Global Banks Sabotage Uruguay’s Efforts to Legalize Marijuana

It’s hard to do business without banks.

By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.

The first country to fully legalize the recreational use of marijuana, Uruguay, has suddenly found itself facing an unexpected obstacle: the international banking industry.

It all began a few weeks ago when one of the 15 pharmacies that had agreed to sell the two varieties of cannabis distributed by the Uruguayan State announced that it was withdrawing from the scheme after its bank, Santander, had threatened to close its account unless it stopped providing services for the state-controlled sales. Shortly afterwards it was revealed that other banks, including Brazil’s Itaú, had canceled the accounts of the private companies that had been granted a license to produce marijuana as well as some cannabis clubs.

To fill the funding void, the state-owned lender Banco República (BROU) stepped up to provide financing to the 15 pharmacies involved in the scheme as well as producers and clubs. But within days it, too, was given a stark ultimatum, this time from two of Wall Street’s biggest hitters, Bank of America and Citi: Either it stops providing financing for Uruguay’s licensed marijuana producers and vendors or it’s dollar operations could be at risk — a very serious threat in a country where US dollars are used so widely that they can even be withdrawn from ATMs.

Under the US Patriot Act, handling money from marijuana is illegal and violates measures to control money laundering and terrorist acts. However, US regulators have made it clear that banks will not be prosecuted for providing services to businesses that are lawfully selling cannabis in states where pot has been legalized for recreational use. Some cannabis businesses have been able to set up accounts at credit unions, but major banks have shied away from the expanding industry, deciding that the burdens and risks of doing business with marijuana sellers are not worth the bother.

But that may not be their only motive. There are also the huge profits that can be reaped from laundering the proceeds of the global narcotics trade. According to Antonio María Costa, the former Under-Secretary of the United Nations Office on Drugs and Crime, over $350 billion of funds from organized crime were processed by European and US banks in the wake of the global financial crisis.

“Inter-bank loans were funded by money that originated from the drugs trade and other illegal activities… There were signs that some banks were rescued that way,” Costa said. To date, no European government or bank has publicly denied Costa’s charges. Meanwhile, numerous big banks on both sides of the Atlantic have been caught and fined, some repeatedly, for laundering billions of dollars of illicit drugs money — in direct contravention of the US anti-drugs legislation.

Whatever the banks’ real motives in denying funds to the Uruguayan pharmacies, the perverse irony, as the NY Times points out, is that applying US regulations intended to crack down on banks laundering the proceeds from the illegal sale of drugs to the current context in Uruguay is likely to encourage, not prevent, illicit drug sales:

Fighting drug trafficking was one of the main reasons the Uruguayan government gave for legalizing recreational marijuana. Officials spent years developing a complex regulatory framework that permits people to grow a limited supply of cannabis themselves or buy it at pharmacies for less than the black market rate. Lawmakers hoped that these legal structures would undercut illicit marijuana cultivation and sales.

“There probably isn’t a trade in Uruguay today that is more controlled than cannabis sale,” said Pablo Durán (a legal expert at the Center of Pharmacies in Uruguay, a trade group).

Despite that fact, the pressure continues to be brought to bear on Uruguay’s legal cannabis businesses. Banco República has already announced that it will close the accounts of the pharmacies that sell cannabis in order to safeguard its much more valuable dollar operations.

In other words, a state-owned bank of a sovereign nation just decided to put draconian US legislation before a law adopted by the Uruguayan parliament authorizing the sale and production of marijuana. The law’s prime sponsor, Uruguay’s former president, José Mujica, is furious. During a session of the country’s Senate, he accused the banks of directly attacking democracy. His successor, President Tabaré Vázquez, is far less enthused about the plans to legalize pot.

The potential implications of this issue extend far beyond Uruguay’s borders. For years opposition to the US-backed war on drugs has been building across Latin America. At the 2013 UN General Assembly Latin American leaders of all political stripes rose to the podium to take a stand against the war. They included Bolivia’s Evo Morales, Costa Rica’s Laura Chinchilla, Guatemalan president Otto Perez Molina, Mexico’s then foreign minister (and now finance minister) José Antonio Meade.

Even Juan Manuel Santos, the president of Colombia, the United States’ staunchest ally in South America and third largest recipient of US military aid after Israel and Egypt, bemoaned that that his country, which received more than $3.5 billion in counter-narcotics aid between 2002 and 2011 and was frequently cited as a model by the Obama administration, “has suffered more deaths, more bloodshed, and more sacrifices in this war” than almost any other, with the obvious exception of Mexico.

