of tainted funds.176
Hence, filing Suspicious Activity Reports
have proven to be more effective in the early detection of money laundering for
risk management purposes.
Banks utilize Suspicious Activity Reports heavily with dispensaries. For
example, banks refused business from pre-existing or prospective clients for
various reasons such as: the money smelled funny (i.e., like marijuana); the
dispensary’s business name clearly referenced selling marijuana; bank employee
saw an advertisement for a client’s business referencing the selling of marijuana;
or, bank employee checked the client in the interbank sharing system, finding the
client had problems at other banks. However bank employees acquire the
information that the client is associated with selling marijuana, or merely
suspected of selling marijuana, banks are likely to file a Suspicious Activity
Report and close the account, or deny banking services altogether—even if the
client is licensed to sell marijuana under state law.177
databases of information to personalize services with clients), with O’Brien, supra note 93,
at 670 (recognizing that “banks know what to look for, and due to their experience, are in
a position to recognize suspicious activities almost intuitively”).
172
Cf. Kamin, supra note 5, at 989–91.
173
The Right to Financial Privacy Act of 1978, Pub. L. No. 95-630, 92 Stat. 3697
(1978) (codified as amended in 12 U.S.C. §§ 3401–3422 (2012)).
174
See BSA/AML Manual, supra note 5, at 67–85 (“Suspicious activity reporting
forms the cornerstone of the [Bank Secrecy Act] reporting system.”).
175
See BSA/AML Manual, supra note 5, at 75–79 (“The decision to file a
[Suspicious Activity Report] is an inherently subjective judgment.”).
176
Over time, Suspicious Activity Reports became the primary enforcement tool
behind banks’ Know Your Customer policies for banks to report suspicious activity
occurring internally or externally. Suspicious Activity Reports have proven to be more
effective because banks’ reporting of suspicious activity was based on bank employees’
personal knowledge in dealing with the suspect rather than automation behind tracking
Currency Transaction Reports.
177
See supra note 3; Letter from Dep’t of Treas. Fin. Crimes Enforcement Network
Office of Law Enforcement Support (Nov. 2, 2012) (on file with author).

36. Savannah Law Review [Vol. 2:2, 2015]
494
Conversely, this reporting tool is inextricably dependent on the strength of
banks’ Know Your Customer policies and the depth of banks’ interaction with
suspects to be effective.178
From 2003-2011, Suspicious Activity Reports only
consisted of approximately 6.56% of all Bank Secrecy Act filings.179
But, a recent
report found that 52% of the Suspicious Activity Reports included money
laundering or structuring from January 1, 2010 to February 28, 2013.180
Even though Suspicious Activity Reports comprise a small percentage of
Bank Secrecy Act filings, authorities rely heavily on Suspicious Activity Reports
to investigate depositors for money laundering because of the bank’s more
intimate level of personal interaction with suspects. Reaffirming this position in
2014, the Suspicious Activity Reporting regime lies at the heart of the new
guidance by Financial Crimes Enforcement Network for financial institutions
dealing with dispensaries. Banks are required to automatically file Suspicious
Activity reports on all dispensaries in states legalizing dispensaries.181
III. Banking is Essential to Creating a Legitimate
Marijuana Industry
The prohibition on marijuana has stripped away the rights of many because
the Controlled Substances Act is counterintuitive to the reality of the use and
distribution of marijuana in the United States.182
States’ progressive drug policy
reforms regarding marijuana clash with the machinations of the Controlled
Substances Act and anti-money laundering laws, resulting in a banking dilemma
that showcases a need for a recalibration of federal government policies. Under
the Money Laundering Control Act of 1986, the federal government utilizes
banks through anti-money laundering laws as a backdoor approach to force
dispensaries and states alike into compliance with the Controlled Substances
178
See Nicholas J. Ketcha, Jr., Dir. of Supervision, Fed. Deposit
Ins. Corp., FIL-29-96, Letter to the Chief Exec. Officer of FDIC-
Supervised Banks on Guidelines for Monitoring Bank Secrecy Act
Compliance (May 14, 1996), available at http://www.fdic.gov/news/news/
inactivefinancial/1996/fil9629.html.
179
See infra Table 2.
180
Fin. Crimes Enforcement Network, U.S. Dep’t of Treas., SAR
Activity Review: Trends, Tips, & Issues, 23 BSA Advisory Group 43
(May 2013), available at http://www.fincen.gov/news_room/rp/files/sar_tti_23.pdf
(“Banks, savings institutions or credit unions filed the majority of the [Suspicious
Activity Reports].”).
181
FinCen Guidance on Marijuana Banking, supra note 31.
182
Andrew S. Gold, Absurd Results, Scrivener’s Errors, and Statutory Interpretation, 75
U. Cin. L. Rev. 25, 76–79 (2006) (defining Sorites Paradox as the fallacy of the logic
that a single grain of sand left standing would remain a heap because eroding a heap in a
piecemeal fashion will eliminate the heap altogether rather than preserve it—that is, a
dilemma analogous to individual rights eroding over time equates to a loss of rights
instead); see Roberts, supra note 54, at 723 (“When core constitutional rights are at stake,
it is imperative that the court maintains its power to issue a remedy. Otherwise the right
itself begins to evaporate.”). But see Mark R. Filip, Note, Why Learned Hand Would Never
Consult Legislative History Today, 105 Harv. L. Rev. 1005, 1022–24 (1992).

37. Bank on Marijuana
495
Act–despite contrary state policies legalizing the distribution of medical
marijuana, recreational marijuana, or both.183
Heavily influenced by government regulations, banks serve as the
gatekeepers controlling who has access to banking within the private sector.
Banks, as private actors, have broader leeway than the federal government in the
public sector to create a roadblock for dispensaries—even when dispensaries are
sanctioned under state law as legal, legitimate businesses. The line between the
public and private sector becomes blurred while banks publicly deny dispensaries
access to banking under the pretext of risk-avoidance. Consequently, business
owners are left unprotected by state laws in an uncertain legal environment.
Banks stigmatize dispensaries as an unbanked184
class of businesses. Thus, access
to banking serves as the threshold for other legal complications that may arise for
dispensaries.
In response to this dilemma, the proposed Marijuana Businesses Access
to Banking Act of 2013185
is a positive step but remains a symbolic gesture because
of several shortcomings. In 2014, the Department of Justice unveiled a new
framework responding to this dilemma by granting conditional access to banking
for marijuana businesses in states legalizing marijuana, but, again, this framework
remains a symbolic gesture, too.186
This section will explore the threshold issue
that unbanked dispensaries face without equal access to banking and the
shortcomings of these proposals as viable solutions in a selective federalism
regime. Ultimately, this section demonstrates the harms marijuana businesses
face without access to banking, creating a tenuous situation for marijuana
businesses without any legal remedy.187
A. The Right to Operate a Business is Symbolic without Access to Banking
Because marijuana is still illegal on a federal level, marijuana businesses are
de facto illegal regardless of states sanctioning dispensaries. In an era of selective
federalism, the states’ experimentation with progressive drug policies is moot
without the cooperation of the federal government and banks, as joint
participants enforcing federal anti-money laundering laws. For state
experimentation to work, the federal government must grant banks leeway to
allow dispensaries access to banking in a public-private partnership in states
opting to legalize marijuana.188
183
See Mulligan, supra note 8; cf. Conant v. Walters, 309 F.3d 629, 644–45 (9th Cir.
2002) (Kozinski, J., concurring) (blocking the federal government’s backdoor approach to
enforce state compliance with the Controlled Substances Act by attacking doctors
prescribing medical marijuana).
184
Emily Robbins, Banking the Unbanked: A Mechanism for Improving the Financial
Security of Low-Income Individuals, 20 Pol’y Perspectives 85, 85–86 (2013), available
at www.policy-perspectives.org/article/download/11786/7944.
185
Marijuana Businesses Access to Banking Act of 2013, H.R. 2652, 113th Cong. §§
1-3 (2013) [hereinafter “Access to Banking Act”].
186
FinCen Guidance on Marijuana Banking, supra note 31.
187
See supra Part II.A.
188
By way of example, Congress enacted the Webb-Kenyon Act in 1913, during the
prohibition era, to forbid shipping of liquor to other states; this act minimized the

38. Savannah Law Review [Vol. 2:2, 2015]
496
This dilemma presents unchartered applications of constitutional law to
attribute the actions of banks, and bank employees, to the federal government in
an era of selective federalism. In short, dispensaries, as legitimate businesses
pursuant to state law, suffer from discrimination in the unequal application of
federal law—compared to other state-licensed businesses—without due process
of the law. The issue is whether dispensaries have a remedy.
Without a show of cooperative federalism, the resounding answer is no.
Initially. Banks and dispensaries alike proceed at their own risk. Consequently,
banks have considerable immunity when refusing dispensaries and denying them
access to banking.189
Without access to banking, the likelihood of dispensaries
surviving in the long-term is dim and the legitimate marijuana industry may rise
only to fall again.
1. Federal Preemption for States Legalizing Marijuana
Under a cooperative federalism regime, the federal government would allow
de facto legalization of marijuana by the states ancillary to the anti-
commandeering rule.190
In states that permit the use of medical marijuana,
recreational marijuana, or both, the federal government already shows a grudging
tolerance to states legalizing marijuana. 191
Technically, because of federal
preemption, the Controlled Substances Act may facially trump state regulation
of drug policies.192
Congress, however, does not have the authority to compel
states to enforce, reinstate, or maintain criminalization of marijuana under the
anti-commandeering rule with respect to the Controlled Substances Act.193
The
spillover effects from one state’s legalization of alcohol to the surrounding states. 27
U.S.C. § 122 (2012) (originally enacted as Act of Mar. 1, 1913, ch. 90, § 1, 37 Stat. 699
(1913)). One could posit a similar concept for marijuana to minimize the risk for banks
servicing marijuana retailers. See, e.g., Todd Shepherd, Michigan’s Wine Shipping
Restrictions: A Valid Use of Twenty-First Amendment Control or Sleight of Hand Legislation
Discriminating Against the Free Market?, 88 U. Det. Mercy L. Rev. 583, 586–93
(2011); James Alexander Tanford, E-Commerce in Wine, 3 J.L. Econ. & Pol’y 275,
287 (2007). The author would like to give special thanks to Professor Brannon Denning
for introducing the Webb-Kenyon Act of 1913.
189
The Anti-Drug Abuse Act created an unqualified privilege for bank employees
reporting customers for suspicious transaction. Pub. L. No. 99-570, 100 Stat. 3207–22
(1986); see 12 U.S.C. § 3403 (2012); Lee v. Bankers Trust Co., 166 F.3d 540, 543–44 (2d
Cir. 1999) (defining the whistleblower safe harbor as an unqualified privilege). But see
Grant, supra note 159 at 238–40.
190
See supra note 34 and accompanying text.
191
See Ogden Memo, supra note 51.
192
See 21 U.S.C. § 903 (2012) (prohibiting states’ regulation of marijuana under
conflict preemption); S. Candice Hoke, Preemption Pathologies and Civic Republican
Values, 71 B.U. L. Rev. 685, 718–22 (1991) (“Federal preemption edicts often
eviscerate the substantive achievements of these state and local political efforts.”); see
also Klein & Grobey, supra note 41, at 113.
193
See Mikos, supra note 36, at 1445–62.

39. Bank on Marijuana
497
anti-commandeering rule prevents Congress from preempting “state legalization
of marijuana-related activity.”194
In contrast, under a selective federalism regime, the federal government only
shows tolerance of the marijuana industry that is conditional upon states’
regulation of the marijuana industry.195
Dispensaries are not protected under the
same umbrella of cooperative federalism unless the state has implemented a strict
regulatory regime for the intrastate commerce of marijuana.196
The Marijuana
Business Access to Banking Act of 2013 (Access to Banking Act) proposed a safe-
harbor provision for banks servicing marijuana businesses under the Federal
Deposit Insurance Act.197
With the Controlled Substances Act hanging like an
albatross over the marijuana industry, the Access to Banking Act glosses over the
issue of federal preemption trumping state law without inspiring a state
regulatory regime that would foster cooperative federalism to coexist in the
banking environment for dispensaries.198
Without more, this Access to Banking
Act is merely symbolic.199
While the Bank Secrecy Act expressly preempts states’ banking regulations
under certain circumstances,200
Congress’s reach under the Money Laundering
Control Act to regulate dispensaries only extends as far as Congress’s reach
under the Controlled Substances Act to regulate marijuana.201
If states are not
required to prohibit marijuana under the Controlled Substances Act,202
then
194
Mikos, supra note 42, at 16; Conant v. Walters, 309 F.3d 629, 645–46 (9th Cir.
2002) (Kozinski, J., concurring); see supra notes 33–34 and accompanying text.
195
See Cole Memo II, supra note 50, at 1–3.
196
Id.
197
Access to Banking Act, H.R. 2652, 113th Cong. §§ 1–3 (2013).
198
Cf. Cole Memo II, supra note 50.
199
Seeking to amend the Federal Deposit Insurance Act, this Act would reduce
banks’ risks of facing penalties under federal anti-money laundering laws by exempting
banks from automatically filing Suspicious Activity Reports on dispensaries for money
laundering. Pub. L. No. 81-797, 64 Stat. 873 (1950) (codified as amended in 12 U.S.C. §§
1811–1835a (2012)). While the Access to Banking Act does not compel banks to service
dispensaries, the Access to Banking Act fails by granting banks absolute immunity from
criminal investigation or prosecution when servicing state-licensed dispensaries—that is,
overly broad. The Access to Banking Act still relies upon banks to draw the line between
criminals and dispensaries under state law. Nor does the Act address limiting the reach of
the Controlled Substances Act, vis-à-vis the Money Laundering Control Act, because
member banks of the Federal Reserve System are considered under the umbrella of
interstate activity under the Commerce Clause. See Carl Felsenfeld, Electronic Banking
and Its Effect on Interstate Branching Restrictions—An Analytic Approach, 54 Fordham
L. Rev. 1019, 1027 (1986). This Act overlooks either one of two things: (1) reclassifying
or removing marijuana under the Controlled Substances Act that is necessary because
federal preemption may still trump state laws as-is; or (2) creating an anti-preemption
clause regarding the Controlled Substances Act that would protect states’ preferences
regarding marijuana legalization. See also supra note 188 and accompanying text.
200
See, e.g., 12 U.S.C. §§ 266, 330, 1820 (2012).
201
See 18 U.S.C. §§ 1956–1957 (2012). But see 21 U.S.C. § 903 (2012).
202
21 U.S.C. § 903 (2012 ) (“No provision of this subchapter shall be construed as
indicating an intent on the part of the Congress to occupy the field . . . unless there is a
positive conflict between that provision of this subchapter and that State law so that the
two cannot consistently stand together.”).

40. Savannah Law Review [Vol. 2:2, 2015]
498
banks may not be able to legally justify enforcing the Money Laundering Control
Act against state-licensed dispensaries—as a Specified Unlawful Activity—
contrary to state law without violating federalism principles.203
More importantly, if the state’s regulation of state-licensed dispensaries—
operating pursuant to state laws—does not conflict with the Controlled Substances
Act, then no violation of the Controlled Substances Act nor the Money
Laundering Control Act has occurred.204
Thus, state-licensed dispensaries may
not fall within the definition of a Specified Unlawful Activity.205
As a caveat, the
issue of preemption hinges upon Congress’s reach under the Commerce Clause
when enforcing the marijuana prohibition under the Controlled Substances
Act.206
This underlying issue squarely confronts whether Congress’s reach under
the Commerce Clause to establish a federal police power over marijuana is a
constitutional exercise of congressional authority.207
Additionally, one may argue that federal actors and banks enforcing the
Money Laundering Control Act against state-licensed dispensaries may fail the
rational basis standard of review.208
Arbitrary enforcement of laws that do not
apply to state-licensed dispensaries violate dispensaries’ rights to operate a
legally sanctioned business pursuant to state laws, warranting dispensaries’
legitimate access to banking. Neither federal actors, nor banks under the pretext
of private discrimination, may enforce federal laws that do not apply to state-
licensed dispensaries to better serve one’s own pecuniary or penal interests.209
When publicly refusing dispensaries, some banks may be feigning coercion
under the guise of private discrimination. Furthermore, bank employees are in
no position to make such a legal determination on the legitimate status of
203
See supra note 51 and accompanying text.
204
See supra notes 9, 51, 130, and accompanying text.
205
See 18 U.S.C. § 1956(c)(7) (2012) (addressing “the manufacture, importation,
sale, or distribution of a controlled substance (as such term is defined for the purposes of
the Controlled Substances Act)”).
206
See supra notes 37–41 and accompanying text.
207
Today, the ability to separate the impact of one state’s activities on another is
difficult in a global economy of economic interdependence thus rendering the physical
distinction between interstate and intrastate commerce less meaningful than the historical
counterparts of interstate and intrastate commerce. In turn, arbitrary distinctions must be
made to define the scope of each under the substantial effects test. The Supreme Court
needs to address a revised test with verifiable limiting principles on Congress’s authority
over state regulations in interstate commerce. To determine whether the effect of the
state’s regulation falls within interstate commerce, factors supporting a new limiting
principle should include: (1) regulation that is reasonably tailored to a sufficient,
legitimate end; (2) the subject of the regulation primarily affects a fungible commodity or
service, but not one’s conduct; (3) the effect does not discriminate against a protected
class expressly determined by Congress or the free exercise of individual rights; and (4)
the end-user has reasonable alternatives for a substantially similar good or service. See
United States v. Lopez, 514 U.S. 549, 584–602 (1995) (Thomas, J., concurring); supra
notes 37–38, 40, and accompanying text.
208
Cf. Kelo v. City of New London, Conn., 545 U.S. 469, 491 (2005) (applying the
rational basis with bite standard of review).
209
This analysis may affect other applications of federal law. See supra notes 50, 56,
and accompanying text.

