During a congressional hearing on Chinese money laundering and “cleaning cartel cash” on Tuesday—a meeting that focused mostly on the topic of fentanyl—Sen. Chuck Grassley (R-IA) spoke out against a congressional bill that would ease access to banking services for state-legal marijuana businesses, pointing to a deadly 2022 shooting at a cannabis facility that involved people who “were all from China,” the senator said.
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Grassley showed members of the Senate Caucus on International Narcotics Control a video of law enforcement responding to the incident, which occurred at what he described as a “fraudulently registered medical marijuana farm in Kingfisher County, Oklahoma.” The shooter, Chen Wu, was convicted and sentenced to life in prison in February.
“Inside, four workers were packaging marijuana, supervised by their boss who, like Wu, they were all from China,” Grassley said. “Wu waved a nine-millimeter pistol as he entered the garage and demanded back pay. He fired a warning shot into his boss’s knee and told the group they had a half an hour to pay him. If they didn’t, he’d kill then all. And that’s exactly what Wu did.”
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Grassley pointed to the event as “a troubling example that should caution Congress to consider carefully legislative proposals easing money laundering laws.” He also said it “wasn’t an isolated occurrence,” noting that police have shut down “more than 800 marijuana farms in the last two years for operating illegally.”
“According to Oklahoma law enforcement, 2,000 of the 3,000 licensed marijuana farms flagged for suspicious activity over the last year had a Chinese connection,” he continued, “providing funding, labor or both.”
Grassley’s argument at the hearing was that marijuana banking reform, most notably the Secure and Fair Enforcement Regulation (SAFER) Banking Act, could enable Chinese money laundering by fraudulent businesses operating under he auspices of state legalization.
“There’s been a lot of debate about whether state-sanctioned marijuana businesses should be able to access the U.S. banking system,” he said. “The proposal on the table assumes that state [and] local regulations will hold back organized crime. The Kingfisher County murders show us that that assumption is just plain wrong.”
“If this legislation passes, Chinese money laundering organizations will have an additional avenue for cleaning dirty money,” the senator told colleagues. “They can simply hand it off to Chinese criminal organizations fraudulently running state sanctioned marijuana farms, for introduction into the U.S. banking system.”
Later in the hearing, Grassley asked William Kimbell, chief of operations for the Drug Enforcement Administration (DEA) about the sufficiency of state cannabis regulations.
“Given history like I just stated,” he said, “does this fact that a state—any state—licensed a marijuana farm mean that the farm isn’t generating illegal proceeds?”
Kimbell responded that DEA has identified 23 states where “Chinese organizations have taken over the cultivation of marijuana. Some of those are legitimate, some of those are illegitimate.”
“The vast majority that we find and working with our state and local counterparts are illegitimate,” he continued. “The people working in those facilities and cultivating for those facilities are controlled and work at the behest of Chinese money laundering organizations or growers’ organizations.”
“We found this is a significant problem,” he added, “and it goes from California all the way across the country and to the Northeast, and it’s becoming a serious challenge.”
Sen. John Cornyn (R-TX) said after Grassley’s comments that “according to news reports in 2021, 80 percent of the marijuana sold in California originated in illegal grows.”
“Can anybody explain to me why, when states have presumably legalized some aspect of the marijuana trade, some medical marijuana and others recreational, why 80 percent of the marijuana sold in California…originated in illegal grows?” he asked.
“I think with any business, there’s the ability to break the law with that business,” answered Kimbell, DEA’s operations chief. “By selling marijuana illegally through the black market, they’re able to skirt tax laws and they’re able to do a multitude of different things by not following regulations.”
“So by presumably legalizing, at least at the state level, if not at the federal level, of marijuana trade, it hasn’t eliminated the illegal activities of growers, distributors and users, right?” Cornyn questioned.
“Correct,” Kimbell replied.
Grassley’s and Cornyn’s criticisms of state-legal marijuana markets and the pending banking legislation come on the heels of similar pushback from Senate Minority Leader Mitch McConnell (R-KY), whose office recently told Marijuana Moment that the lawmaker “continues to oppose marijuana banking.”
Across the aisle, Senate Majority Leader Chuck Schumer (D-NY) said Tuesday, in the aftermath of a DEA marijuana rescheduling decision he called “historic,” that he remains “strongly committed” to passing marijuana banking and legalization bills.
“It is great news that DEA is finally recognizing that restrictive and draconian cannabis laws need to change to catch up to what science and the majority of Americans have said loud and clear,” the majority leader said. “While this rescheduling announcement is a historic step forward, I remain strongly committed to continuing to work on legislation like the SAFER Banking Act as well as the Cannabis Administration and Opportunity Act, which federally deschedules cannabis by removing it from the Controlled Substances Act.”
The SAFER Banking Act already already moved through the Senate Banking Committee last September. The legalization bill, meanwhile, is expected to be reintroduced on Wednesday, after Schumer and other prime sponsors solicited support from colleagues, with a sign-on deadline passing last week.
How news of DEA’s rescheduling decision affects the prospects of advancing other cannabis legislation is yet to be seen. The SAFER Banking Act already enjoys bipartisan support, though sources have said Republican leadership—principally McConnell—has posed an obstacles to pushing it forward as part of an unrelated aviation bill alongside cryptocurrency regulations legislation.
Rep. Nancy Mace (R-SC) said during an interview with The Dales Report on Tuesday that DEA’s possible reclassification of cannabis is something she’s “going to be looking at” in terms of how it affects the SAFER Banking Act, as well as her own separate legalization bill.
“How does this affect things moving forward?” she asked. “What’s the next goalpost?”
