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Feds Warn Casinos to Turn Away Gamblers With Medical Marijuana Ties

| June 12, 2014
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By Nathan Halverson

Melinda Haag medical marijuana interview

(Justin Sullivan/Getty Images)

U.S. casinos, including those in the Bay Area and throughout California, cannot accept bets from people working in the medical marijuana industry — unless these gamblers pass an extensive background check and have their bets regularly monitored by the federal government.

That was the word out of Las Vegas on Thursday, where federal regulators addressed the gaming industry at the 2014 Bank Secrecy Act Conference.

The marijuana guidelines impact all casinos, from Northern California to riverboat casinos in Mississippi to mega-resorts on the Las Vegas Strip. Gaming operators are now being required to either turn away gamblers they know work in state-sanctioned marijuana businesses or implement highly invasive and expensive procedures to monitor these gamblers.

These same costly procedures have resulted in the banking industry closing thousands of financial accounts in the last few years. Banks have essentially blacklisted anyone in the marijuana business from opening a checking or savings account.

On Thursday, Jim Dowling, a former White House advisor on money laundering issues and now a regulatory consultant to casinos, told gaming executives they are obligated to follow the same marijuana guidelines as banks.

“Casinos can’t accept any money from them, or they have to comply with the new government guidance,” Dowling said.

In order for a casino to knowingly accept a bet from someone in the marijuana industry, it would need to perform what Dowling described as a “criminal background check” and then file reports every 90 days to federal regulators on the gambler’s activities.

Even then, the casinos cannot be certain the federal government will not pursue criminal or civil charges against them.

While this will likely not prevent a marijuana dispensary owner from going to the blackjack table and plunking down $20, problems arise if a card dealer or pit boss recognizes the dispensary owner or if a large enough sum is wagered that would require the casino to research the gambler’s source of income.

In that case, the casino would have to cut gamblers off or run a background check and monitor their gambling.

‘It’s Coming to a Head’

“This is a federal problem that has been brewing for a while, and now it’s coming to a head,” Dowling said. “State laws and federal laws don’t match up.”

Thursday was the first time the topic of state-authorized marijuana proceeds and casinos had been publicly broached, Dowling said.

The head of FinCEN, a bureau of the Treasury Department that regulates casinos and banks to ensure they follow these rules, also spoke at Thursday’s industry conference.

Director Jennifer Shasky Calvery referred questions regarding marijuana and casino compliance to her media spokesman.

“FinCEN’s guidance applies to all financial institutions covered under FinCEN regulations, including casinos,” Stephan Hudak wrote in an email, in apparent confirmation of Dowling’s assessment.

Paul Camacho, who manages these issues for Station Casinos, which operates the newly opened Graton Resort & Casino in Rohnert Park, declined comment, saying he was not authorized to speak to the media. A call to the Station Casinos media representative was not returned by the time of publication.

The Graton Casino operates in a region the federal government deems a “High Intensity Financial Crime Area” because of the large amount of marijuana grown on California’s North Coast. As a result, the Rohnert Park casino is required to implement additional monitoring to identify people who might be gambling with illicit funds, which according to the federal government includes money from medical marijuana businesses.

Ongoing Conflict Between the Feds and States

Casinos are the latest institutions to get caught up in the ongoing conflict between federal and state laws on marijuana. Thursday’s disclosure on federal policy comes only months after U.S. Attorney General Eric Holder appeared to publicly support the right of state-authorized marijuana businesses to have access to the U.S. financial system and deposit their money.

“You don’t want just huge amounts of cash in these places. They want to be able to use the banking system,” Holder said during an appearance at the University of Virginia’s Miller Center. “There’s a public safety component to this. 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.”

The North Coast has notoriously high amounts of cash transactions, with one Mendocino County banker saying more than half the deposits there are in cash, making it one of the highest ratios in the country.

Following Holder’s statement in February, the U.S. Justice Department and the U.S. Treasury Department both issued updated guidelines on how U.S. financial institutions need to handle customers with ties to the marijuana industry.

One dispensary owner in San Francisco said he has gone through nine banks in 10 years.

But banking executives said the new guidelines did nothing to assuage their fears, leaving them open to both criminal and civil prosecution if they worked with businesses in the marijuana trade.

“Bankers are all just saying, ‘We don’t want those problems,’ ” said Dowling, who also consults on these issues for major U.S. banks. “One banker called them toxic.”

Dowling expects casinos will react the same way, turning away from people who work in the state-sanctioned marijuana industries that now operate in 22 states and D.C.

“The federal government is again saying people involved in the marijuana business don’t have rights,” said Dale Gieringer, director of California NORML, a marijuana advocacy group.

A dispensary owner in San Francisco, who asked not to be named because of previous regulatory problems with the federal government, said he has gone through nine banks in 10 years.

“At the core, it’s just the hypocrisy of the federal government and its financial regulations,” he said. “They say one thing but they are really acting a whole other way.”

Another dispensary owner in Mendocino County, who likewise asked not to be named because of previous problems with federal regulators, said the U.S. government is ignoring the voters.

“The federal government doesn’t care about our state laws,” the owner said. “It’s dead wrong. It’s one more right they are taking away from us.”

Dowling said he decided to raise the issue at Thursday’s conference because the federal government could prosecute casinos that are not complying with the new guidelines.

“It’s very controversial. I’ll probably get a lot of hate mail for bringing it up,” Dowling said. “But if you put yourself in a banker’s situation, would you want to have to do all that and put yourself at criminal risk?”