41. Bank on Marijuana
499
dispensaries. Only state agencies regulating state-licensed dispensaries may
authorize such a legal determination of dispensaries’ legitimate status pursuant
to state law.
2. Liability for Banks Shunning Marijuana Businesses
To hold banks accountable for shunning dispensaries, one may posit that
banks are accountable to dispensaries under the state action doctrine.210
The U.S.
Constitution affords due process of law before any “person shall be deprived of
life, liberty, or property.” 211
Under the state action doctrine, the U.S.
Constitution offers redress for governmental intrusions on individual rights. The
government is prohibited from discriminatory or arbitrary acts as a public actor
and these restrictive laws apply to its agents as well.212
For all social and economic
regulations, regulations concerning marijuana would be subject to the rational
basis standard of review: The government’s intrusion of an individual right must
rationally relate to a conceivable, legitimate government interest.213
Moreover, the U.S. Constitution offers no protection from private actors
engaging in discriminatory practices or wrongful conduct—only protection from
government actors.214
The state action doctrine affords dispensaries with two
causes of action: (1) government actors violate the Due Process Clause of the
Fifth Amendment by arbitrarily enforcing anti-money laundering laws against
dispensaries;215
and (2) individuals acting under the color of federal law violate
dispensaries’ right to earn a living216
and to operate as a legal business pursuant
to state law under Title 42, Section 1983.217
210
Blum v. Yaretsky, 457 U.S. 991, 1004–05 (1982).
211
U.S. Const. amend. V; see Kane, supra note 144, at 545–58.
212
However, a mere license by the state does not qualify a private entity as a state
actor. Yaretsky, 457 U.S. at 1004–05 (“Mere approval of or acquiescence in the initiatives
of a private party is not sufficient to justify holding the State responsible for those
initiatives . . . .”).
213
See Williamson v. Lee Optical of Oklahoma Inc., 348 U.S. 483, 491 (1955); United
States v. Carolene Products Co., 304 U.S. 144, 152–153 n.4 (1938); Steven D. Clymer,
Unequal Justice: The Federalization of Criminal Law, 70 S. Cal. L. Rev. 643, 680–81
(1997). Because the financial industry serves a pivotal role in today’s economy as fund
intermediaries and transmitters, the government has a legitimate interest regulating the
financial industry in the service of public welfare to ensure funds are available for
depositors’ accounts. H.R. Rep No. 101-446 § 3–4, 6 (1990) (penalizing banks if
convicted of money laundering by revoking the bank’s charter under the Depository
Institution Money Laundering Amendments of 1990). Anti–money laundering laws target
money laundering that jeopardizes the integrity of the financial industry and depository
reserves to cover depositors’ funds. Such a cursory, conclusive analysis would overlook
the reality of the banking situation today, and banks abusing private discriminatory
practices.
214
Yaretsky, 457 U.S. at 1004-05.
215
U.S. Const. amend. V.
216
Mass. Bd. of Ret. v. Murgia, 427 U.S. 307, 317–27 (1976) (Marshall, J.,
dissenting).
217
42 U.S.C. § 1983 (2012) (“Every person who, under color of any statute,
ordinance, regulation, custom, or usage, of any State or Territory or the District of
Columbia, subjects, or causes to be subjected, any citizen of the United States or other

42. Savannah Law Review [Vol. 2:2, 2015]
500
First, equal protection claims may arise either under the Fifth Amendment
or Fourteenth Amendment applicable to the federal government or the state
government respectively.218
Here, only the Fifth Amendment applies because
banks are enforcing federal anti-money laundering laws against dispensaries in
states legalizing marijuana.219
In Bolling v. Sharpe, the Supreme Court reverse-
incorporated the spirit of the Fourteenth Amendment’s Equal Protection Clause
into the Due Process Clause of the Fifth Amendment by stating that
“discrimination may be so unjustifiable as to be violative of due process.”220
Similar to the analysis under the Due Process Clause, the state action
doctrine analysis under Title 42, Section 1983, is nuanced by holding individuals
acting in their official capacity, and not the government, accountable for violating
constitutional rights.221
This analysis turns upon the substantive cause of action,
and whether the government has infringed upon a right, privilege, or immunity
under federal or state law.222
Under the theory of apparent authority in agency
law,223
the state action doctrine technically extends to individuals acting in their
official capacity when enforcing federal laws.224
In short, the state action doctrine
applies to federal law and federal government actors too under either cause of
action.225
Both analyses turn upon two key elements: (1) whether the government
infringed a right; and (2) whether a private actor falls under the exception to the
state action doctrine. For dispensaries, the right asserted under both analyses
person within the jurisdiction thereof to the deprivation of any rights, privileges, or
immunities secured by the Constitution and laws, shall be liable to the party injured in an
action at law, suit in equity, or other proper proceeding for redress . . . .”); see U.S.
Const. amend. X; Carolene Prods. Co., 304 U.S. at 53 (“[T]he constitutionality of a
statute predicated upon the existence of a particular state of facts may be challenged by
showing to the court that those facts have ceased to exist.”).
218
U.S. Const. amend. V; U.S. Const. amend. XIV; see Kane, supra note 144,
at 545–58.
219
See Buckley v. Valeo, 424 U.S. 1, 74 (1976). But see United States v. Miller, 425
U.S. 435, 442–43 (1976) (facilitating “the use of a proper and long-standing law
enforcement technique by insuring that records are available when they are needed”).
220
Bolling v. Sharpe, 347 U.S. 497, 499 (1954) supplemented sub nom. Brown v. Bd. of
Educ. of Topeka, Kan., 349 U.S. 294 (1955); Detroit Bank v. United States, 317 U.S. 329,
337 (1943) (extending equal protection if “the discrimination in the statute is so arbitrary
as to violate due process”); Kane, supra note 144, at 527, 546–47.
221
See Will v. Michigan Dep’t State Police, 491 U.S. 58, 71 (1989).
222
42 U.S.C. § 1983 (2012).
223
Adickes v. S. S. Kress & Co., 398 U.S. 144, 188–234 (1970) (Brennan, J.,
concurring in part, dissenting in part) (explaining the apparent authority theory of agency
law underlying the state action doctrine).
224
Normally, the analysis of the state action doctrine deals with the Fourteenth
Amendment and state law; however, this doctrine is not limited to merely state law but
also reaches federal law. See Columbia Broad. Sys., Inc. v. Democratic Nat’l. Comm., 412
U.S. 94, 179 (1973) (citing Adickes, 398 U.S. at 202 (Brennan, J., concurring in part,
dissenting in part)).
225
See Adickes, 398 U.S. at 188–234 (Brennan, J., concurring in part, dissenting in
part). On the other hand, state or federal governments may still claim sovereign immunity
in defense to the state action doctrine. U.S. Const. amend. XI.

43. Bank on Marijuana
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may differ because states may also extend dispensaries and banks further
protection under state law by creating rights, privileges, or immunities related to
banking.226
A formalistic approach to this dilemma would establish the nature of
the right asserted to determine whether the federal government has
impermissibly intruded upon the rights of dispensaries.
More than likely, a court would find: (1) individuals have no right to use
marijuana; (2) dispensaries have no right to sell marijuana; and (3) individuals,
including businesses such as dispensaries, have no right to banking.227
But, this
conclusion is a narrow view of individual rights and fails to recognize the role of
banking. Access to banking is arguably fundamentally important before one may
exercise other rights, even beyond the marijuana industry.228
Regarding banks, both analyses use the same tests to determine liability for
private actors under the state action doctrine.229
As an exception to this doctrine,
private actors may be liable for violating the U.S. Constitution when their actions
are fairly attributable to the government.230
The entanglement theory purports
that private actors are subject to the U.S. Constitution when fulfilling the role as
a government actor under the following circumstances: (1) the private actor
fulfills a role normally reserved for the sovereign (i.e., a public function); (2) a
symbiotic relationship exists between the state and private actor; or (3) the state
encourages or coerces the private actor’s discriminatory practices.231
Simply put, dispensaries have no claim for discrimination against FDIC-
insured banks under the Equal Protection Clause of the Fourteenth Amendment,
which applies to state law and not federal law.232
Ultimately, FDIC-insured banks
226
See William J. Brennan, Jr., State Constitutions and the Protection of Individual
Rights, 90 Harv. L. Rev. 489, 490–91 (1977). Whether dispensaries clearly frame the
nature of the right asserted is critical to a successful claim. Individual rights may include,
but are not limited to: an individual’s privacy; an individual’s right to earn a living; an
individual’s liberty interests in one’s reputation; an individual’s right to property (from a
state-sanctioned business); an individual’s right against search and seizure; a state’s right
to regulate crime; and a state’s right to legalize marijuana. The interplay between state
rights compared to federal rights is beyond the scope of this Note.
227
See supra note 43 and accompanying text.
228
See Robbins, supra note 184; cf. San Antonio Indep. Sch. Dist. v. Rodriguez, 411
U.S. 1, 98–110 (1973).
229
See Lugar v. Edmondson Oil Co., 457 U.S. 922, 938–39 (1982).
230
Id. Various theories exist to determine whether a private actor’s conduct is fairly
attributable to the government before holding the government liable for private conduct:
(1) the public function test; (2) the state compulsion test; (3) the nexus test (or
entanglement theory); and (4) the joint action test. Id. The entanglement theory is often
applied to the financial industry. See Kane, supra note 144, at 545–58.
231
Kane, supra note 144, at 545–58; Blum v. Yaretsky, 457 U.S. 991, 1003–05 (1982).
232
The Equal Protection Clause under the Fourteenth Amendment states: “No
State shall make or enforce any law . . . [that denies] any person within its jurisdiction the
equal protection of the laws.” U.S. Const. amend. XIV. Dispensaries cannot claim a
violation of equal protection under the Fifth Amendment because the Fifth Amendment
does not extend equal protection from banks enforcing federal laws. Unless state law is in
question, the Equal Protection Clause under the Fourteenth Amendment does not apply.
U.S. Const. amend. XIV. Under the Fourteenth Amendment, the Equal Protection
Clause is only applicable to the states’ regulation of banks and not to member banks of the

44. Savannah Law Review [Vol. 2:2, 2015]
502
are quasi-public institutions when enforcing anti-money laundering laws,
subjected only to the Fifth Amendment. As an exception to the state action
doctrine, dispensaries must show that banks’ discrimination is so arbitrary and
rises to the level of depriving dispensaries due process of law under the Fifth
Amendment.
B. Quasi-Privatization of Policing Money Laundering Raises Red Flags
Banks abdicate their role as a private actor and emerge as quasi-public
institutions when acting on behalf of the federal government, enforcing anti-
money laundering laws.233
Inevitably, banks become quasi-prosecutors in an era
of selective federalism—a coercive means using a third party mercenary to
accomplish that which Congress may not do overtly.234
This strategy is one of
economic warfare against dispensaries, to drive them out of business by denying
them equal access to banking.235
While this may be an effective strategy, this
strategy is unwise because it unfairly categorizes dispensaries as criminals even
though state law sanctions the dispensaries.
On February 14, 2014, the Financial Crimes Enforcement Network
responded to the growing trend of states legalizing marijuana, and issued a new
guidance “for financial institutions seeking to provide services to marijuana-
related businesses.”236
On a conditional basis, the new regulations allow financial
institutions to service dispensaries. Financial institutions must report all
transactions with dispensaries to government authorities accordingly: (1) low-
level risks as “Marijuana Limited” even when banks do not identify any
suspicious activity;237
(2) mid-level risks as “Marijuana Priority” when banks do
identify suspicious activity; 238
and (3) high-level risks as “MARIJUANA
Federal Reserve System (i.e., FIDC-insured financial institutions). This Note will not
focus on the interplay between state actors enforcing state law prohibiting money
laundering versus federal government actors.
233
See Kane, supra note 144, at 546 (“Although not members of any branch of the
government, banks are not strictly private actors. By virtue of their essential role in
American life, banks are in essence extensions of the government.”).
234
See supra notes 43–49 and accompanying text. A selective federalism policy, thus,
is void on its face and unnecessarily infringing upon a state’ plenary powers to regulate for
the welfare of its people—to protect its people from oppressive tyranny when Congress
and the President fail to do so.
235
See The Cash Connection, supra note 6, at x.
236
FinCen Guidance on Marijuana Banking, supra note 31, at 1. This
guidance merely presents a modified reporting regime for Suspicious Activity Reports
that still requires all financial institutions to file a Suspicious Activity Report when
servicing dispensaries by default because “[t]he obligation to file a [Suspicious Activity
Report] is unaffected by any state law that legalizes marijuana-related activity.” Id.
237
Id. at 3 (“A financial institution providing financial services to a marijuana-related
business that it reasonably believes, based on its customer due diligence, does not
implicate one of the Cole Memo priorities or violate state law should file a ‘Marijuana
Limited’ [Suspicious Activity Report].”).
238
Id. at 4 (“A financial institution filing a SAR on a marijuana-related business that
it reasonably believes, based on its customer due diligence, implicates one of the Cole
Memo priorities or violates state law should file a ‘Marijuana Priority’ SAR.”).

45. Bank on Marijuana
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TERMINATION” when banks deem the situation require termination of the
account to avoid compliance issues with money laundering (as well as reporting
the individual or business to other financial institutions, if known).239
Nevertheless, these banks are filing termination reports and closing accounts
at nearly the same rate of banks that are servicing dispensaries and opening
accounts. On average, banks earmarked 50.84% of the reports for law
enforcement agencies to investigate further since the guidance was issued. Still,
the new reporting regime for dispensaries shows little-to-no improvement in the
banking situation for dispensaries with banks reporting only about half of the
dispensaries as a low priority for federal law enforcement agencies.240
In essence, the federal government uses banks as a smokescreen when
enforcing anti-money laundering laws because banks are shielded as private
actors.241
In turn, banks serve the role of government actors embodied in a Trojan
horse for dispensaries, denying them equal access to banking as an entire class of
businesses. Banks’ use of Suspicious Activity Reports is arbitrary in nature,
benefiting the banks individually, and, perhaps, breaching their fiduciary duty to
depositors as a breach of privacy. Thus, dispensaries suffer a deprivation of
liberty under the Fifth Amendment which protects a “full range of conduct
which the individual is free to pursue, and it cannot be restricted except for a
proper governmental objective.”242
1. Banks Emerge as Quasi-Prosecutors against Marijuana Businesses
Traditionally, law enforcement primarily belongs to federal and state
agencies. But, here, the Financial Crimes Enforcement Network has veritably
dumped non-delegable, legislative authority on banks as private actors. The
process begins with banks’ discretionary submission of Suspicious Activity
Reports—that is, the primary investigation tool for federal and state agencies to
239
Id. at 4–5; USA PATRIOT Act, Pub. L. No. 107-56, § 314, 115 Stat. 272, 307–08
(2001) (codified as amended in 31 C.F.R. § 1010.540).
240
See Alison Jimenez & Steven Kemmerling, Who is Filing Suspicious Activity Reports
on the Marijuana Industry? New Data May Surprise You, Dynamic Sec. Analytics
(Apr. 13, 2015), http://securitiesanalytics.com/marijuana_SARs (reporting statistics for
Suspicious Activity Reports filed on marijuana businesses from February 2014 to January
2015: (1) over 374 financial institutions in 42 states filed 3,157 Suspicious Activity Reports
(184 reports may include multiple filings); (2) reports targeting marijuana businesses
included 1,736 as marijuana limited, 313 as marijuana priority, and 1,292 as termination
reports; (3) 66.58% of the financial institutions reporting on marijuana businesses were
banks; and (4) the data overlaps for recurring reports filed for repeat business, or more
than one priority level filed together in the same report); Remarks of Jennifer Shasky
Calvery, Director, Fin. Crimes Enforcement Network, 2014 Mid-Atlantic AML Conf. (Aug.
12, 2014), http://www.fincen.gov/news_room/speech/pdf/ 20140812.pdf (reporting 105
financial institutions in states legalizing marijuana are filing marijuana suspicious activity
reports in 2014 from February to August); see also Kindle, supra note 85.
241
See supra 232 and accompanying text.
242
Bolling v. Sharpe, 347 U.S. 497, 499–500 (1954) (expanding liberty from a “mere
freedom from bodily restraint”), supplemented sub nom. Brown v. Bd. of Educ. of Topeka,
Kan., 349 U.S. 294 (1955); see also Clymer, supra note 213, at 680–81.