By now it is painfully obvious, to all but those who financially benefit from it, that the US government’s heavily militarized War on Drugs has been a dismal failure. Despite the slaughter of over 150,000 people in Mexico in a war that no one is winning and just about everyone is losing, the drugs keep crossing the border, and in many cases in greater numbers than ever before.

Uruguay’s efforts to legalize marijuana could represent a sea change in drugs policy in a region that is being ripped asunder by the global narcotics trade. If successful, it could go viral as other countries, including Canada, set out to legalize marijuana. But if big global banks like Santander, Citi and Bank of America get their way, the scheme will be snuffed out before it even has a chance to make a difference. By Don Quijones.

One reason stands out, and it’s not the price of oil. Read…  How Did Things Get This Bad This Fast for Oil Giant, Pemex?

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  59 comments for “Global Banks Sabotage Uruguay’s Efforts to Legalize Marijuana

  1. Joan of Arc says:

    If all drugs were legalized there would be no drug cartels or drug crime. Why are the US banks opposed to the legalization of Marijuana?

    • Mattose says:

      Because they launder the drug money.

    • Harris says:

      Laundering drug money is very profitable for banks.

      • Johnny Appleseed says:

        That’s right. The “war on drugs” is a HUGE success. The US based drug cartel and banks make over a trillion/year on the heroin, cocaine and marijuana of illegal sales. Plus those incredibly profitable opioids.

        Uruguay must forge bonds with other countries to break this strangle-hold of the banks & their drug cartels.

      • chip javert says:

        …and your evidence for this is (“I just know” and (It’s obvious don’t count)?

        • Harris says:

          Banks pay a lot in fines when they are caught doing it. If they were not making money, they would stop wouldn’t they??

      • alex in san jose says:

        Yep there’s a lot of money in keeping something illegal. Banks, law enforcement, keep in mind slavery is still legal in the US for prisoners and you can get a lot of good work out of ’em for 15c an hour or so – if you’ve used a Skilcraft pen or worn a military uniform, prisoners made those.

        In fact, pre-Internet, I remember seeing a “Prison Industries” catalog, it was a big fat thing like the old Sears catalog. This was in the 90s.

    • sinbad says:

      “Puritanism: The haunting fear that someone, somewhere, may be happy.”
      Hl Mencken

    • Silly Me says:

      If you follow the money, it becomes surprisingly likely that the same agents generate, profit from, and “fight” the drug trade.

      • John says:

        Exactly, a veryinterconnected web of banks, officials, and those behind the scenes that have real power. They are simply not goingto share in any profits from their drug trade. Afterall, the drugs will still be sold and used, why would they want to share the profits withthe public orthe pharmacies? They are used to keeping 100% of that pie for their web.

    • RepubAnon says:

      I expect that the big banks worry about Jeff Sessions coming after them. My suggestion would be to bring back some of the solutions from the Grange Movement – such as setting up a parallel credit union-type system that isn’t tied to the international bank cartels. The Farm Credit System, for example:

  2. JungleJim says:

    One of the ironies of the current debate about doing away with cash is that it is meant to to prevent crime and the laundering of criminal proceeds. Yet here we see that the major international banks are not merely laundering money, but actually depend on the trade. It lends a whole new dimension to the term “bankster”

    I wonder what Dr. Rogoff and his acolytes will say now. Surely they will find some new bit of twisted logic to support a ban on currency.

    • Frederick says:

      We all know why we went into Afghanistan or at least one of the reasons

  3. Lee says:

    Are US banks doing the same in states in the USA where the stuff is now legal?

    IMO marijuana should be made legal and taxed just like cigarettes and other tobacco products. The illegality of the product also lines the pockets of numerous gangs and allows them to increase their reach and influence. Legality would deal them a huge blow.

    Too much of the law enforcement apparatus in the USA is being used to enforce the laws against it.

    These laws are a means to control people, further increase the size and number of law enforcement personnel, promote civil asset forfeiture, and other aspects of the prison industry in the USA.

    Just imagine if all that time and effort and money were to be applied to other more serious crime such as serial murder and people trafficking.

    Here in Oz we have states such as South Australia where the laws are quite different than in the USA and the people there are ok (Well except for their stupid electricity generation program/policies!!!)

    • Wolf Richter says:


      To your question: “Are US banks doing the same in states in the USA where the stuff is now legal?”

