In the past few weeks, violence in the western Mexican state of Michoacán has been rapidly escalating. The government’s inability to deal with the powerful cartels has led to citizens taking the law into their own hands – by forming armed vigilante groups. The bloodshed caused by this development has now led to the deployment of Mexican soldiers into the region, which in turn has caused further civilian deaths.
The failure of both the vigilantes and the army to quell the cartel’s carnage is a direct result of the huge profits that the drug trade generates. Cartel leaders can continue hiring and arming their combatants because it’s worth the expenditure; the illegal drug trade accounts for around 8% of all international trade. One of the primary reasons that cartels retain their enormous power is that well-known and popular banks are supporting their finances.
Bank of America, Western Union, and JP Morgan, are among the institutions allegedly involved in the drug trade. Meanwhile, HSBC has admitted its laundering role, and evaded criminal prosecution by paying a fine of almost $2 billion. The lack of imprisonment of any bankers involved is indicative of the hypocritical nature of the drug war; an individual selling a few grams of drugs can face decades in prison, while a group of people that tacitly allow – and profit from – the trade of tons, escape incarceration.
The hypocrisy of the role that banks play in the drug trade is particularly disgraceful when considering the recent system of marijuana regulation that was introduced in Colorado. The state’s legal marijuana business has proven to be highly lucrative, with $5 million made in the first week of 2014. However, at present, marijuana businesses cannot access essential banking services. Despite liberalization of marijuana laws in Colorado and elsewhere, the plant remains illegal at the federal level; this means that banks won’t open accounts for marijuana businesses, so the majority of their transactions are cash-only. The movement of such large amounts of cash can be highly dangerous for business owners, and troublesome for both customers and tax collectors.
Earlier this week, several Colorado legislators made a bipartisan appeal to the federal government, requesting clear guidelines for marijuana businesses’ regulation within the banking sector. Banks have avoided allowing these new companies to open accounts, ironically, for the fear of being penalized, or implicated as launderers. Essentially, the current banking system implicitly tolerates the handling of violent cartels’ illegal assets, but blocks the legal and legitimate business of the Coloradan marijuana industry.
The role that banks have played in the global drug trade has been partly responsible for widespread carnage and countless civilian deaths, particularly in Mexico. Now, as legal marijuana industries begin to emerge, and the war on drugs seems to slowly decelerate, the banking sector has an opportunity to redeem itself in this respect. Banks cannot undo the wrongs of the past, but they can create a fairer future for regulated trade within this expanding and legal new industry, and without supporting lawlessness.
Avinash Tharoor is a freelance journalist.