46. Savannah Law Review [Vol. 2:2, 2015]
504
prioritize their resources more effectively.243
Consequently, banks, and their
employees, wield substantial police power based on their inherently subjective
discretion.244
Banks still draw the line between legal and illegal dispensaries.245
Mass reporting of dispensaries does not cure such veto power by bank
employees.246
Anti-money laundering laws target both sides of the transaction
from both the perspectives of the bank and the depositor, resulting in an overall
stigma to dispensaries. Exempted by the Due Process Clause, banks are shielded
as private institutions and allowed to assess customers as a liability upfront,
thereby rendering dispensaries’ inalienable rights as mere tokens in a commercial
setting.247
After banks report dispensaries to federal authorities, dispensaries may
suffer a deprivation of rights, while banks remain immune to most consequences.
Dispensaries are left without redress for governmental intrusion to dispensaries’
privacy regarding sensitive, financial information.
Although dispensaries are legalized on a state level, banks enforce anti-
money laundering laws using their Know Your Customer policies to report
dispensaries to the IRS as common criminals—the antithesis to the Right to
Financial Privacy Act of 1978 valuing consumer privacy. 248
While banking
records are confidential, competing interests between privacy and security have
emerged before the courts, resulting in a slow erosion of the concept of privacy
in banking. 249
Generally, banks are prohibited from disclosing customer
243
See FinCen Guidance on Marijuana Banking, supra note 31. While
Currency Transaction Report filings are useful for tracking dispensaries’ deposits over
$10,000, the Suspicious Activity Reports maintain a broader reach and encompasses bank
employees reporting any possible suspicious activity of an accountholder. Suspicious
Activity Reports allow unfettered discretion regardless of whether the suspicious activity
is related to the account or dollar amount of any transaction. See supra Part II.C.
244
See BSA/AML Manual, supra note 5, at 67–75.
245
See supra text accompanying note 34.
246
See FinCen Guidance on Marijuana Banking, supra note 31.
247
U.S. Const. amend. V; In re Winship, 397 U.S. 358, 361–64 (1970); M’Culloch
v. Maryland, 17 U.S. 316, 324–26 (1819); Kane, supra note 144 at 554–55 (“[U]nless
specifically authorized by Congress, states may not regulate banks in any way that
interferes with federal regulation.”). But see Knickerbocker Life Ins. Co. v. Pendleton, 115
U.S. 339, 344–45 (1885); Wilmarth, Jr., supra note 140; Pérez, supra note 16, at 1612–13.
248
The Right to Financial Privacy Act of 1978 was enacted in response to the Bank
Secrecy Act reporting requirements. Pub. L. No. 95-630, 92 Stat. 3697 (1978) (codified as
amended in 12 U.S.C. §§ 3401–3422 (2012)); see Meltzer, supra note 6, at 252–55.
249
Compare Katz v. United States, 389 U.S. 347, 361 (1967) (restraining government
interference when “a person [has] exhibited an actual (subjective) expectation of privacy
and . . . the expectation [is] one that society is prepared to recognize as ‘reasonable’”),
and Joseph v. Bancorpsouth Bank, 414 F. Supp. 2d 609, 612 (S.D. Miss. 2005) (balancing
“an expectation of privacy with allowing financial institutions to serve as reporting arms
to assist law enforcement. . . . [because] privacy is overcome by the valid reasons for the
subject law”), with Samuel D. Warren & Louis D. Brandeis, The Right to Privacy, 4
Harv. L. Rev. 193, 214–20 (1890) (“[Predicting] in advance of [one’s] experience the
exact line at which the dignity and convenience of the individual must yield to the
demands of the public welfare or of private justice would be a difficult task.”). Regarding
privacy in the Supreme Court’s jurisprudence, “[s]hall the courts thus close the front
entrance to constituted authority, and open wide the back door to idle or prurient
curiosity?”

47. Bank on Marijuana
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information for any other purposes except internal use.250
Because marijuana is
still illegal under federal law, most banks deny dispensaries any privacy in
banking, unlike other state-licensed businesses. Thus, whistleblower bank
employees are exempted from civil liability when filing Suspicious Activity
Reports on customers who are suspected or convicted of money laundering.
Banks enjoy considerable immunity under a whistleblower safe harbor provision
for reporting dispensaries and refusing them publicly.251
As a result of using discretionary risk-assessment tools, banks are rewarded
for exercising caution through blanket reporting requirements as a shield to avoid
becoming criminalized themselves.252
Specifically, some banks may be benefiting
from their whistleblower immunity, or private actor status, as a smokescreen to
obscure bona fide money laundering on an international scale. Some banks may
deal with dispensaries under the table, engaging in money laundering secretly.253
Obviously, these banks are not too skittish about skirting the law.254
Therefore,
the immunity granted to banks is too broad, just as banks reporting
dispensaries—as a class of businesses violating anti-money laundering laws—is
too broad.255
250
See 12 U.S.C. § 3403 (2012). The Annunzio-Wylie Anti-Money Laundering Act
of 1992 mandated filings for Suspicious Activity Report that only took into effect in April
of 1996. 31 U.S.C. § 5318(g)(3) (2012); Annunzio-Wylie Anti-Money Laundering Act of
1992, Pub. L. No. 102-550, § 1517, 106 Stat. 3672 (1992); Laura N. Pringle & Conni L.
Allen, Privacy and Related Issues for Financial Institutions and Other Regulated Entities, 53
Consumer Fin. L.Q. Rep. 28, 33 (1999).
251
The Anti-Drug Abuse Act of 1986 created an unqualified privilege for bank employees
reporting customers for suspicious transaction. Pub. L. No. 99-570, 100 Stat. 3207–22 (1986);
12 U.S.C. § 3403 (2012); Lee v. Bankers Trust Co., 166 F.3d 540, 543–44 (2d Cir. 1999)
(defining the whistleblower safe harbor as an unqualified privilege); see supra note 3 and
accompanying text. But see Grant, supra note 159, at 238–40. Under the whistleblower safe
harbor for banks, provision only limits the bank employees’ discretion to a bad faith standard;
this highly questionable standard belies an improper delegation of legislative authority. This
safe harbor provision—an unqualified privilege—grants banks immunity from disclosing
limited account information “regardless of whether the [Suspicious Activity Report] is filed as
required by the [Bank Secrecy] Act or in an excess of caution.” 31 U.S.C. § 5318(g)(3) (2012);
Lee, 166 F.3d at 543–44 (creating an affirmative defense of immunity for bank employees filing
an Suspicious Activity Report, provided that they refrain from “acknowledging filing, or
commenting on the contents of, an Suspicious Activity Report unless ordered to do so by the
appropriate authorities”). Even when made in good faith, this privilege subjects banks only to
the U.S. Constitution. Banks lose their immunity when too much information is revealed,
cloaking the disclosure as made in bad faith. Id. Whether the new suspicious activity reporting
system for marijuana is “too much” disclosure remains unseen.
252
See Grant, supra note 159, at 238–40.
253
Robert Mazur, Op-Ed., How to Halt the Terrorist Money Train, N.Y. Times (Jan. 2,
2012), http://www.nytimes.com/2013/01/03/opinion/how-bankers-help-drug-
traffickers-and-terrorists.html?_r=0; see supra note 3 and accompanying text.
254
See Mazur, supra note 253.
255
Cf. City of Chicago v. Morales, 527 U.S. 41, 70–71 (1999) (Breyer, J., concurring)
(delegating policy decisions to governmental officials on an ad-hoc or subjective basis raises an
unconstitutional application of the law “not because a [bank employee] applied this discretion
wisely or poorly in a particular case, but rather because the [bank employee] enjoys too much
discretion in every case. And if every application of the [statute] represents an exercise of

48. Savannah Law Review [Vol. 2:2, 2015]
506
Moreover, the information procured by banks’ Know Your Customer policies
allows the federal government to use other effective tools that target dispensaries
and leverage its limited resources without engaging in criminal prosecution.256
According to banks’ Know Your Customer provisions, pursuant to the Bank
Secrecy Act, 257
banks’ new account standard operating procedures collect
taxpayers’ sensitive financial information for both internal and governmental
tracking purposes.258
Hence, banks are no longer operating as solely private
institutions because “the bank makes and keeps records under compulsion of the
Secretary’s regulations . . . act[ing] as a Government agent.”259
Under the Department of Treasury,the Financial Crimes Enforcement Network
delegates some of its examination authority to the IRS, who collects and monitors
banks’ required reporting under the Bank Secrecy Act. 260
Once filed, Currency
Transaction Reports and Suspicious Activity Reports become public records for the
IRS and Financial Crimes Enforcement Network to store respectively. Federal
prosecutors reserve the right to use this information against dispensaries regardless of
the right against (1) unreasonable search and seizures under the Fourth
Amendment,261
or (2) self-incrimination under the Fifth Amendment.262
unlimited discretion, then the [statute] is invalid in all its applications.”); Zwickler v. Koota,
389 U.S. 241, 249–50 (1967) (citing NAACP v. Alabama ex rel. Flowers, 377 U.S. 288, 307
(1964)) (declaring a statute that is both clear and precise as also void for over breadth because
the statute offends constitutional principles “by means which sweep unnecessarily broadly and
thereby invade the area of protected freedoms”); United States v. Jin Fuey Moy, 241 U.S. 394,
401–02 (1916) (opining that Congress strained its powers when criminalizing a “very large
proportion of citizens who have some preparation of [contraband] in their possession . . . and
subject[ing] [them] to [] the serious punishment”).
256
See supra text accompanying notes 51, 57.
257
See supra note 12.
258
See generally BSA/AML Manual, supra note 5 (intertwining government anti-
money laundering policies with banks’ Know Your Customer policies).
259
Cal. Bankers Ass’n v. Shultz, 416 U.S. 21, 96–99 (1974) (Douglas, J., dissenting).
260
I.R.S. Gen. Examining Proc., IRM 4.2.6 (2013), available at http://
www.irs.gov/irm/part4/. These reports are accessible to other law enforcement agencies
for federal criminal investigation and prosecution. See 31 C.F.R. § 1010.520 (2011). But see
United States v. Miller, 425 U.S. 435, 442–43 (1976).
261
See U.S. Const. amend. IV; United States v. White, 401 U.S. 745, 751–52 (1971);
Shapiro v. United States, 335 U.S. 1, 32–33 (1948); Wilson v. United States, 221 U.S. 361, 382
(1911). However, courts differ on whether a search and seizure of a depositor’s records would
withstand constitutional challenge under the Fourth Amendment without adequate judicial
process (or fair notice to depositor of such proceedings). See 12 U.S.C. § 3408 (2012). Compare
Cal. Bankers Ass’n, 416 U.S. at 27 (requiring records from financial institutions to be made
available for law enforcement purposes only after invoking judicial process), and Burrows v.
Superior Court, 529 P.2d 590, 593–96 (Cal. 1974) (finding that “the police violated petitioner’s
rights by obtaining from banks, without legal process, documents in which petitioner had a
reasonable expectation of privacy”), with Miller, 425 U.S. at 442–43 (denouncing depositor’s
expectation of privacy when voluntarily revealing sensitive financial information to another
party who may act as an intermediary for the government). But see 12 U.S.C. § 3402 (2012).
262
See U.S. Const. amend. V; supra text accompanying notes 51, 57. But see Mapp
v. Ohio, 367 U.S. 643, 661–66 (1961) (Black, J., concurring); Boyd v. United States, 116
U.S. 616, 633–35 (1886).

49. Bank on Marijuana
507
Based solely on the status of being a dispensary, banks may exclude
dispensaries from banking by default and file either Currency Transaction
Reports, Suspicious Activity Reports, or both, accordingly. Upon review of these
filings, a federal banking regulator263
may exert pressure on banks that have
current or previous dealings with dispensaries by: (1) terminating or limiting a
bank’s deposit insurance; (2) prohibiting or penalizing banks from providing
business to dispensaries; or (3) recommending, incentivizing, or encouraging
banks to downgrade, terminate, or refuse service to dispensaries.264
This same
information becomes a tracking device for federal authorities to flag dispensaries
for further investigation—even if federal authorities never pursue money
laundering offenses or criminal prosecution.
This new guidance refutes any possibility of banks being a disinterested,
neutral third party and allows banks a safe-harbor-parachute from any liability
when reporting dispensaries. Even if banks reasonably rely on information
provided by state-licensing agencies for dispensaries, and banks report suspicious
activities accordingly, banks may still countermand states’ reform on marijuana
by complying with federal law instead of state law. By strictly adhering to anti-
money laundering laws, banks have become a misdirected weapon against
dispensaries, enforcing the Controlled Substances Act even when states choose
not to do so.
Therefore, banks are a backdoor approach to mitigate the harm from societal
ills265
that stem from illicit drug trafficking and use.266
But, dispensaries are also
subject to banks’ private discrimination under the guise of compliance with anti-
money laundering laws. Consequently, banks’ compliance with anti-money
laundering laws within the current reporting regime leads to severe consequences
for dispensaries that go well beyond access to banking.267
263
Various agencies and departments regulate banking and financial services per the
Secretary of the Treasury: Board of Governors of the Federal Reserve System, the
Federal Deposit Insurance Corporation, the National Credit Union Administration, the
Office of the Comptroller of the Currency, the Office of Thrift Supervision, the State
Liaison Committee, the Bureau of Consumer Financial Protection. See BSA/AML
Manual, supra note 5, at A-1 to B-2; see also Access to Banking Act, supra note 185, at
§§ 3–6.
264
See Access to Banking Act, supra note 185, at § 2.
265
See U.N. Office on Drugs & Crime, World Drug Report 2012, at
iii–iv, U.N. Sales No. E.12.XI.1 (2012), available at http://www.unodc.org/documents/
data-and-analysis/WDR2012/WDR_2012_web_small.pdf; see also Seth Harp,
Globalization of the U.S. Black Market: Prohibition, the War on Drugs, and the Case of
Mexico, 85 N.Y.U. L. Rev. 1661, 1669 (Nov. 2010) (eviscerating the perpetual cycle of
violence through an economic analysis of marijuana on the black market).
266
Gonzales v. Raich, 545 U.S. 1, 10–15 (2005); see David F. Musto, &
Pamela Korsmeyer, The Quest for Drug Control 60 (2002).
267
See United States v. Miller, 425 U.S. 435, 442–43 (1976) (denying depositors any
reasonable expectations of privacy over sensitive, financial information because
depositors disclosed information to a third party voluntarily before rights under the
Fourth or Fifth Amendment attach to government investigations, interrogations, or
prosecution); see also supra Part I. Additionally, banks may blacklist dispensaries from the
banking industry by reporting dispensaries to credit reporting agencies–agencies who may
also report dispensaries’ checking account history to other financial institutions as