      Yes, it’s very difficult (impossible) for a pot business to find a regular bank that will work with it. The problem in the US is that marijuana is still illegal under federal law, and the feds could go after those businesses, even if they’re legal under state law. Banks are heavily regulated by federal authorities, so they don’t mind engaging in money laundering when it’s out of view, but to openly doing business with a company that deals in a controlled substance under federal law – that’s too much for them.

      • TJ Martin says:

        True Wolf except the fact that NO bank can or will do business with the 420 industry. So ironic aint it that despite the ban on 420 banking that our Colorado 420 industry is thriving and growing having no problem what so ever ‘ laundering ‘ their according to federal law ill gotten bootie turning much of their technically illegal cash into residential and commercial real estate helping to drive Denver’s real estate bubble ?

        And yes the War on Drugs has been an abject failure but gotta tell you so has across the board legalization here in Colorado .. with organized crime on the rise ( why pay $40 at the shop when you can pay $20 at any age on the street ) public medical costs soaring , what tax revenues are collecting being absorbed by all the additional costs etc etc – et al – ad nauseam . e.g This aint working worth a damn either

        So suffice it to say to one and all … there is no easy or simple answer to this very complex and potentially deadly question .. other than extensive scientific and medical research … both of which for the most part are illegal as well

        What a goram freaking mess we’ve made .. all in the name of escape , addiction and the almighty dollar .. sigh

        • alex in san jose says:

          Banks are raring to go on the 420 industry. They just need the federal ban to be lifted. Then, trust me, it’ll be Big Pot just like Big Tobacco.

          Think about it; a backyard grower could produce some fine tobacco and sell it for half the price of the legal stuff and make a fine profit, how come no one does this? It’s because the banks and big industry have that racket sealed up tight.

      • Roland says:

        I think the Oregon Tax Assessors’ offices had to install new machinery to handle the large volume of cash they get from these shops. It’s ridiculous.

      • Robert says:

        Well there are a number of exchange-listed companies profiting mightily from the trade, so go figure.

  4. MC says:

    I find deeply ironic it was Santander to kick this hornet nest: Spain is the entry point for about 50% of the illegal drugs sold in Europe and 70-80% of all the cannabinoids and cocaine.
    This hasn’t happened since yesterday: it has been going on since the closing years of Franco dictatorship and it keeps going on and on despite every single Spanish government swearing to “do more”.
    Yet I don’t remember the US government or its minions ever uttering a single word about it. The EU, Washington’s comedy sidekick, seems completely uninterested.

    Street prices throughout Europe have never been lower, hinting the flow of drugs is actually growing in size, meaning the sums of money involved are huge.
    Meaning you need banks to handle them, not to mention a well developed network to transport and distribute the drugs and a legal fframework to launder the money as quickly and efficiently as possible.

    Years ago I read a book about the Colombian drug lords of the 80’s. The author described a scene he witnessed firsthand at the CDG airport: a muleta (low level drug carrier) suddenly fell to the floor screaming and clutching his abdomen. The cocaine ovules he was carrying in his stomach ruptured and almost killed him.
    The French police and customs were obviously delighted at this catch and later held a joint press conference to present their success and the few miserable cocaine ovules extracted from the hapless Colombian.
    As the author soberly remarked “How many kilograms of pure cocaine entered France just during this press conference, completely undetected?”.

    I take most people here had their run-in with the war on drugs despite not wanting anything to do with it, and most likely came to same conclusions as the aforementioned writer.
    I came about it around 1994 after a particularly unpleasant run-in with Belgian custom authorities at the Brussels airport and my idea it’s a scam of gigantic proportions has strenghtened year by year.

    • JungleJim says:

      The “War on Drugs” is a farce because it is based on a fallacy of logic. Our drug policy assumes that the problem is supply driven. In other words, people use drugs because there are drugs present. In that logic, if we cut off the supply of drugs people will stop using them, right ? Or is that a little BS ?

      Everyone over the age of eight knows that the problem is demand driven. If people who want drugs can’t get them legally, they will buy them illegally. It is that money that drives the smugglers. In so many words, we are focused on the wrong end of the problem. We are not fighting the drug lords, we are fighting market economics. That is a battle we will always lose.

      Lets be real, the only thing that our drug policy is doing is to create a profit margin for the drug dealers…..oh yeah, and jobs for cops who could be better employed investigating Congress.

      • Frederick says:

        If you believe it’s that simple you need to take a closer look at what’s really going on Jimbo I know I know conspiracy theorist RIGHT

      • Norman Gooding says:

        15 years of protecting the opium crops proves the war on drugs is nothing but market control.