Ironically, this all comes less than two weeks after a surprising bipartisan vote in the Republican-controlled House of Representatives, which passed a measure that seeks to end Department of Justice interference with state marijuana laws. Medical marijuana advocates praised the vote as a game-changer and one that reflected a huge shift in public opinion.

Nathan Halverson is a freelance reporter working at The Center for Investigative Reporting and Investigative Reporting Program and can be reached at Halverson@sonic.net.

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Category: Law, Politics

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  • claygooding

    This is federal employees protecting each others jobs by joining in on the fray,,federal employees have enjoyed the best of healthcare and benefits including one of the best pension plans available,,of course the government is about to go default on their pensions and I am sure eventually the Affordable Care Act will kick in and they will have to find their own health insurance,,we are seeing the resulting build up of resentment towards what seems to be the only bulletproof budget in the government,,the DEA’s war on marijuana.

    Over 23,ooo,ooo million American citizens arrested since 1972 and over two trillion tax dollars spent arresting and imprisoning people for marijuana and the arrests continue to fill the news,,the people want change and the money behind the government says NO.

    • theskeptic2

      Law enforcement’s only concerns are for the continuation of property seizures.

      Follow the money.

      Cannabis busts bring huge bonuses: cars, boats, motorcycles, airplanes, homes,
      land, cash…

      How much profit is involved in busting a murderer, rapist, robber, kidnapper, car
      thief?

      NONE

      Easy to see why pot busts take TOP priority…

  • Immortal Illumined

    the greatest plant in the universe is almost free, LET FREEDOM RING! 13

    ENLIGHTENMENT…i was a brainwashed evil, mean, christian conservative until i tried it at 17 years old…i hated gays, immigrants, women’s rights, blacks, marijuana, i was Rush Limbaugh’s #1 fan….until i smoked marijuana….changed the world

    1000s of my friends and family have grown 30-99 plants for 20 years, thanks for keeping prices high and NORCAL wealthy…#1 crop in cali = $15 Billion Untaxed…

    “any doctor against marijuana is a doctor of death” – cali secret 420

    from 0 states to half the country, from low 20% approval to almost 70%, cali runs this planet by 2 decades, time to tie marijuana to the 2014, 2016 elections, out with the old, in with the new

    20 years behind us southern states and NEW YORK, sad and scary….nobody denies freedoms like the south, nobody…the top ten incarcerators on the planet are southern states and more blacks are in prison then were slaves before the civil war…even if marijuana reforms did pass the republiCANTS in charge would deny you all your freedoms, centuries of practice…no matter though, we never planned on getting your backwards brethren from day one, half the country already but not one southern state, lol…not 1….the new generations are taking over in the south and they are nothing like their freedom denying parents, let’s ride…

    Deaths by Alcohol: Millions
    Deaths by Tobacco: Millions
    Deaths by Prescription Drugs: Quadrupled in last decade
    Deaths by Guns: Millions
    Deaths by the food we are fed: Millions
    Deaths by Marijuana: 0, ever…they are killing my American family while denying freedom

    love and freedom forever

    AMERICA’S WAR ON DRUGS IS A WAR ON AMERICANS! 33

    • theskeptic2

      Re the southern states…medicinal marijuana is on Florida’s ballot this November.
      (I am happy to report…)
      The only thing that can derail the cause is voter apathy…

      • Immortal Illumined

        thanks captain obvious, my crew and i have been fighting double time the last year to get it there….i even went to visit my family and push the revolution in Del Ray and Palm Beach…..glad you’re paying attention though, thank you

        took me 1 year to legalize it in cali…my senior year of high school in my first vote ever…long live my cali crew, been making it rain marijuana on every capital building in the United States the last 10 months, that’s why it’s so out of control currently….everyday

        not only that but southern states have also passed limited CBD laws in the last few months, Alabama, Kentucky, Georgia, Mississippi and even Utah

  • Immortal Illumined

    almost everyone i know in NORCAL grows and this will be impossible…hahahahahahahahahahahaha,

  • Brian Pruitt

    looks to me thay are worried about money laundering through casinos

  • Daniel Price

    Look up ac press cannabis conundrum this is probably a domino effect to the issue i raised with casinos in april we filed for probable cause

  • Daniel Price

    Help support my cause if you wanna change this smoke in there smoking sections and eat there restaurants enjoy there night clubs

  • http://sociology.ucsc.edu/whorulesamerica/ moleman

    Casinos are always going to be a good place to launder money. At least the launderers will pay taxes on the income… Marijuana should be legal in the u.s. independent of that.

    Love the irony of how banks are wary of dealing with drug dealers and shirkers… HSBC and UBS prime examples. Oh, NOW they are worried. High-level launderers need not be concerned.

  • Diane Win

    First of all, was this rule voted on by Congress, or was it some mealy mouthed prohibitionist anti-Cannabis corporatist bribed bureaucrat implementing this?

  • DonDig

    I guess our government representatives, (and I use that term loosely) have no idea of how stupid this looks, sounds and IS.

  • Common Science

    There was a hint dropped two days earlier that the casinos may already be on board to fighting all things marijuana, as casino magnate Sheldon Adelson is bankrolling Drug Free Florida Committee $2.5 million to denying the medical marijuana measure there in November. His wife is a physician involved in the drug treatment industry.

    http://tinyurl.com/olt5q36

  • theskeptic2

    “…have their bets regularly monitored by the federal government.”
    Our tax dollars at work…give me a freakin’ break…