50. Savannah Law Review [Vol. 2:2, 2015]
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2. Federal Authorities and Banks Form a Symbiotic Relationship
The issue arises when the government privatizes public services or facilities
using private entities to perform these law enforcement functions instead. The
government’s overreliance on third parties in public-private partnerships to
enforce regulations, even when state laws do not enforce those regulations,
exposes these partnerships to liability.268
Banks may face liability, especially if the
execution of Suspicious Activity Reports varies from one bank to another.269
The
legitimate, marijuana industry faces almost a complete shutdown in banking
services.
As a private-public partnership between the federal government and the
financial industry, the government is entangled with the banking industry in a
symbiotic relationship enforcing anti-money laundering laws against
dispensaries. A labyrinth of banking regulations intertwines the creation of banks
through charters, FDIC Deposit Insurance Coverage, and the disclosure of
depositors’ sensitive financial information. This extensive labyrinth of banking
regulations is so pervasive within the banking industry that, in effect, government
anti-money laundering policies have become synonymous with banks’ Know Your
Customer policies.270
More importantly, the federal government lacks the resources to effectively
detect money laundering on a national scale.271
Limited governmental resources
prevent blanket enforcement of federal laws in all situations. The federal
government enlists banks as quasi-public institutions to share the burden fighting
money laundering from drug trafficking.272
But, the federal government directly
benefits from enforcing money laundering and seizing funds from banks. The
funds are forfeited to the Department of Treasury and usually disbursed to law
enforcement, padding their budgets, rather than going to state substance abuse
rehabilitation programs or the like.273
Whistleblowers at banks get a cut, too.274
“problem” accounts because of suspected money laundering or some “other” reason to
exclude dispensaries as “unwanted” customers. See 31 C.F.R. § 1010.540 (2013); Pérez,
supra note 16, at 1593, 1602–04.
268
See supra text accompanying note 167; cf. Mikos, supra note 42, at 1463–79
(discussing the chilling effect of federal government pronouncements despite insufficient
resources to enforce its edict).
269
See supra text accompanying note 3; Mazur, supra note 253.
270
See Part II.C.
271
Compare Ogden Memo, supra note 51, at 2 (explaining that the “prosecution of
commercial enterprises that unlawfully market and sell marijuana for profit continues to
be an enforcement priority of the Department”), with Kamin, supra note 5, at 988
(opining that a federal prosecutor does not have the resources to enforce the Controlled
Substances Act with every dispensary in her district but can devise the same effect
through other means invoking federal wrath).
272
See supra text accompanying note 262; see also Klein & Grobey, supra note 41, at
113.
273
18 U.S.C. § 981(e) (2012); Marian R. Williams, Ph.D., et al., Policing for Profit:
The Abuse of Civil Asset Forfeiture, Inst. for Just. 15–37 (Mar. 2010), available at
http://www.ij.org/images/pdf_folder/other_pubs/assetforfeituretoemail.pdf.
274
Bank employees who report money laundering in excess of $50,000, may also
receive an award from the Department of Treasury; the government funds the award with

51. Bank on Marijuana
509
In the early stages of a legitimate marijuana industry, whether dispensaries
or banks face criminal prosecution for money laundering is largely subject to
prosecutorial grace.275
Some convictions for money laundering may attribute to
the individual and not the business itself for dispensaries; whereas, banks
normally pay fines for money laundering, forfeit the illegal funds, and terminate
personnel.276
The bottom line is this: The federal government uses anti-money
laundering laws to create an in terrorem effect within the financial industry for
banks to exclude dispensaries—regardless of whether the federal government
prosecutes dispensaries.277
Prosecutorial discretion is a mysterious, amorphous concept, but past
behavior is often a good indicator of future behavior. For money laundering
offenses, most of the referrals to federal prosecutors usually come from the IRS,
within the Department of Treasury, and the Federal Bureau of Investigations,
within the Department of Justice.278
However, as a trend, federal prosecutors
tend to decline prosecuting nearly half of these referrals, and usually charge
money laundering offenses as a secondary offense to a predicate crime.279
The
available statistics confirm this trend reporting marijuana trafficking as the
primary offense charged, whereas money laundering charges are usually a
secondary offense.280
In 2010, approximately 1% of the criminal convictions in the United States
resulted from money laundering from all types of criminal activities.281
The
federal government does not distinguish between dispensaries and criminals
the seized funds from money laundering after the forfeiture proceedings are complete. See
28 U.S.C. §524(c)(1)(B) (2012) (allowing payment of awards to whistleblower from the
Treasury Executive Officer of Asset Forfeiture); 31 U.S.C. § 5323 (2012) (awarding
whistleblower up to 25% of the net amount forfeited from money laundering or $150,000,
whichever is less). The Department of Treasury maintains a revolving forfeiture fund
from all seizures until those funds are later returned, forfeited to the state, or both. See
infra table 4.
275
See Cole Memo III, supra note 35, at 2; Cole Memo II, supra note 50, at 3; Cole
Memo I, supra note 50; Ogden Memo, supra note 51.
276
Prosecutors may also target directors, officers, and employees individually, but,
for banks, the focus more than likely involves reporting violations of the Bank Secrecy
Act, egregious misconduct from insiders in the bank, and willful engagement of money
laundering tactics. See, e.g., BSA/AML Penalties List, BankersOnline.com,
http://www.bankersonline.com/security/bsapenaltylist.html (last visited on Nov. 20,
2015); see also infra Table 5–8.
277
See infra Table 4–8.
278
See Mark Motivans, Ph.D., Money Laundering Offenders,
1994–2001, Bureau of Justice Statistics, U.S. Dep’t of Just., NCJ
199574 (2003), available at http://www.bjs.gov/content/pub/pdf/mlo01.pdf.
279
Id.
280
John Scalia, Federal Drug Offenders, 1999 with Trends 1984–
99, Bureau of Justice Statistics, NCJ 187285 (2001), available at http://www
.bjs.gov/content/pub/pdf/fdo99.pdf.
281
See O’Hara, supra note 41. Compare Klein & Grobey, supra note 41, at 22, 113
(reporting in 2010 that money laundering convictions only comprise of 1% total
convictions in the United States), with MOTIVANS, supra note 278, at 1 (reporting that
money laundering resulted in 1.8% of total convictions from 1994–2001).

52. Savannah Law Review [Vol. 2:2, 2015]
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when reporting drug or money laundering offenses. Consequently, the available
statistics conflate criminal convictions for marijuana possession, marijuana
trafficking, money laundering, white-collar crimes, and other financial crimes.282
These statistics merely indicate that prosecution for money laundering is a small,
insignificant number of actual convictions in this in terrorem campaign toward
banking dispensaries.
Furthermore, while the IRS tracks the proceeds of dispensaries, one of the
most effective weapons the federal government has against banks (and
dispensaries alike) lies in forfeiture: the axel of insolvency for any business.283
Because of “limited resources,” the federal government reserves the right to
prosecute banks and dispensaries based on a criterion of certain egregious
activities. These conditions allow federal prosecutors the discretion to pick and
choose the enforcement of federal laws: whether the opportunity cost of
prosecuting dispensaries is worthwhile based on who has deeper pockets or who
is bigger. 284
A selective federal regime that uses discretion promoting one
ideology over another is not consistent with a cooperative federal regime allowing
states to experiment with drug policies. Simply put, law enforcement is operating
as a business—making cost-benefit decisions to charging. And, money
laundering is a cash cow. Once dispensaries become large enough and profitable,
prosecuting dispensaries generates revenue for law enforcement through
forfeiture.285
While few cases from banks’ proliferous reporting actually materialize into
criminal convictions for money laundering, cases that involve banks reporting
dispensaries to law enforcement agencies are more than likely to involve possible
civil or criminal forfeiture proceedings instead.286
In 2003, the Bureau of Justice
Statistics reported that 20% of money laundering cases from 1994-2001 involved
over $1 million, considering the wide range of money laundering offenses from
less than $2,000 to over $100,000,000.287
In tandem with criminal prosecutions,
law enforcement agencies primarily rely on forfeiture to seize the assets in
marijuana trafficking, money laundering, or both.288
Forfeiture has become a
widely used tactic for law enforcement because the government directly benefits
from the proceedings to create a cash surplus when budgets fall short.289
282
See infra Table 4–7. Little public, statistical data exists regarding state-licensed
dispensaries suspected or convicted of money laundering at this time. The statistics for
drug offenses and white-collar crimes subsume the connection between convictions for
marijuana trafficking and money laundering.
283
See supra note 84.
284
See Cole Memo III, supra note 35, at 2; Cole Memo II, supra note 50, at 3; Cole
Memo I, supra note 50; Ogden Memo, supra note 51.
285
See, e.g., City of Oakland v. Holder, 961 F. Supp. 2d 1005, 1013–16 (N.D. Cal.
2013).
286
12 U.S.C. §§ 93, 1818 (2015).
287
See Motivans, supra note 278, at 1.
288
See Williams, Ph.D., et al., supra note 273, 15–37; see also Miron & Waldock,
supra note 58, at 49; infra Table 4.
289
See Williams, Ph.D., et al., supra note 273.

53. Bank on Marijuana
511
The use of forfeiture is highly controversial and arguably a questionable
exercise of prosecutorial discretion because forfeiture proceedings may: (1) act
as a backdoor to criminal prosecutions; or (2) be merely a substitute for criminal
prosecutions as the suspect has less protection in forfeiture proceedings.290
More
than likely, forfeiture is the main factor driving banks—especially those with deep
pockets—to refuse dispensaries after assessing the risks involved.291
The trend
shows that forfeitures related to money laundering, especially to narcotics,
accounts for a significant portion of cash or monetary seizures.
3. Unmasking the Real Cost of Doing Business with Marijuana
Businesses
As a quasi-deputy for the federal government, banks exercise unfettered
discretion through their Know Your Customer policies to refuse business
regardless of a real or perceived threat of federal prosecution. Unsurprisingly,
banks opt to refuse dispensaries rather than risk insolvency, lose FDIC Deposit
Insurance Coverage, or, more realistically, pay fines. The banks’ real, or
perceived, threat of federal prosecution jeopardizes the rise of a legitimate
marijuana industry. Banks are highly effective weapons to combat money
laundering, but also to discriminate against legitimate businesses, socially
undesirable classes, or the unbanked.
The penalty for banks convicted of money laundering is severe, which
underscores banks’ fear of insolvency when dealing with tainted funds.292
For
banks, the fear of insolvency when dealing with tainted funds is more realistically
aligned with the FDIC disciplinary process, civil and criminal fines, and
reputational harm from criminal liability. 293
In theory, money laundering
penalties spell impending doom with the “‘death penalty’ provisions—loss of a
bank charter or loss of deposit insurance—[that] discourage banks from
inadvertently becoming involved in money laundering.”294
290
Kamin, supra note 5, at 988; see supra notes 51–57 and accompanying text; see also
infra Table 4. But see State v. Nunez, 2 P.3d 264, 271–81 (N.M. 1999) (bifurcating civil
and criminal proceedings for the same offense to prosecute both civil forfeiture in
addition to incarceration attaches as double jeopardy, which is punitive in nature under
the New Mexico Constitution—and contrary to federal law).
291
See Williams, Ph.D., et al., supra note 273; Mazur, supra note 253; see also supra
note 84. But see, e.g., Tharoor, supra note 87. Personal liability for directors, officers, and
employees for insiders’ abuse is another major deterrent because the FDIC will request
the removal or prohibition of directors and officers. See infra Table 4–8. Rather than risk
corporate liability, banks will likely cast employees as scapegoats to mitigate penalties
from money laundering.
292
See supra notes 80–82 and accompanying text.
293
Id.; Paul Allan Schott, World Bank & Int’l Monetary Fund,
35052, Reference Guide to Anti-Money Laundering and Combating
the Financing of Terrorism: Second Edition and Supplement on
Special Recommendation IX, at II-4 to -6 (2006), available at http://
siteresources.worldbank.org/EXTAML/Resources/396511-1146581427871/Reference_
Guide_AMLCFT_2ndSupplement.pdf.
294
Alford, supra note 100, at 460.

54. Savannah Law Review [Vol. 2:2, 2015]
512
In reality, banks normally go through a corrective process with the FDIC
before losing the FDIC Insurance Coverage, making the death penalty provisions
rare occurrences.295
From 2009 to 2013, the available statistics show that criminal
prosecution and loss of FDIC Insurance Coverage for banks are low risks on an
overall basis: only 1 suspension (.01%) for criminal activity; and 8 terminations
(0.1%) of FDIC Insurance Coverage (none of which were imposed
involuntarily).296
Arguably, these risks merely translate into a cost of doing
business.297
For example, the following chart shows the inverse relationship
between the bank filings under the Bank Secrecy Act and actual penalties from
2009 to 2013:298
295
See infra Table 8. Compare 12 U.S.C. § 1820 (2012) (governing disciplinary
proceedings), with 12. U.S.C. § 1818 (2012) (terminating FDIC insurance).
296
See infra Table 4, 7–8.
297
See AML Report, supra note 97, at 4 (“Without tough and appropriate
penalties, sanctions will simply remain the cost of doing business for financial
institutions.”).
298
CTRs and SARs denote Currency Transaction Reports and Suspicious Activity
Reports respectively. See infra Table 2–8.
6,537
1,294
2,983
763
530 360
8 1
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
ConvictionsorPenalties
BSAFilings
B A N K S E C R E C Y A C T F I L I N G S T O P E N A L T I E S
2 0 0 9 - 2 0 1 3
CTRs filed (avg) SARs filed (avg)
FDIC-Insured Financial Institutions Convictions

55. Bank on Marijuana
513
Coupled with banks’ proliferous reporting, the small percentage of money
laundering convictions indicates that banks’ private regulation and policing of
money laundering amass for the bulk of policing of money laundering.299
As one
possible explanation, the main deterrent is more than likely bank employees, who
fear individual civil and criminal liability for servicing dispensaries.300
Moreover,
while dispensaries and banks alike may risk money laundering charges in routine
banking transactions, the threat of criminal conviction for banks is significantly
less when banks report dispensaries accordingly.301
To illustrate this entanglement of federal and bank policies, the Financial
Crimes Enforcement Network delivered a report at the request of the U.S.
District Attorney’s office for the District of Colorado regarding banks servicing
marijuana businesses in 2013. This report listed all the banks in Colorado filing
Suspicious Activity Reports on dispensaries from October 1, 2002, to October 1,
2012. From a total of 92 filing depository institutions, 37.1% of the Suspicious
Activity Reports filed involved 1,392 accounts with 979 being unique accounts
for dispensaries.
A little more than one out of every three Suspicious Activity Reports filed in
Colorado over a ten year period involved a dispensary. Also, out of the Suspicious
Activity Reports filed, a Suspicious Activity Report was likely filed more than
299
See, e.g., Mulligan, supra note 8, at 2359–63 (discussing the federal government’s
reliance on banks to deter money laundering).
300
See supra note 82 and accompanying text.
301
See infra Table 8.
1,585
1,292
1,149
763
908
732
675
530845
607
528
360
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
I NV E S T I G A T I O NS P R O S E CU T I O NS I ND I CT M E NT S S E NT E NCE S
NUMBER
STAGES OF THE ADVERSARIAL CRIMINAL JUSTICE SYSTEM
I.R.S. INVESTIGATIONS TO CONVICTIONS FOR MONEY
LAUNDERING, FINANCIAL CRIMES, AND BSA VIOLATIONS
I.R.S. Money Laundering I.R.S. Financial Crimes (Narcotics) I.R.S. BSA Violations

56. Savannah Law Review [Vol. 2:2, 2015]
514
once on average for seven out of ten dispensaries. The unique accounts comprise
of 70% of the Suspicious Activity Reports filed, indicating the likelihood of
dispensaries discreetly smurfing across various branches and banks and using
personal or non-descriptive business accounts. After these reports were filed,
banks received audits from the FDIC and were instructed to close the
dispensaries’ accounts.
In sum, the threat of future federal interference and federal prosecution for
marijuana businesses is real.302
Business owners’ tax identification obtained by
banks through banks’ Know Your Customer policies is the common denominator
in the paper trail to the Financial Crimes Enforcement Network, the IRS, and
ultimately to the federal prosecutors.303
From there, cherry picking marijuana
businesses for IRS investigations, criminal prosecutions, and forfeiture
proceedings based on size or profitability will take place under the guise of
“limited resources.” 304
Not just uncooperative, this federalism regime is
selective and arbitrary at best.
While money laundering is a serious issue in the United States, the time is at
hand to make the distinction between criminals and dispensaries when enforcing
anti-money laundering laws. At the heart of the matter, this issue belies banks’
arbitrary enforcement of anti-money laundering laws against dispensaries: the
improper delegation of veto power to banks and economizing prosecutorial
discretion from banks’ data collection. The extensive policing of money
laundering by banks, as private actors, combined with the insignificant
percentage of criminal convictions for money laundering, undermines the
effectiveness of using banks to enforce anti-money laundering regulations against
dispensaries under the pretext of private discrimination. Such unfettered
discretion flies in the face of the right to a presumption of innocence.305
C. Marijuana Businesses Face Stigma from the Banking Industry
Because the Money Laundering Control Act of 1986 criminalizes money
laundering, the criminal sanctions associated with money laundering also attach
a social stigma against dispensaries denying them equal access to banking.306
Inevitably, dispensaries operate in a legal limbo without legal access to banking.
Banks’ Know Your Customer policies exclude dispensaries by automatically
subjecting dispensaries to anti-money laundering laws like common criminals
without regard for state laws that legalize dispensaries.
Like individuals on the low-income level, dispensaries are swept into the
unbanked market because banks refuse their business. Today, “the unbanked”
302
See BSA Examiner’s Guide, supra note 39; Part III.A.1.; see also Blair Shiff
& Jeremy Jojola, Marijuana Shop Raided Again by DEA, KUSA-TV (Apr. 30, 2014, 4:46
PM), http://www.9news.com/story/news/investigations/2014/04/30/marijuana-shop-
dea/8504673/; supra note 39 and accompanying text.
303
Cal. Bankers Ass’n v. Shultz, 416 U.S. 21, 79–91 (1974) (Douglas, J., dissenting).
304
See Ogden Memo, supra note 51; Cole Memo I, supra note 50, at 1; Cole Memo II,
supra note 50, at 3; Clymer, supra note 213, at 682–97.
305
See In re Winship, 397 U.S. 358, 361–64 (1970).
306
See Villa, supra note 124, at 500–01.