    • Frederick says:

      Drug deflation Gotta love it right? How about decreasing cancer drugs?

  5. Norman Gooding says:

    The drug lords of the international drug cartels sit behind mahogany desks on the top floors of the world’s largest banks,,,not the swarthy sinister front men the media owned by the banks would like us to believe.

    • Nicko2 says:

      Drug lords are small fry and liabilities for the big banks, they don’t need their business.

      • Frederick says:

        They may not need their business but they sure don’t refuse it Same Psychopaths as in the weapons trade

  6. Stevedcfc72 says:

    Bizarre that the banks are getting involved lol.

    As Lee mentioned above it should be legalised, from a tax point of view it would bring in huge revenues, similar to tobacco.

    I presume the same banks who have done this aren’t showing their new moral financial stance to Companies who produce opoids which is a far bigger issue.

    • Frederick says:

      HSBC was fined for drug money laundering Remember? Gee what a surprise NOT

      • Gershon says:

        The HSBC drug money laundering was brazen and large-scale that even the Justice Department could no longer turn its usual blind eye to this criminal racketeering. Of course, the bank and its principals escaped with the usual slap-on-the-wrist fines and immunity from prosecution for their “cooperation” with the feds. Almost alone among the media, Rolling Stone magazine blasted the settlement and held it up as an example of the collusion between the TBTF banks and the drug cartels, with a see-no-evil Justice Department ensuring impunity for its bankster cohorts.

  7. Petunia says:

    If Latin America wasn’t so corrupt, they might have banks that have credibility around the world. But they are so corrupt and therefore, must rely on the credibility of outsiders. This is a local problem and needs a local solution. If they could build banks that aren’t piggy banks for every politician, then maybe they would attract real investment and build financial credibility.

    This banking issue isn’t just about the drugs. It’s about the culture of corruption that Latinos are all too comfortable with, it has ramifications, and this is only another self imposed obstacle.

    • Frederick says:

      Plenty of corruption right here in the good ole USA Look at the Bush and Clinton families for example They are untouchable The banana republics of South and Central America have nothing on us

      • Gershon says:

        Amen, brother. And still the sheeple graze on the green shoots sprouting from the manure the corporate-owned MSM is spreading across their pastures.

      • Petunia says:

        The reason the Bushes bailed out the banking system was because they understood that if they didn’t we would be another Argentina. The bailout wasn’t the bad part, where the money went was the bad part, it should have gone to the homeowners. While people like me were looted, not one dollar on deposit was lost. This is the model that Latin America is incapable of sustaining. They push their banking systems to the brink and use it as an excuse to steal what’s left. I don’t say this lightly, as a Latina, it is a source of disappointment.

        • Gershon says:

          The bailout wasn’t the bad part, where the money went was the bad part, it should have gone to the homeowners. While people like me were looted, not one dollar on deposit was lost.

          F**k the homeowners. They bought into a housing bubble, taking on reckless and irresponsible levels of debt for houses they couldn’t afford, and pricing more responsible and prudent people out of the market. Others used their houses as ATMs to pull out home equity loans for new cars, etc. I have no sympathy for anyone who buys into a bubble, then cries that they’re a victim when the bottom drops out. Fools and their money are soon parted, although the mystery is how they ever came together in the first place.

        • Petunia says:

          A$$holes like you really piss me off. I lived in that house “I couldn’t afford” for ten years before the financial crisis. BTW, I put down 40% when I bought it. You weren’t more prudent, just more lucky.

      • Humbaba The Terrible says:

        Oh? And Trump is NOT untouchable?

    • Johnny A says:

      Too right, the last thing the bankers in New York, DC and London want is an uppity South American country to figure out how to prosper and become independent. The bankers are thinking’: we can’t let South American slip out of the leash.

      Hope they can do it.

    • alex in san jose says:

      Petunia – Latinos are comfortable with corruption? Then why are Latinos the most honest sonsofguns I’ve ever dealt with, as a group, than any other over years of selling at swapmeets and dealing in general?

      • Petunia says:

        People who grow up in Latin American countries are used to seeing corruption on the govt and business level. They expect it and have a high tolerance for it. Latinos who grown up in the states have a different attitude and tolerance for those behaviors.

  8. rj says:

    The obvious, yet much less revenue producing solution, would be to remove the stigma and legal restrictions associated with treating cannabis as it should be. A plant grown in your herb garden right next to the basil and rosemary.

  9. Kent says:

    The only reason big banks are doing this is because it is not in the best interests of their shareholders.

