Why the Feds should deny the Fourth Corner Credit Union a “master account.”

Following the decision to legalize marijuana, Colorado weed sellers are awash in cash (and the cartels are selling cheap heroin in response). But they have no place to put their cash because banks worry about federal money laundering prosecutions even though Holder issued a memo saying that DOJ would not prosecute. The banks, rightly, were not mollified. Selling marijuana is a federal crime as is money laundering and someday (like today) Holder will be gone.

So Colorado chartered the Fourth Corner Credit Union to take dope money. The problem for Fourth Corner is that it must get a master account from the Federal Reserve System that would allow it to clear checks and transfer funds within the nation’s money system. So far as I know, the application is still pending and has not been issued, although a Fed representative has recently met with “industry” representatives to hear their sad stories about drowning in cash. There is also the related question of whether Fourth Corner, being a state charted institution, can gain insurance from the Federal Deposit Insurance Corporation. (FDIC)

This seems like a no-brainer to me for the Fed and the FDIC. Deny the application and refuse to issue insurance. Until and unless Congress changes the criminal law, stoner banks will not be federally authorized to help Colorado dealers commit federal crimes.

Reminder to stoners and those who support them: The rule of law only matters when you don’t like the result.


Correction:   Because it is a credit union, Fourth Corner Credit Union cannot get insurance from the FDIC. It might try to get insurance from National Credit Union Administration (NCUA), another federal agency. The same reasoning expressed in the text–federal agencies ought not assist in the commission of federal crimes–would apply to the NCUA.

16 responses

  1. “The rule of law only matters when you don’t like the result” … unless you are a judge, in which case, you just make shit up.

    Which begs the question: Are you Judge Cheech or Judge Chong? 🙂

  2. RGK,
    Yeah I agree with this. It’s not a matter of morality, it’s what the law says. The executive isn’t the legislative branch.

    I’m curious though, since you seem to know a lot more about the system (probably from painfully boring litigation) what do you have to do, in general terms, to get a master account and be insured with the FDIC?


  3. If the Fed or FDIC are required by law to reject applications because of drug law then the rule of law is involved but rejection would be automatic. If the usual rule that they must take into account statutes they do not enforce in exersising discretion, but discretion still exists, then the automatic rule you suggested would arguably be an abuse of discretion. Only your imagination and dislike for Holder see an issue of rule of law. Maybe the judicial model here is Rumpole’s adversary the Recorder of London Judge Bullingham, ‘the mad bull”

  4. repentinglawyer,

    Does a lawful discretionary act include assisting in the commission of a federal crime? All the best.


  5. SLS,

    I don’t know a lot, although I used to represent a lot of state chartered banks.

    To get a “master account” from the Federal Reserve, the paperwork is fairly simple. See, e.g., New Financial Services Customer – Setup Services or Access, Federal Reserve Bank Services (last accessed April 27, 2015).

    I erred when I referred to the FDIC. Since this Colorado entity is a state charted credit union it cannot get FDIC insurance, but it might try to obtain insurance from the National Credit Union Administration (NCUA). Here is a link to the requirements to become a member of the NCUA.

    All the best.


  6. You are suggesting that licensing would amount to coparty status in alleged crimes, like to see case that supports that theory with regard to gov. agency, if not we are back where we started either illegal per se or factor in decision.

  7. Is it clear that accepting deposits from criminals is a federal crime?

    My reading of 18 USC 1956 requires both that the transaction be with the intent to promote the carrying on of specified unlawful activity*and* that:

    knowing that the transaction is designed in whole or in part—
    (i) to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or
    (ii) to avoid a transaction reporting requirement under State or Federal law,

    I don’t see the case that their banking for out-in-the-open pot businesses by necessity meets part (B)(i) or (ii).

    If the bank does engage in transactions to conceal the money, they could be prosecuted post hoc. But before the fact, it doesn’t look like a crime to me.

  8. It seems that in the process of paying lip service to a law that is no longer enforced in certain but increasingly numerous jurisdictions, the Fed is biding its time until a few more states make pot legal. Congress allowed medical marijuana “legal” in states that said so via the 2014 spending bill last December with no fanfare. It’s akin to where gay marriage was a few years ago; the tide is turning and old farts like us are either on the bus or falling asleep watching Fox News.

  9. Peter H.,

    All good points. But if you were bank counsel would you bet the business that the feds could not prove up some federal crime?

    If it were me, I would be especially concerned with the language in 18 U.S. Code § 1956 relating to “the control of the proceeds of specified unlawful activity . . . .” Furthermore, the drug conspiracy statute is broad. It does not even require an overt act. See 21 U.S. Code § 846. Then, there is the always useful aiding and abetting statute. 18 U.S. Code § 2.

    Once upon a time when banks were fighting for deposits, maybe some banker might take a chance. I can’t see that happening now, and for good reason.

    All the best.


  10. Marcos,

    Can’t I do both? Ride a bus and fall asleep watching Fox (and friends) on my iPhone?

    All the best.


  11. Rather missed the point Judge, if the bank is not in violation of federal law, then a fortiori, your odd theory of complicity by banking authorities is out the window. Fact banks may be prudent in avoiding taking the money is beside the point since Colorado institution exists and wants to take the money. Maybe you should start sleeping through Fox and Friends or turn to some other fount of legal misinformation.

  12. repentinglawyer,

    As I understand it not one bank in Colorado will take dope deposits because their lawyers advise them that they face potential federal liability if they do. Surely not all of those lawyers are slaves to Fox and friends!

    All the best.


  13. I always wondered why Nebraskan’s Against Cartels Selling Cheap Heroin To Children; Because Coloradoans are Stoners and the Franklin Mint’s limited edition gold Supremacy Clause lapel pins shared a full page ad in the Sunday edition supplement of the Lincoln Journal Star.

    P.S. You wouldn’t be using Hercules and the Umpire to put any undue political pressure on Esther L. George, the President of the Federal Reserve Bank of Kansas City, now would you judge? She’s got a tough job baby sitting the infants and worrying about crop insurance in the10th district as it is without the toddlers acting up and throwing tantrums. You know, you could always just write her a letter or better yet invite her out to coffee next time she is in town. Bankers like to hang out with judges.

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