57. Bank on Marijuana
515
refers to a class of people who only carry cash and do “not have a traditional bank
account . . . [relying on] alternative financial services.” 307
The unbanked,
excluded from cashless transactions, become stigmatized because dealing on a
cash-only-basis is becoming associated with individuals who are either poor or
criminals, and pose a high-risk to financial institutions.308
Without equal access
to banking, this stigma attaches to dispensaries seeking to operate as legitimate
businesses.
1. Unbanked Marijuana Businesses Invite Room for Error
This stigma challenges dispensaries’ long-term ability to survive the
marketplace,309
and ultimately threatens the viability of the retailer-supply-model
integral in the states’ drug policy reform efforts within an emerging marijuana
industry.310
Dispensaries are cast aside as an unbanked class of businesses ,311
a
status that interferes with their ability to manage their cash flow and profitability.
As society moves away from cash-and-carry to an era of electronic money, the
primary functions of a bank account are: “(1) to convert checks into money; (2)
to serve as a payment system to third parties; and (3) to provide security for
savings, eliminating the need to carry large amounts of cash . . . .”312
307
See Robbins, supra note 184, at 85.
308
See id. at 86–89. Compare Michael Snyder, A Cashless Society May Be Closer Than
Most People Would Ever Dare To Imagine, Econ. Collapse (Mar. 29, 2012),
http://theeconomiccollapseblog.com/archives/a-cashless-society-may-be-closer-than-
most-people-would-ever-dare-to-imagine (“Simply using cash is enough to get you
branded as a potential criminal these days.”), and H. Paul Leyva, M-Payment: A Threat to
Anti-Money Laundering, 34 Vt. B.J. 62, 63 (“Criminals will be able to bypass regulated
banks and their financial reporting requirements and exchange dirty money for digital
value in the form of stored value cards or mobile payment credits.”), with Adam J.
Levitin, Priceless? The Social Costs of Credit Card Merchant Restraints, 45 Harv. J. on
Legis. 1, 35 (2008) (“The poor are heavily overrepresented among the unbanked [as
cash-only consumers].”), Fed. Deposit Ins. Corp., Dep’t of Treas., 2011
FDIC National Survey of Unbanked and Underbanked Households
4, 14 (2012), available at https://www.fdic.gov/householdsurvey/2012_unbankedreport
.pdf (reporting that minorities such as African-Americans (21.4%), Hispanics (20.1%), and
Native Americans (14.5%) disproportionately comprise of more than half of the unbanked
population of 17 million (8.2%) Americans), and Lupica, supra note 140, at 561–65
(explaining contemporary consumerism today in America “that impact[s] class creation,
reinforcement, and mobility”).
309
Melendez, supra note 59 (stating that this situation draws elite business owners
with deep pockets enabling them to financially withstand the uncertain legal environment
surrounding the marijuana industry).
310
But see H.R. Rep No. 101-446 § 9 (1990) (designing recordkeeping
requirements to (1) limit governmental interference with legitimate banking business, (2)
allow exemptions for legitimately conducted routine business transactions, and (3) shift
the burden of providing specified information onto the customer rather than banks who
are not in a position to obtain information).
311
Robbins, supra note 184, at 85–86.
312
See Pérez, supra note 16, at 1591.

58. Savannah Law Review [Vol. 2:2, 2015]
516
In this new era of electronic money, operating on a cash-and-carry basis is
an unsustainable way to manage finances in the long-term.313
Consequently,
dispensaries resort to fringe banking services, laundering their own money, or a
combination thereof like common criminals.314
This unbanked status often leads
dispensaries to resort to any of the following: (1) high-interest, high-fee fringe
banking services such as pawn shops, payday lenders, or check-cashing services
(known as Money Services Businesses); 315
(2) tax evasion; 316
(3) the aid of
organized crime;317
or (4) a high susceptibility to robbery.318
Primarily, unbanked dispensaries are concerned with two major issues:
security319
and accurate recordkeeping.320
Because dispensaries largely operate
on a cash-and-carry basis, they often store large amounts of cash onsite, which
invites robbery. For IRS auditing purposes, dispensaries have a much harder time
creating a paper trail without reliable banking services for easier recordkeeping.321
This predicament inevitably creates room for error and subjects dispensaries to
further scrutiny in a whirlwind fashion from tax implications, compliance issues,
and possible criminal prosecution.322
2. Normative Values on Marijuana Backfire and Restrict Autonomy
As one of its primary roles, the government exists at the hub of our economy
to promote commerce and “the means and instrumentalities that are necessary
to commerce.”323
Government interference with these rights is justified only
313
See Leyva, supra note 308 (“The widespread adoption of m-payment could
eliminate the need to carry cash, visit an ATM machine, send wire transfers, or even use a
credit card.”); Snyder, supra note 308.
314
See Realuyo, supra note 83, at 11–13; see also supra Part II.B.1.
315
See Pérez, supra note 16, at 1595 (fringe banking services).
316
See Leyva, supra note 308, at 64–65 (tax evasion); Robert A. Mikos, State Taxation
of Marijuana Distribution and Other Federal Crimes, 2010 U. Chi. Legal F. 223, 232–
48 (2010) (tax evasion).
317
See, e.g., Kindle, supra note 85; Aaron Sankin, Why the Silk Road 2.0 Bust Didn’t
Sink Bitcoin Prices, Daily Dot (Nov. 6, 2014), http://www.dailydot.com/business/
bitcoin-price-silk-road-2/ (organized crime); Patrick Howell O’Neill, Shunned by Banks,
Legal Weed Retailers are Turning to Bitcoin, Daily Dot (Feb. 7, 2014),
http://www.dailydot.com/business/shunned-banks-legal-weed-retailers-bitcoin/.
318
See Kindle, supra note 85; Ingram, supra note 1 (robbery).
319
Ryan Grim & Ryan J. Reilly, Department of Justice ‘Actively Considering’ How to
Allow Bank, Pot Shop Transactions, Citing Public Safety, Huffington Post (Aug. 30,
2013), http://www.huffingtonpost.com/2013/08/30/banks-marijuana_n_3842526.html.
320
William H. Hoffman, Medical Marijuana Dispensaries Persist Despite Tax Obstacles,
Tax Analysts 825, 825-27 (May 14, 2012), http://www.woodllp.com/Publications/
Articles/pdf/Medical_Marijuana_Dispensaries.pdf.
321
Joel Connelly, Marijuana: Bank on it—Rep. Heck, Seattle Post-
Intelligencer (Aug. 22, 2013, 8:06 PM), http://blog.seattlepi.com/marijuana/2013/
08/22/marijuana-bank-on-it-rep-heck/.
322
See supra note 51 and accompanying text. But see infra Part III.C.1.
323
George J. Terwilliger III, Impediments to Commercial Risk-Taking, 12 Tex. Rev.
L. & Pol. 425, 426 (2008) (describing the government’s role as “preventing fraud on
the market, protecting the engines of commerce: transportation, communication,

59. Bank on Marijuana
517
when deemed “necessary or proper for the mutual good of all.” 324
Hence,
concessions of individual liberty are usually couched as being in the best interests
of the collective society.325
When normative values trump the fundamental rights
of a few, the law tends to produce absurd results.326
With modern regulations, banking is no longer private and subject to review
largely because of drug trafficking; this focus became eclipsed by terrorism after
September 11, 2001.327
After such a traumatic event, a more pro-law enforcement
approach tipped the scales on one’s reasonable expectations of privacy that is
often more violative of individual privacy rather than a balanced approach.328
The
banks’ voluminous reporting of customer information to government agencies
discloses a wealth of sensitive, financial information left to the idle curiosity of
law enforcement and searchable by a mere keystroke—before any rights attach
under the Fourth or Fifth Amendment.329
The banks’ literal enforcement of anti-money laundering laws against
dispensaries leads to absurd, discriminatory results. Banks deprive dispensaries
of the means necessary to conduct business like any other legitimate business.
Federal authorities requiring the banks’ mandatory reporting on dispensaries to
government agencies may ultimately deprive business owners of their ability to
pursue a legitimate profession selling marijuana under state law through the use
financing, banking, honest and free markets themselves, and protecting . . . the integrity of
courts which are necessary to the orderly resolution of business disputes”).
324
Slaughter-House Cases, 83 U.S. 36, 116 (1872) (Bradley, J., dissenting).
325
Letter from James Madison to Thomas Jefferson (Oct. 17, 1788), in 5 The
Writings of James Madison, 1787–1790, at 271 (Gaillard Hunt ed., 1904).
326
Green v. Bock Laundry Mach. Co., 490 U.S. 504, 527 (1989) (Scalia, J.,
concurring,) (referencing the absurd results doctrine as the literal application of a statute
leading to an absurd and possibly unconstitutional result, justifying consultation of the
background of the statute and legislative intent); see supra note 182.
327
Later federal regulation reinforced these earlier strategies as counter measures to
money laundering from more of an international perspective from the War on Drugs to
the War on Terror. The Money Laundering and Financial Crimes Strategy Act of 1998
enhanced the collaborative efforts countering money laundering at the state and local
level that encourage reverse money laundering sting operations against foreign suppliers
of narcotics. Pub. L. No. 105-310, 112 Stat. 2941 (1998) (codified as amended in 31 U.S.C.
§ 5341–55(2014)); see 28 U.S.C. §524(c) (2012); 31 U.S.C. §9703(a)(2)(B)(i) (2012);
Leff, supra note 6, at 24–25, 29. The USA PATRIOT Act held U.S. banks more
accountable for transactions occurring with foreign correspondent banks and criminalized
bulk cash smuggling. Pub. L. No. 107-56, §§ 301–77, 115 Stat. 272, 296–342 (2001).
Additionally, the Intelligence Reform & Terrorism Prevention Act of 2004 was passed
“requiring certain financial institutions to report cross-border electronic transmittals of
funds, if the Secretary determines that such reporting is ‘reasonably necessary’ to aid in
the fight against money laundering and terrorist financing.” AML History, supra note 2;
Pub. L. No. 108-458, §§ 6001–04, 118 Stat. 3638, 3742–64 (2004).
328
James Leonard, Criminal Procedure—Oliver v. United States: The Open Fields
Doctrine Survives Katz, 63 N.C. L. Rev. 546, 562 (1985) (“Fourth amendment law is
forged from the tension between each citizen’s desire to be free of governmental intrusion
upon his privacy and society’s need to enforce its laws . . . ideally [] preserv[ing] at least
those privacy interests necessary to maintain individual freedom.”).
329
See generally Warren & Brandeis, supra note 249 (discussing the evolution of
privacy as a right and whether that right will sway to public opinion).

60. Savannah Law Review [Vol. 2:2, 2015]
518
of forfeiture. Under the Controlled Substances Act, dispensaries become a prima
facie criminal case regardless of whether dispensaries are prosecuted under anti-
money laundering laws.330
3. The Long March Forward in the Future of Banking Regulations
Dispensaries will likely resort to other means of processing cash to survive
in the marijuana industry, which ultimately undermine government banking
regulations. The future of banking and governmental regulation over the banking
industry hinges on moving past regulating the traditional role of deposits.331
Technology is changing the landscape of the banking industry. Existing
regulations are becoming outmoded, forcing the government to rely heavily “on
greater and more sophisticated private market discipline, the still most effective
form of regulation.”332
Over the years, the Bank Secrecy Act has evolved its
approach, combatting money laundering by adding on layers that regulate the
banking industry and close loopholes in the system.333
For example, Currency Transaction Reports do not prevent money
launderers from using other forms of monetary instruments or services for
cashless transactions that do not trigger a Currency Transaction Report. The
Anti-Drug Abuse Act of 1988 closed the loophole with banks selling monetary
instruments such as money orders, cashier’s checks, or traveler’s checks. Now,
banks are required to follow stricter identification procedures and report all
purchases of monetary instruments in excess of $3,000.334
In response to heavy
banking regulations, financial institutions created more efficient means of
pumping liquidity into the market: Electronic Funds Transfer (EFT); 335
Automatic Clearing House (ACH); Automated Teller Machines (ATM); Point-
of-Sale Terminals; cash disbursing machines operating on private ATM
networks; credit cards; interest rate swaps; and mortgages.336
Regulations are also starting to close loopholes with the fringe banking
services commonly referred to as Money Services Businesses. 337
Money Services
330
Klein & Grobey, supra note 41, at 113.
331
See Akindemowo, supra note 139.
332
Alan Greenspan, Chairman, U.S. Fed. Reserve Bd., Remarks at the Sixth Annual
Reception for Regulators on Technology and Banking (Nov. 20, 2000), available at
http://www.federalreserve.gov/boarddocs/speeches/2000/20001120.htm; see Lupica,
supra note 140, at 610 (“[P]rivate counterparty supervision remains the first line of
regulatory defense.”).
333
See Meltzer, supra note 6, at 255; Realuyo, supra note 83; see also AML History,
supra note 2.
334
31 U.S.C. § 5325 (2012).
335
15 U.S.C. §§ 1693–1693r (2012); 31 C.F.R. § 1010.340(d) (2013) (excluding “[a]
transfer of funds through normal banking procedures which does not involve the physical
transportation of currency or monetary instruments” from reporting requirements); see
also Electronic Fund Transfer Act of 1978, Pub. L. No. 95-630, § 2001, 92 Stat. 3641,
3728–41 (1978) (codified as amended in 15 U.S.C. §§ 1693–1693r).
336
See generally Oedel, supra note 141, at 327–402 (discussing private interbank
controls adapting to governmental regulations).
337
31 C.F.R. 1010.100(ff) (2013).