  10. Raymond Robitaille says:

    There is a double standard here. These rules are applied against Uruguay but not against US states where marijuana is legalized.
    A way around this problem might be to have only very small scale production and distribution with cash-only transactions.

  11. Mary says:

    When I was growing up in the old South during the 1950s and 60s, it was illegal to sell alcoholic beverages by the drink and bottled liquor was only sold in state run package stores. It was an article of faith that such laws were kept in place by a de facto political alliance of Fundamentalists and moonshiners. Plus ca change……

  12. Tom Stone says:

    Cui Bono?
    Millions of minority American disenfranchised due to convictions for simple possession, Privatized prisons, the latest figure I saw for Asset Forfeitures was $14 Billion for one year ( Many major police departments depend on this money for their budgets). Huge money laundering profits for banks, The MIC does real well out of the War on Drugs supplying military and surveillance gear both in the USA and around the world. And an excuse for ever more repressive laws ( More Power!).
    What’s not to like if you are part of the Global Elite?

    • Gershon says:

      Cui bono indeed.

      Books like “The Redneck Manifesto” (Jim Goad) or “Hillbilly Elegy” (can’t recall the author) should be assigned reading for American high schoolers, who might then make the proper connection between our globalist-pillaged productive economy and the blue collar class that has been consigned to economic desolation. Not only are the oligarchs responsible for looting and asset-stripping the productive economy and off-shoring our manufacturing base, they also dictate and profit from the “solutions” like private prisons and drug rehab rackets that are making bank off our downward national spiral and hopelessness of the portion of the population that has been rendered “economically non-viable” by TPTB.

  13. Gershon says:

    The TBTF banks are as addicted to the liquidity provided by drug trafficking as our growing army of addicts are to opioids or crack cocaine. Banks like Wachovia caught laundering billions in cartel drug money can count on slap-on-the-wrist fines that amount to a fraction of their ill-gotten gains, with no criminal charges, ever, for banking officials or compliance officers.
    The “war on drugs” is a lucrative farce as long as the really big criminals are untouchable, thanks to the DoJ.

  14. Dogstar says:

    I used to do drugs. I still do, but I used to, too.

    Mitch Hedberg

  15. Harry Tuttle says:

    WOW……but Banks have no problem laundering money from Drug Cartels in Mexico……

    Sounds to me the Drug Cartels are dictating terms….not the banks……

  16. Joan of Arc says:

    Lesson # 2.

    “Don’t get high on your own supply.” – Scarface, 1983

  17. hoop says:

    Reality in Uruguay.

    First of all, you can growth 3 plants yourself in your garden/house. You not need to go to a pharmacy.
    Second, assume your parents, grandparents, neighbours, other relatives don’t smoke it, you can basically growth more plants for yourself.
    Because (potentially) in every backyard people now can growth 3 weed plants it becomes basically impossible to control for the government, so it’s not controlled.
    That means that it is not necessary to buy in in a pharmacy. You can buy it from friends or get it for free. The whole idea to register yourself with the government and buy it in a pharmacy was and is bull…. I think it was included in the legislation to satisfy UN regulations regarding drugs. So I assume the pressure will not change nothing for the Uruguayan cannabis user.

    Off course the notice that US banks are pressuring BROU is bad. I have no idea what is behind this idea, can only speculate ‘’businessman’’ in other parts of South America have lost some of their marketshare.

  18. Robert says:

    “Under the US Patriot Act, handling money from marijuana is illegal and violates measures to control money laundering and terrorist acts. However, US regulators have made it clear that banks will not be prosecuted for providing services to businesses that are lawfully selling cannabis in states where pot has been legalized for recreational use. ”
    This is the sort of legal inconsistency that alienates Americans from their government: “lawfully selling cannibis”?: it is a federal crime to do so. Hw would the gvernment react if the states decided to legalize alcohol distilling? Cigarette manufacturing? And yet they would dictate to foreign nations!

  19. mean chicken says:

    I for one, don’t appreciate being in the midst of stoners.

  20. Stevedcfc72 says:

    You get the sense that due to the low interest rates reducing banks incomes, they would get into anything to make an extra buck.

  21. Helen Highwater says:

    Canada will be legalizing marijuana in 2018. I very much doubt whether banks in Canada will refuse to handle the money from legal marijuana sales. Medical marijuana is already legal here, and is sold in dispensaries. I don’t think there have been any problems with the banks.

  22. Smitty says:

    Drug cartels don’t like competition

Comments are closed.