61. Bank on Marijuana
519
Businesses fill a void for money launderers by: (1) exchanging and dealing with
currencies; (2) selling monetary instruments, such as traveler’s checks or money
orders; (3) providing check-cashing or prepaid access (Stored Value Products);338
(4) serving as money transmitters (i.e., hawala networks) or cash carriers (i.e.,
armored trucks);339
or (5) offering U.S. Postal Services onsite.340
Some Money Services Businesses are still at arm’s length from anti-money
laundering laws. Money Services Businesses are required to register with
Financial Crimes Enforcement Network, but not all do. To qualify as a registered
Money Services Business, the business must meet the threshold of doing any of
the aforementioned activities in excess of $1,000 per day per person over the
course of one or multiple transactions. 341
Therefore, some Money Services
Businesses may escape notice of federal oversight and fall prey to money
laundering.342
Moreover, Suspicious Activity Reports serve no purpose to detect
money laundering if the business is not registered with Financial Crimes
Enforcement Network.
Ultimately, the financial industry adapts to the labyrinth of governmental
regulation and finds other means of freeing liquidity into the stream of commerce
with less federal oversight over time.343
Cashless transactions are becoming the
normative payment method and eventually will surpass the traditional deposit
model of banking.344
Modern technology has transformed the role of banks from
mere depository institutions to the medium for exchange in daily (e)commerce.345
338
Any financial institution that sells prepaid access in excess of $10,000 in a single
day must file a Currency Transaction Report. 31 C.F.R. § 1010.100(ff)(7)(ii) (2013); see
also BSA/AML Manual, supra note 5, at 307–15 (outlining risk assessment
procedures for Money Services Businesses).
339
Recently, Financial Crimes Enforcement Network closed the loophole for cash-
carriers, as they are no longer exempt from Currency Transaction Report filings. Fin.
Crimes Enforcement Network, Dep’t of Treas., FIN-2013-R001,
Treatment of Armored Car Service Transactions Conducted on
Behalf of Financial Institution Customers or Third Parties for
Currency Transaction Report Purposes (2013), available at http://www
.fincen.gov/news_room/rp/rulings/html/FIN-2013-R001.html.
340
31 C.F.R. 1010.100(ff) (2013).
341
31 C.F.R. 1010.100(ff)(2)(i) (2013) (defining the threshold for a money services
business as one “that accepts checks . . . or monetary instruments . . . in return for
currency or a combination of currency and other monetary instruments or other
instruments, in an amount greater than $10,000 for any person on any day in one or more
transactions”).
342
AML Report, supra note 97, at 9, 17–18, 23 (noting that Financial Crimes
Enforcement Network “has yet to implement the mandatory registration of all U.S.
money service businesses”).
343
Bruce L. Rockwood, Interstate Banking and Nonbanking in America: A New Recipe
for an Old Prescription or Why Does the Elephant Banker Wear Tennis Shoes and Water
Wings, and Carry an Economist Pocket Diary?, 12 Seton Hall Legis. J. 137, 157
(1989).
344
See Pérez, supra note 16, at 1591–93 (“[B]ank debit cards are now perhaps more
common and more secure than cash.”).
345
See id. at 1591–93 (“[W]ith the rise of the Internet, online banking has made
everything from direct deposit to paying bills to applying for home or educational loans
easily accessible and instantaneous.”).

62. Savannah Law Review [Vol. 2:2, 2015]
520
As technology creates new means of commerce, new emerging payment
systems are rapidly changing the dynamics of monetary exchanges. Beyond the
physical exchange of funds, and governmental regulation over these physical
funds, three primary examples of emergent payment systems include the
following: Stored Value Products such as pre-paid gift cards or credit cards (i.e.,
prepaid access);346
mobile banking, or (m)commerce, that allows the transfer of
funds through mobile applications;347
and peer-to-peer digital currency such as
Bitcoin.348
Additionally, mobile technology has launched entirely new parameters
for peer-to-peer cashless exchanges outside the purview of regulation in
(m)commerce.
While legislation lags behind, these new emergent payment systems alter the
dynamics of money exchange and create new opportunities for money laundering
beyond the scope of heavily regulated financial institutions.349
When banks refuse
dispensaries, dispensaries may resort to using these various emergent payment
systems to stay afloat. Allowing dispensaries equal access to banking would
ensure greater transparency for states to police dispensaries instead of
encouraging these alternative systems beyond governmental oversight.
4. The Need for Fiscal Transparency in a Rising Marijuana Industry
Originally, anti-money laundering laws emerged because the suppliers
behind drug trafficking in the United States were mainly international parties
outside of the federal government’s jurisdiction to prosecute. Without the ability
to control the source of drugs, the federal government monitored paper trail to
track the proceeds of drug trafficking through funds transmitters and
intermediaries instead—primarily depository institutions in the beginning.350
Now, the federal government views dispensaries as “generating
disproportionately large sums of cash through the sales of marijuana and
marijuana tainted products when they should be operating as essentially
nonprofit enterprises. Most of these profits are going unreported.” 351
The
346
31 C.F.R. § 1022.420 (2012).
347
See Akindemowo, supra note 139, at 8–13, 34 (defining digital money as “(a) a
contrast with or the exclusion of deposit access products; (b) a reference to the
transferability of stored value units by abstract means, whether this is via a terminal,
infrared technology, contactless technology, etc.; (c) note that transfers are
disintermediated and between peers; and (d) a reference to the mobility of the device,
where units are stored on a device in the possession of the user (rather than on a central
server)”).
348
See Emily Flitter, FBI Shuts Alleged Online Drug Marketplace, Silk Road,
Reuters (Oct. 2, 2013), http://www.reuters.com/article/2013/10/02/us-crime-
silkroad-raid-idUSBRE9910TR20131002. See generally Bitcoin Project, http://
bitcoin.org/en/ (explaining how peer to peer digital currency works removing banks as
intermediaries).
349
See Akindemowo, supra note 139, at 8–13, 34.
350
See The Cash Connection, supra note 6.
351
Drug Enforcement Admin., Dep’t of Justice, The DEA
Position on Marijuana 14 (Apr. 2013), available at www.justice.gov/dea/
docs/marijuana_position_2011.pdf.

63. Bank on Marijuana
521
government’s concern is that “the money from illegal drugs is so substantial that
it attracts organized criminal groups and makes criminals out of otherwise honest
citizens.”352
To curtail marijuana trafficking by organized crime, the states legalizing
marijuana simply created a legal source of marijuana trafficking that directly
attacks illegal marijuana trafficking through capitalism.353
The marijuana industry
is slowly emerging as a growing legitimate industry, though a heavily regulated
one, to weed out criminals from non-criminals. Because it is an emerging
industry, there is the potential for abuse, including drug dealers and organized
crime using marijuana businesses as a shell to hide other illegal activities.354
Initially, transparency within a controlled banking environment is crucial to draw
out the underground elements attracted to the legitimate marijuana industry in
its early stages.355
Such measures, though, should have a sunset provision or bear
the risk of being overly intrusive.
Clearly, the backdoor approach that indirectly attacks marijuana trafficking
through anti-money laundering laws—with a lopsided focus on regulating
depository institutions—has proven to be ineffective in stemming marijuana
trafficking over the last forty years.356
But this indirect approach has been highly
effective in casting a large net, reaching well beyond marijuana trafficking.
Allowing dispensaries equal access to banking would foster overall safety and
fiscal transparency in the beginning stages of this new, regulated industry rather
than driving the marijuana industry underground again.
Without equal access to banking, dispensaries remain at a significant
economic disadvantage to survive the turbulent beginnings of legitimizing the
marijuana industry.357
Overall, this uncertain legal environment for dispensaries
exacts a high “social cost of imposing such a stigma on individuals–especially
those who have not been convicted of, let alone charged with, any crime–[]
present[ing] grave civil liberties concerns even for the most ardent law-and-order
legislator.”358
If the federal government deputizes banks to enforce its marijuana
laws—while the state governments do not—then the federal government creates
an impossible situation for dispensaries to be accurately and fairly transparent in
352
Id.
353
See generally Dickson, supra note 22 (discussing capitalistic warfare against
organized crime).
354
See Davis, supra note 53 (convicting marijuana business owner of money
laundering). But see Mazur, supra note 253.
355
See Lindberg, supra note 29, at 63–64; Press Release, San Diego Man is Sentenced
to 100 Months for Running Marijuana Dispensary and Money Laundering, U.S. Drug
Enforcement Admin., U.S. Dep’t of Justice (Jan. 24, 2013), available at http://www.
justice.gov/dea/divisions/sd/2013/sd012413.shtml; see also Fernández et al., supra note
139, at 29.
356
See O’Hara, supra note 41.
357
See supra notes 51, 57–59, and accompanying text.
358
See Villa, supra note 124, at 500–01.

64. Savannah Law Review [Vol. 2:2, 2015]
522
their business reporting: “what else is to be concluded from this, but that you
first make [criminals] and then punish them.”359
IV. Marijuana Businesses Need a Public-Private Banking Partnership
A working solution for marijuana businesses already exists within the
framework of banking regulations in a sister industry of vices: the casino model.360
In states prohibiting gambling, casinos are technically in violation of federal law.
But, casinos are legal under federal law for states sanctioning casino gambling,
and many states have legalized some form of gambling.361
While casinos are also
listed as financial institutions, casinos are exempt from filing Currency
Transaction Reports for deposits given the nature of the gambling industry which
deals heavily in cash. Just like bank employees, casino employees are trained to
watch any betting in excess of $10,000, to file a Currency Transaction Report, or
possibly remit a Suspicious Activity Report. But, as regulated as casinos are,
gambling is not listed as a Specified Unlawful Activity.362
Formulating a well-designed program with the Department of Treasury does
not require an act of Congress to create a safe harbor for banks servicing
marijuana businesses. As a short term solution, states allowing marijuana
businesses could jointly petition to the Secretary of the Department of Treasury
to: (1) add marijuana businesses as type of financial institution; (2) exempt
marijuana businesses from Currency Transaction Report filings; and (3) make
marijuana businesses, as licensed distributors of marijuana pursuant to state law,
an exception to controlled substances regulation (conditional upon providing
licensing documentation with application for exemption status).
Still, although the Secretary of the Treasury is authorized to change banking
regulations without an act of Congress, the Secretary, like Congress, may also
revoke and repeal any exemptions made after a certain period of time. 363
Moreover, the any solution Department of Justice may implement will be subject
359
Thomas Moore, Utopia 10–11 (Paul Negri et al. eds., Dover Thrift ed.
1997) (1516).
360
31 C.F.R. §§ 1021.100-1021.670 (2013). But see 31 C.F.R. § 1010.311 (2013).
361
18 U.S.C. § 1955 (2012).
362
The cooperative federalism regime surrounding recent developments in the
marijuana industry is parallel to the gambling industry, which is also illegal on the federal
level in states that have not sanctioned gambling. The gambling industry has produced
extensive case law defining proceeds in relation to money laundering, but gambling
businesses’ proceeds are not defined as a Specified Unlawful Activity. In contrast,
dispensaries’ proceeds are a Specified Unlawful Activity. See Jon Patterson, Internet
Gambling and the Banking Industry: An Unsure Bet, 6 N.C. Banking Inst. 665, 691
(2002); I. Nelson Rose, Gambling and the Law—Update 1993, 15 Hastings Comm. &
Ent L.J. 93, 111 (1992); Virgil W. Peterson, Obstacles to Enforcement of Gambling Laws,
269 Annals 9, 14, 18 (1950).
363
12 U.S.C. § 1829b (2012); see supra note 188 and accompanying text.

65. Bank on Marijuana
523
to change at will, reserving the federal government’s right to enforce federal
law.364
For these reasons, although the federal government has expressed grudging
tolerance for state-sanctioned marijuana businesses, the states are in the best
position to extend protection to marijuana businesses so that marijuana
businesses do not remain handicapped by anti-money laundering laws.365
Beyond
the minimum protections offered by the U.S. Constitution, states can provide
additional protection to their constituents by amending state constitutions to
withstand attacks from federal preemption. Thus, states may give greater
protection to marijuana businesses through state-created rights to banking and
privacy.366
Furthermore, states could do a better job than just following the casino
model. Establishing a state bank for the sole purpose of allowing marijuana
businesses to have banking access may not be legal, nor a cost-effective solution
for states. However, states would benefit by creating a private-public partnership
with in-state banks (or branches) in a controlled environment of intrastate
commerce by creating a state safe-harbor exemption list of preapproved
marijuana businesses for banks. 367
Anti-money laundering laws, like the
Controlled Substances Act, are grounded in the Commerce Clause reaching
interstate commerce (and intrastate commerce that impacts interstate
commerce, in the aggregate).368
States enterprising in progressive drug reform policies need to rectify the
situation of unequal access to banking for marijuana businesses beforehand—not
as an afterthought. In theory, if a banking account was structured in a manner for
only intrastate commerce, then anti-money laundering laws may yield in an era
of cooperative federalism. Lending services to marijuana businesses would still
be classified as an interstate activity under the Commerce Clause, but depository
364
Pete Yost, Feds Seek to Legalize Marijuana Industry Banking, Denver Post
(Sept. 10, 2013, 1:09:25 AM), http://www.denverpost.com/news/ci_24057692/
congress-looks-at-justices-marijuana-decision.
365
See supra Part II.A.
366
The law is well settled that states may grant additional rights above and beyond
the U.S. Constitution but States may not take away rights guaranteed by the U.S.
Constitution. Hence, states legalizing marijuana should also create additional legal rights
for a right to health and a right to access financial services within state constitutions to
safeguard marijuana businesses and consumers. Thus, creating a legal right affords
marijuana businesses a remedy that may withstand federal preemptive attacks. See People
v. Gutman, 959 N.E.2d 621, 625–31 (Ill. 2011) (“A federal court’s construction of a
federal statute is not binding on Illinois courts in construing a similar state statute.”);
State v. McAllister, 875 A.2d 866, 874–75 (N.J. 2005); Conant v. Walters, 309 F.3d 629,
644–45 (9th Cir. 2002) (Kozinski, J., concurring) (bifurcating the supply of marijuana
from physicians, who prescribe marijuana, to dispensaries does not implicate physicians
in marijuana trafficking under the Controlled Substances Act); State v. Kaluna, 520 P.2d
51, 57–60 (1974); see also Brennan, Jr., supra note 226; supra note 54 and accompanying
text; cf. Oregon v. Hass, 420 U.S. 714, 719 (1975); Miranda v. Arizona, 384 U.S. 436,
490–91 (1966).
367
See Grant, supra note 159, at 268.
368
18 U.S.C. §§ 1956–57 (2012).

66. Savannah Law Review [Vol. 2:2, 2015]
524
accounts may be restricted to intrastate commerce to limit the impact on
interstate commerce.
While this concept may seem similar to the savings and loans banking model,
this solution is tailored more after trust accounts set up for state government
retirement plans involving securities. Under the Securities Exchange
Commission, the government monitors securities and insider trading for high-
risk profile businesses. Similarly, this solution tightly regulates the movement of
cash for high-risk profile businesses where the government dictates to financial
institutions which businesses are legitimate. This solution creates a safe harbor
for financial institutions, and removes the incentive for financial institutions to
create a blanket reporting regime against marijuana businesses, which would
accomplish the following: (1) reduce or remove the risk of money laundering
penalties for financial institutions that service marijuana businesses; and (2) give
financial institutions leeway to report only targeted suspicious activity should the
occasion arise.
Under this regime, banks’ reporting of any suspicious activities regarding
marijuana businesses should be directed to the state agency responsible for
maintaining business licenses for marijuana businesses. 369
The discretion to
monitor and police the activities of marijuana businesses, as the legal supply of
marijuana under state law, should fall squarely within the state agency
responsible for licensing marijuana businesses—not banks. A public-private
partnership would leverage the existing banking system as long as the state
strictly confined banking activities of marijuana businesses within intrastate
commerce. This framework would allow fiscal transparency—a system that
protects owners of marijuana businesses that are in compliance with state
regulations and redline those who are not. Moreover, banks would be well
positioned to cater to the clientele of marijuana businesses without fear of
prosecution for money laundering.
States could create an Access to Banking program for state-licensed marijuana
businesses in good standing. The program would enlist designated depository
institutions to offer deposit accounts for registered, state-licensed marijuana
businesses. Similar to states requiring accounts for government employee
retirement accounts, the state can establish trustee accounts for individual
marijuana businesses and reserve control over intrastate banking activities. In
turn, states could provide protection to marijuana businesses from anti-money
369
See, e.g., Money Remittances Improvement Act, supra note 12; Press Release,
Ellison and Paulsen Reintroduce Money Remittances Improvement Act To Help Somali
Families Send Money Home, Sen. Keith Ellison & Sen. Erik Paulsen, U.S.S. (Apr. 4,
2014), http://ellison.house.gov/media-center/press-releases/ellison-and-paulsen-
reintroduce-money-remittances-improvement-act-to. Congress passed the Money
Remittances Improvement Act for Somali-Americans to send money from non-bank
financial institutions overseas and support family members in Somalia. Preexisting
legislation served as a major interference for Somali-Americans to support their families
abroad. This example demonstrates that the Secretary of the Treasury has discretion to
direct federal agencies to state agencies instead and give states more autonomy over state
programs. Thus, the Secretary of the Treasury has the wherewithal to implement such
changes without an act of Congress, but, again, this solution is subject to change.

67. Bank on Marijuana
525
laundering laws with the state licensing agency controlling deposits, transfers,
and disbursements of funds. State licensing agencies would establish trustee
accounts for each marijuana business, designating an authorized state official
from the state licensing agency for marijuana businesses as the fiduciary on each
account.
Banks would have no discretion over the account because the discretion is left to
the corresponding state agency who has access to review and approve marijuana
businesses’ banking accounts in accordance with licensing and compliance
requirements. Good standing with licensing and compliance would ensure access to a
deposit account. Marijuana businesses would have the flexibility to transfer funds to
another bank account provided the bank account was within the same state and
approved by the state official, meaning all cash transfers would have to be pre-
approved. Because the state is the fiduciary and trustee on the account, marijuana
businesses and banks alike would benefit from the states’ immunity in the event that
the Secretary of the Treasury, Congress, or other federal government entities decided
to enforce the prohibition on marijuana again.
Still, this framework is a short-term solution that neither entertains
reciprocity between states in the long-term nor addresses commercial lending.
Both scenarios would probably fall under the jurisdiction of the Commerce
Clause as interstate commerce activities should federal preemption occur. As a
caveat, this model would probably cease as soon as marijuana is rescheduled
under Schedule II-V of the Controlled Substances Act or legalized. Regardless of
the legal status of marijuana, the federal government more than likely will want
to have more oversight on transactions involving marijuana businesses because
of the nature of the industry to draw both legitimate and illegitimate sources of
income. In that instance, the casino model would be highly instructive to allow
states flexibility as to whether states choose to legalize marijuana and exempt
marijuana businesses from the Controlled Substances Act.370
V. Conclusion
Medical or recreational marijuana is a legitimate business that warrants
nothing short of equal access to banking with all the appropriate safeguards like
any other business. Under the Bank Secrecy Act’s current reporting regime, the
federal government improperly deputizes financial institutions, assigning non-
delegable duties reserved for law enforcement. Financial institutions are no
longer disinterested third parties but rather active whistleblowers. Consequently,
marijuana businesses are unfairly cast aside as an unbanked class of business,
facing a stigma that other state-licensed businesses do not. This relegated status
threatens to undercut states’ progressive reforms where states are relying upon
marijuana businesses as the means to create a self-sustaining, regulatory regime
for marijuana. The status quo is unworkable and new solutions are necessary.
States should have the freedom to experiment with new drug policies without
federal interference, or improper prosecutorial discretion that conflates a rising
marijuana industry with those who truly wish to avoid the law.
370
See, e.g., Respect State Marijuana Laws Act of 2013, H.R. 1523, 113th Cong. (2013).

68. Savannah Law Review [Vol. 2:2, 2015]
526
Appendix
Table 1: State Laws & the District of Columbia Legalizing Marijuana in 2014371
State Legal Medical Act(s) Laws
Alaska 2014 1998 Medical Uses of Marijuana for
Persons Suffering from
Debilitating Medical Conditions
Act of 1998; Tax and Regulate the
Production, Sale, and Use of
Marijuana of 2014.
Alaska Stat. §§ 17.37.010-.080 (2013);
2014 Initiative Meas. No. 2, 828th
Leg., 2d Reg. Sess (Alaska 2014) (Bal.
Meas. No. 2 to be codified as Alaska
Stat. §§ 17.38.010-.900, 43.61.010-
.030).
Arizona No 2010 Arizona Medical Marijuana Act of
2010.
Ariz. Rev. Stat. Ann. §§ 36-2801 to -
2819 (West 2014).
California No 1996 Compassionate Use Act of 1996. Cal. Health & Safety Code §§ 11362.5,
11362.7-.9 (West 2014).
Colorado 2012 2000 Marijuana Initiative No. 20 of
2000; Amendment 64 of 2012;
Colorado Medical Marijuana Code
of 2010.
Colo. Const. art. XVIII, §§ 14, 16
(West 2014); Colo. Rev. Stat. Ann. §§
12-43.3-101 to -1102, 18-18-406 to -
406.5, 25-1.5-106 (2014).
Connecticut No 2012 Palliative Use of Marijuana Act of
2012.
Conn. Gen. Stat. Ann. §§ 21a-277 to -
278, -279 to -279a, 21a-408 to -408q
(West 2013).
D.C. 2014 2010 Legalization of Marijuana for
Medical Treatment Initiative Act
of 2010; Legalization of Possession
of Minimal Amounts of Marijuana
for Personal Use Act of 2014.
D.C. Code Mun. Regs. Tit. G-II, §§ 7-
1671.01 to .13 (2014); D.C. Code §§ 1-
1001.16, 48-904.01 (2014) (2014
Initiative Meas. No. 71).
Delaware No 2011 Delaware Marijuana Medical Act
of 2011.
Del. Code Ann. tit. 16, §§ 4901A-
4926A (2014).
Hawaii No 2000 Medical Use of Marijuana Act of
2000.
Haw. Rev. Stat. §§ 329-121 to -128
(2014), amended by H.B. 668, 27th
Leg., Reg. Sess. (Haw. 2015).
Illinois No 2013 Compassionate Use of Medical
Cannabis Pilot Program Act of
2013.
410 Ill. Comp. Stat. Ann. §§ 130/1 to
/999 (West 2014)
Maine 2013* 1999 Maine Medical Marijuana Act of
1999 as amended by the Maine
Medical Use of Marijuana Act of
2009.
Me. Rev. Stat. tit. 22, §§ 2383, 2421-
2430-B (West 2013); see also
Portland, Me., Code ch. 17, art. VIII,
§§ 113-119 (legalizing recreational use
only in municipality).
Maryland No 2014 Marijuana Control Act of 2014. Md. Code Ann., Health-Gen. § 13-
3301 to -1336 (West 2014)
Massachusetts No 2012 Humanitarian Medical Use of
Marijuana Act of 2012.
Mass. Gen. Laws Ann. ch. 94C, §§ 1-
49 (West 2014); Mass. Gen. Laws
Ann. ch. 94C app., §§ 1-1 to -17 (West
2014).
Michigan No 2008 Michigan Medical Marihuana Act
of 2008.
Mich. Comp. Laws Ann. §§
333.26421-.26430 (West 2014).
371
These compilations were generated on November 11, 2014. 23 Legal Medical
Marijuana States and DC, ProCon.org, http://medicalmarijuana.procon.org/
view.resource.php?resourceID=000881 (last updated July 31, 2014); State Laws, Nat’l
Org. for the Reform of Marijuana Laws, http://norml.org/states (last
visited Nov. 30, 2015).

69. Bank on Marijuana
527
State Legal Medical Act(s) Laws
Minnesota No 2014 Medical Marijuana (Cannabis) Use
Authorization Act of 2014.
S.B. 2470, 88th Legis., Reg. Sess.
(Minn. 2014) (enacted and to be
codified in Minn. Stat. § 13.3806).
Montana No 2004 Montana Marijuana Act of 2004. Mont. Code Ann. §§ 50-46-301 to -
344 (2013).
Nevada No 2000 Medical Use of Marijuana Act of
2000.
Nev. Const. art IV, § 38 (West 2013);
Nev. Rev. Stat. Ann. §§ 453A.010-
.810 (West 2013).
New Hampshire No 2013 Use of Cannabis for Therapeutic
Purposes Act of 2013.
N.H. Rev. Stat. Ann. §§ 126-X:1 to –
X:11 (West 2014).
New Jersey No 2010 New Jersey Compassionate Use
Medical Marijuana Act 2010.
N.J. Stat. Ann. §§ 24:6I-1 to -16 (West
2013).
New Mexico No 2007 Controlled Substances
Therapeutic Research Act of 1978;
Lynn and Erin Compassionate Use
Act of 2007; Controlled
Substances Act of 1972.
N.M. Stat. §§ 26-2A-1 to -7, 26-2B-1
to -7, 30-31-1 to -41 (2014).
New York No 2014 Compassionate Care Act of 2014. N.Y. Crim. Proc. Law §§ 216.00,
410.91 (McKinney 2014); N.Y. Penal
Law §§ 179.00-.15, 221.00-.55
(McKinney 2014); N.Y. Pub. Health
Law §§ 3360 to 3669-E (McKinney
2014); N.Y. Gen Bus. Law § 853
(McKinney 2014); N.Y. State Fin.
Law § 89-h (McKinney 2014); N.Y.
Tax Law §§ 490-491 (McKinney
2014).
Oregon 2014 1998 Oregon Medical Marijuana Act of
1998; Control, Regulation, and
Taxation of Marijuana and
Industrial Hemp Act of 2014.
Or. Rev. Stat. Ann. § 475.300-.375
(2013); S.B. 1556, 77th Leg., Reg.
Sess. (Or. 2014) (2014 Initiative Meas.
No. 91, § 3).
Rhode Island No 2006 The Edward O. Hawkins and
Thomas C. Slater Medical
Marijuana Act of 2006.
R.I. Gen. Laws Ann. §§ 21-28.6-1 to -
14 (West 2014).
Vermont No 2004 Therapeutic Use of Cannabis Act
of 2004.
Vt. Stat. Ann. Tit. 18, §§ 4471-4474l
(West 2014).
Washington 2012 1998 Washington State Medical Use of
Marijuana Act of 1998; Marijuana
Initiative Measure No. 502 of
2012.
Wash. Rev. Code §§ 69.50.101-.609,
69.51A.005-.903 (2014).

70. Savannah Law Review [Vol. 2:2, 2015]
528
Table 2: Bank Secrecy Act Filings from 2003-2011372
Total BSA
Reports
Filed
Total
CTRs
Filed
CTR
Filing
Rate
> $10,000
Received
in Trade/
Business
(Form
8300)
Trade/
Business
Filing
Rate
Exempted
Persons
Exemption
Status
Rate of
CTR
Filings
Total
SARs
Filed
SAR
Filing
Rate
2003 14,159,621 13,341,699 94.22% 129,824 0.92% 69,450 0.49% 507,217 3.58%
2004 14,959,168 13,674,114 91.41% 151,998 1.02% 80,763 0.54% 689,414 4.61%
2005 15,792,312 14,210,333 89.98% 160,449 1.02% 92,404 0.59% 919,230 5.82%
2006 17,597,848 15,994,484 90.89% 162,309 0.92% 84,613 0.48% 1,078,894 6.13%
2007 17,952,878 16,219,434 90.34% 173,027 0.96% 63,632 0.35% 1,250,439 6.97%
2008 18,005,809 16,082,776 89.32% 184,305 1.02% 53,675 0.30% 1,290,590 7.17%
2009 16,740,102 14,909,176 89.06% 180,801 1.08% 32,117 0.19% 1,281,305 7.65%
2010 16,197,658 14,065,871 86.84% 174,023 1.07% 18,616 0.11% 1,326,606 8.19%
2011 17,124,020 14,826,316 86.58% 194,366 1.14% 22,900 0.13% 1,521,227 8.88%
2012 N/A 15,734,249 N/A N/A N/A N/A N/A 1,582,879 N/A
2013 N/A N/A N/A N/A N/A N/A N/A 1,640,391 N/A
Average 16,503,268 14,905,845 89.85% 167,900 1.02% 57,574 0.35% 1,189,836 6.56%
372
Office of Res., I.R.S., Dep’t of Treas., Calendar Year
Projections of Information and Withholding Documents for the
United States and IRS Campuses: Publication 6961 2014 Update
(2014), available at http://www.irs.gov/pub/irs-pdf/p6961.pdf; Fin. Crimes
Enforcement Network, U.S. Dep’t of Treas., 2012-2013 SAR Stats
Technical Bulletin 1 (2014), available at http://www.fincen.gov/news_room/
rp/files/SAR01/SAR_Stats_proof_2.pdf; Fin. Crimes Enforcement
Network, U.S. Dep’t of Treas., The SAR Activity Review–By the
Numbers, no. 18, at 4, http://www.fincen.gov/news_room/rp/files/btn18/sar_by_
numb_18.pdf (last visited Nov. 30, 2015); U.S. Dep’t of Treas., 2011 FinCEN
Ann. Rep. 8 (2011), available at http://www.fincen.gov/news_room/rp/files/annual_
report_fy2011.pdf; U.S. Dep’t of Treas., 2008 FinCEN Ann. Rep. 12 (2008),
available at http://www.fincen.gov/news_room/rp/files/annual_report_fy2008.pdf;
U.S. Dep’t of Treas., 2006 FinCEN Ann. Rep. 11 (2006), available at http://
www.fincen.gov/news_room/rp/files/annual_report_fy2006.pdf; U.S. Dep’t of
Treas., 2005 FinCEN Ann. Rep. 11 (2005), available at http://www.fincen.gov/
news_room/rp/files/annual_report_fy2005.pdf; U.S. Dep’t of Treas., 2004
FinCEN Ann. Rep. 11 (2004), available at http://www.fincen.gov/news_room/rp/
files/annual_report_fy2004.pdf; Statistical Data - Money Laundering & Bank Secrecy Act
(BSA), IRS, (Oct. 9, 2014), http://www.irs.gov/uac/Statistical-Data-Money-Laundering-
&-Bank-Secrecy-Act-(BSA).

71. Bank on Marijuana
529
Table 3: Common Acronyms for Terms in this Note
AML Anti-money laundering
BSA Bank Secrecy Act of 1970
CSA Controlled Substances Act of 1970
CTR Currency Transaction Report
FBI Federal Bureau of Investigation
FDIC Federal Deposit Insurance
Corporation, Inc.
DEA Drug Enforcement Administration
FinCEN Financial Crimes Enforcement
Network
IRS Internal Revenue Services
KYC Know Your Customer
MSB Money Service Business
SAR Suspicious Activity Report
SUA Specified Unlawful Activity

72. Savannah Law Review [Vol. 2:2, 2015]
530
Table 4. Assets Seized and Forfeited through Forfeiture Proceedings from 2009-
2013373
2009 2010 2011 2012 2013
Total Assets Seized $ 1,810,261,000
$ 1,761,197,000
$
4,041,929,000
$
1,785,240,000 $ 1,911,694,000
I.R.S. Seized Assets
(CI) (Includes Illegal
Sources) N/A N/A N/A $ 754,673,569 $ 465,150,567
Cash and Monetary
Instruments $ 1,544,033,000 $ 1,588,064,000 $ 3,844,026,000 $ 1,587,055,000 $ 1,738,021,000
Cash $ 135,002,000 $ 106,154,000 $ 87,243,000 $ 82,166,000 $ 40,063,000
Monetary Instruments $ 25,520,000 $ 24,876,000 $ 26,579,000 $ 24,000,000 $ 24,156,000
Financial Instruments $ 50,116,000 $ 28,692,000 $ 24,101,000 $ 55,920,000 $ 39,165,000
Real Property $ 61,426,000 $ 56,409,000 $ 49,413,000 $ 35,139,000 $ 75,390,000
Personal Property $ 154,686,000 $ 88,032,000 $ 124,371,000 $ 107,126,000 $ 59,118,000
Firearms*
(number only, non-
valued) 14,919 9,459 23,858 19,716 13,496
Total Assets
Forfeited
$
1,402,885,000 $ 1,628,886,000
$
1,297,763,000
$
4,121,701,000 $ 1,863,985,000
I.R.S. Forfeited
Assets (CI) (Includes
Illegal Sources) N/A N/A N/A $ 97,670,943 $ 517,026,852
Cash and Monetary
Instruments $ 1,262,207,000 $ 1,512,792,000 $ 1,168,102,000 $ 4,010,966,000 $ 1,717,399,000
Financial Instruments $ 24,475,000 $ 14,051,000 $ 2,702,000 $ 6,125,000 $ 39,455,000
Real Property $ 41,959,000 $ 46,074,000 $ 51,243,000 $ 36,790,000 $ 47,241,000
Personal Property $ 56,304,000 $ 55,969,000 $ 75,716,000 $ 67,820,000 $ 59,890,000
Firearms*
(number only, non-
valued) 16,481 13,290 19,548 20,805 14,133
Net Cost of
Operations $ 994,789 $ 1,284,418,000
$
1,663,899,000
$
4,308,822,000 $ 1,775,350,000
Payments to Innocent
Third Parties $ 197,103,000 $ 254,228,000 $ 639,253,000 $ 3,003,499,000 $ 446,105,000
Forfeiture Case
Prosecution $ 41,898,000 $ 54,039,000 $ 53,530,000 $ 48,859,000 $ 39,877,000
Awards for
Information $ 9,403,000 $ 12,127,000 $ 28,218,000 $ 27,180,000 $ 29,966,000
Investigative Cost
Leading to Seizure $ 42,728,000 $ 55,110,000 $ 74,225,000 $ 77,663,000 $ 70,257,000
Equitable Sharing
(with States) $ 426,649,000 $ 550,288,000 $ 440,063,000 $ 681,019,000 $ 710,444,000
Joint Law Enforcement
Operations $ 115,202,000 $ 148,586,000 $ 177,484,000 $ 160,277,000 $ 151,779,000
373
See supra note 579; Office of the Inspector Gen., U.S. Dep’t of
Justice, Audit of the Assets Forfeiture Fund and Seized Asset
Deposit Fund Annual Financial Statements Fiscal Year 2013 49–50,
52, 56 (2014), available at http://www.justice.gov/oig/reports/2014/a1408.pdf; Office
of the Inspector Gen., U.S. Dep’t of Justice, Audit of the Assets
Forfeiture Fund and Seized Asset Deposit Fund Annual Financial
Statements Fiscal Year 2011 45–46, 48, 52 (2012), available at http://www.
justice.gov/oig/reports/2012/a1212.pdf; Office of the Inspector Gen., U.S.
Dep’t of Justice, Audit of the Assets Forfeiture Fund and Seized
Asset Deposit Fund Annual Financial Statements Fiscal Year 2009
47–48, 51, 54 (2010), available at http://www.justice.gov/jmd/afp/01programaudit/
fy2009/fy2009_afs_report.pdf.

73. Bank on Marijuana
531
Table 5: Arrests for Marijuana Trafficking and Narcotics Money Laundering374
2009 2010 2011 2012 2013 Average
DEA
Domestic
Arrests
(Total)
31,857 31,407 32,524 31,058 30,911 31,551
Marijuana
Traffickin
g
10,073 9,687 8,501 6,508 6,513 8,256
Domestic
Seizures of
Marijuana
(kgs)
671,650 725,862 575,972 388,064 270,823 526,474
FBI
Arrests
(Total)
13,687,24
1
13,120,94
7
12,408,89
9
12,196,95
9
11,302,10
2
12,543,2
3
Marijuana
Traffickin
g
821,234 826,620 769,352 719,621 632,918 752,594
Possession 6,241,382 6,009,394 5,373,053 5,171,511 5,198,967 5,596,78
374
Drug Enforcement Admin., Dep’t of Justice, 2013 Domestic
Cannabis Eradication/Suppression Program Statistical Report
(2013), http://www.dea.gov/ops/cannabis_2013.pdf; Uniform Crim. Report,
U.S. Dep’t of Justice, Crime in the United States, 2013: Persons
Arrested (2013), http://www.fbi.gov/about-us/cjis/ucr/crime-in-the-u.s/2013/crime-
in-the-u.s.-2013/persons-arrested/persons-arrested; Drug Enforcement Admin.,
Dep’t of Justice, 2012 Domestic Cannabis Eradication/Suppression
Program Statistical Report (2012), http://www.dea.gov/ops/cannabis_2012
.pdf; Uniform Crim. Report, U.S. Dep’t of Justice, Crime in the
United States, 2012: Persons Arrested (2012), http://www.fbi.gov/about-
us/cjis/ucr/crime-in-the-u.s/2012/crime-in-the-u.s.-2012/persons-arrested/persons-
arrested; Drug Enforcement Admin., Dep’t of Justice, 2011 Domestic
Cannabis Eradication/Suppression Program Statistical Report
(2011), http://www.dea.gov/ops/cannabis_2010.pdf; Uniform Crim. Report,
U.S. Dep’t of Justice, Crime in the United States, 2011: Persons
Arrested (2011), http://www.fbi.gov/about-us/cjis/ucr/crime-in-the-u.s/2011/crime-
in-the-u.s.-2011/persons-arrested/persons-arrested; Drug Enforcement Admin.,
Dep’t of Justice, 2010 Domestic Cannabis Eradication/Suppression
Program Statistical Report (2010), http://www.dea.gov/ops/cannabis_2010
.pdf; Uniform Crim. Report, U.S. Dep’t of Justice, Crime in the
United States, 2010: Persons Arrested (2010), http://www.fbi.gov/about-
us/cjis/ucr/crime-in-the-u.s/2010/crime-in-the-u.s.-2010/persons-arrested, Drug
Enforcement Admin., Dep’t of Justice, 2009 Domestic Cannabis
Eradication/Suppression Program Statistical Report (2009),
http://www.dea.gov/ops/cannabis_2009.pdf.

74. Savannah Law Review [Vol. 2:2, 2015]
532
Table 6: Convictions for Marijuana Trafficking and Narcotics Money
Laundering375
2009 2010 2011 2012 2013 Average
Total Convictions in the
United States
81,549 84,095 86,361 84,360 80,207 83,314
Individuals 81,372 81,372 86,201 84,173 80,035 82,631
Companies (or Organizations) 177 177 160 187 172 175
Drug Offenses Convictions 24,709 24,303 25,131 25,477 25,000 24,944
Simple Possession 760 1,025 902 1,451 2,332 1,294
Drug Trafficking Convictions 24,446 24,378 24,911 25,109 22,668 24,302
Marijuana Offenses
Convictions
6,251 6,605 7,099 7,331 5,400 6,537
Average Months to Serve 36.2 37 36 36 30 35
Weapons Involved 425 515 518 572 551 522
U.S. Citizen 3,557 3,560 3,762 3,746 3,321 3,614
375
Statistics usually apply to drug trafficking or money laundering as the primary
offense. Glenn R. Schmitt & Elizabeth Jones, Office of Res. and
Data, U.S. Sentencing Comm’n, Overview of Federal Criminal
Cases Fiscal Year 2013 1-2, 6-7 (2014), available at http://www.ussc.gov/sites/
default/files/pdf/research-and-publications/research-publications/2014/FY13_
Overview_Federal_Criminal_Cases.pdf; U.S. Sentencing Comm’n, 2013
Sourcebook of Federal Sentencing Statistics (2013), http://www.Ussc
.gov/research-and-publications/annual-reports-sourcebooks/2013/sourcebook-2013;
Glenn R. Schmitt & Jennifer Dukes, Office of Res. and Data, U.S.
Sentencing Comm’n, Overview of Federal Criminal Cases Fiscal
Year 2012 1–3, 6–8 (2013), available at http://www.ussc.gov/sites/default/files/pdf/
research-and-publications/research-publications/2013/FY12_Overview_Federal_
Criminal_Cases.pdf; Louis Reedt & Melissa Reimer, Office of Res. and
Data, U.S. Sentencing Comm’n, Overview of Federal Criminal
Cases Fiscal Year 2011 1–3, 6–7 (2012), available at http://www.ussc.gov/sites/
default/files/pdf/research-and-publications/research-publications/2012/FY11_
Overview_Federal_Criminal_Cases.pdf; Louis Reedt & Melissa Reimer,
Office of Res. and Data, U.S. Sentencing Comm’n, Overview of
Federal Criminal Cases Fiscal Year 2010 1–2, 5–7 (2012), available at
http://www.ussc.gov/sites/default/files/pdf/research-and-publications/research-
publications/2012/FY10_Overview_Federal_Criminal_Cases.pdf; Glenn R.
Schmitt, Office of Res. and Data, U.S. Sentencing Comm’n,
Overview of Federal Criminal Cases Fiscal Year 2009 1–3, 5–7, 10
(2010), available at http://www.ussc.gov/sites/default/files/pdf/research-and-
publications/research-publications/2012/FY11_Overview_Federal_Criminal_Cases.pdf.

75. Bank on Marijuana
533
Table 7: Money Laundering Investigations to Convictions from 2009-2013376
2009 2010 2011 2012 2013 Average
U.S. Non-fraud
White Collar Crimes
3,017 3,027 3,109 2,953 2,807 2,983
F.B.I. Money Laundering Convictions
Prosecution
Recommendations
350 323 303 N/A N/A 325
Indictments/
Informations
43 N/A 37 N/A N/A 40
Sentenced* 84 N/A 45 N/A N/A 65
Restitutions
$81,900,00
0
N/A $18,400,000 N/A N/A $50,150,000
Recoveries $643,000 N/A $809,414 N/A N/A $726,207
F.B.I.Money
LaunderingFines
$1,500,000 N/A $983,536 N/A N/A $1,241,768
I.R.S. Money Laundering Convictions
InvestigationsInitiated 1,341 1,597 1,726 1,663 1,596 1,585
Prosecution
Recommendations
1,048 1,240 1,383 1,411 1,377 1,292
Indictments/
Informations
936 1,066 1,228 1,325 1,191 1,149
Sentenced* 753 751 678 803 829 763
IncarcerationRate 85.90% 83.80% 86.10% 84.70% 85.40% 85.18%
AverageMonthstoServe 72 69 70 64 68 69
I.R.S. Convictions for Financial Crimes Related to Narcotics (Including Money Laundering)
InvestigationsInitiated 753 855 988 954 991 908
376
See supra note 578; I.R.S. Crim. Investigation, Dep’t of Treas.,
Fiscal Year 2013 National Operations: Annual Business Report 29,
33 (2014), available at http://www.irs.gov/pub/foia/ig/ci/REPORT-fy2013-ci-annual-
report-02-14-2014.pdf; I.R.S. Crim. Investigation, Dep’t of Treas.,
Fiscal Year 2012 National Operations: Annual Business Report 23,
25 (2012), available at http://www.irs.gov/pub/foia/ig/ci/REPORT-fy2012-ci-annual-
report-05-09-2013.pdf (“[Bank Secrecy Act] statistics include investigations from
Suspicious Activity Report (SAR) Review Teams, violations of [Bank Secrecy Act] filing
requirements, and all Title 31 and Title 18-1960 violations.”); Fed. Bureau of
Investigation, Financial Crimes Report to the Public: Fiscal
Years 2010-2011 (2011), http://www.fbi.gov/stats-services/publications/financial-
crimes-report-2010-2011; Fed. Bureau of Investigation, Financial
Crimes Report to the Public: Fiscal Years 2009 (2009), http://www
.fbi.gov/stats-services/publications/financial-crimes-report-2009/financial-crimes-
report-2009#asset; SOI Tax Stats - Criminal Investigation Program, by Status or Disposition
- IRS Data Book Table 18, Internal Rev. Serv., http://www.irs.gov/uac/ SOI-Tax-
Stats-Criminal-Investigation-Program-by-Status-or-Disposition-IRS-Data-Book-Table-18
(last updated on Mar. 24, 2015) (“Under the Narcotics Related Financial Crimes
Program, IRS Criminal Investigation seeks to identify, investigate, and assist in the
prosecution of the most significant narcotics-related tax and money-laundering
offenders.”); Kulbir Mand, IRS Criminal Investigation, Internal Rev. Serv. (2012)
(unpublished presentation), http://www.missioneas.org/media/Criminal-Investigation-
3-to-a-page.pdf.

76. Savannah Law Review [Vol. 2:2, 2015]
534
2009 2010 2011 2012 2013 Average
Prosecution
Recommendations
532 659 799 782 888 732
Indictments
/Informations
524 531 780 743 795 675
Convictions 492 448 468 619 690 543
Sentenced* 546 505 446 544 611 530
IncarcerationRate 86.40% 88.70% 90.40% 89.30% 88.40% 88.64%
AverageMonthstoServe N/A N/A N/A 81 84 83
I.R.S. Convictions for Bank Secrecy Act Violations
InvestigationsInitiated N/A 738 795 923 922 845
Prosecution
Recommendations
N/A 456 518 683 771 607
Indictments
/Informations
N/A 380 462 575 693 528
Sentenced* N/A 299 344 342 453 360
IncarcerationRate N/A 73.90% 75.30% 76.60% 70.60% 74.10%
AverageMonthstoServe N/A 38 33 40 36 37

77. Bank on Marijuana
535
Table 8: FDIC Compliance with BSA/AML Regulations377
2009 2010 2011 2012 2013 Average
Total FDIC-Insured
Financial Institutions
8,012 7,702 7,357 7,083 6,812 7,393
Commercial Banks 6,840 6,530 6,291 6,096 5,876 6,327
Savings Institutions 1,172 1,172 1,066 987 936 1,067
FDIC-Insured Member
Financial Institutions
3,512 2,917 2,706 2,567 2,458 2,832
FDIC-Supervised
Financial Institutions (state
non-member banks)a
4,500b 4,785 4,651 4,516 4,354 4,561
Problem Institutions 702 884 813 651 467 703
Suspicious Activity
Reports
128,973 126,098 125,460 139,102 123,134 128,553
Total FDIC Investigations 7,858 7,776 10,471 9,901 9,327 9,067
Total FDIC Actions 710 724 443 328 258 493
Formal (Consent Orders) 285 300 146 104 51 177
Informal (Memorandum of
Understanding)
425 424 297 224 207 315
FDIC BSA/AML
Examinations &
Investigations for FDIC-
Insured Members
2,698 2,813 2,734 2,585 2,328 2,632
BSA/AML Actions for
FDIC-Insured Members
31 25 32 34 49 34
Formal (Consent Orders) 9 9 15 19 22 15
Informal (Memorandum of
Understanding)
22 16 17 15 27 19
Termination of FDIC
Insurance for FDIC-
Insured Members
6 5 11 7 9 8
Voluntary 6 5 11 7 9 8
Involuntary 0 0 0 0 0 0
377
Office of Inspector Gen., Fed. Deposit. Ins. Corp., Report
No. AUD-14-009, The FDIC’s Response to Bank Secrecy Act and
Anti-Money Laundering Concerns Identified at FDIC-Supervised
Institutions 4, 6 (2014), available at http://www.fdicoig.gov/reports14%5C14-
009AUD.pdf; Fed. Deposit. Ins. Corp., Statistics at a Glance:
Historical Trends (2014), https://www.fdic.gov/bank/statistical/stats/2014Jun/
FDIC.pdf; Fed. Deposit. Ins. Corp., FDIC Annual Report 2013 20, 115
(2013), available at https://www.fdic.gov/about/strategic/report/2013annualreport/
AR13final.pdf; Fed. Deposit. Ins. Corp., FDIC Annual Report 2012 19
(2012), available at https://www.fdic.gov/about/strategic/report/2012annualreport/
AR12final.pdf; Fed. Deposit. Ins. Corp., FDIC Annual Report 2011 22
(2011), available at https://www.fdic.gov/about/strategic/report/2011annualreport/
AR11final.pdf; Fed. Deposit. Ins. Corp., FDIC Annual Report 2010 28–29,
57, 152 (2010), available at https://www.fdic.gov/about/strategic/report/
2010annualreport/AR10final.pdf; Fed. Deposit. Ins. Corp., FDIC Annual
Report 2009 25, 57 (2009), available at https://www.fdic.gov/about/strategic/report/
2009annualreport/AR09final.pdf; Number of Unit Institutions and Institutions with
Branches FDIC-Insured Commercial Banks, Fed. Deposit. Ins. Corp., https://
www2.fdic.gov/hsob/HSOBRpt.asp (last visited on Nov. 20, 2015).

78. Savannah Law Review [Vol. 2:2, 2015]
536
2009 2010 2011 2012 2013 Average
Removal/Prohibition of
Director or Officer
66 121 111 116 113 105
Suspension/Removal
When Charged With
Crime
0 0 1 0 0 0
BSA/AML Examinations
and Visitations
Conducted for FDIC-
Supervised Financial
Institutions
4,500 4,785 4,651 4,516 4,354 4,561
BSA Examinations and
Visitations Conducted
N/A 3,918 3,917 3,722 3,523 3,770
FDIC Examinations N/A 2,722 2,815 2,678 2,413 2,657
FDIC Visitations N/A 42 31 39 50 41
State Banking Agency
Examinations
N/A 1,154 1,071 1,005 1,060 1,073
Financial Institutions Cited
for Apparent Violations
N/A 490 498 463 435 472
Apparent Violations Cited N/A 806 920 818 750 824
Actions Imposed on FDIC-
Supervised Financial
Institutions
N/A 43 42 42 48 44
Formal Actions N/A 11 18 16 19 16
Informal Actions N/A 32 24 26 29 28
a
The FDIC reports on all FDIC-Insured banks, however, some omissions remain in FDIC’s reports and
the Office of Inspector General presents different results for FDIC-Supervised Financial Institutions.
b This number is an approximation.