On the heels of Colorado and Washington legalizing the recreational use of marijuana, Deputy Attorney General James Cole told Congress on Tuesday that the Justice Department and federal banking regulators will help clear the way for financial institutions to transact business with legitimate marijuana vendors without fear of prosecution.

Currently, processing money from marijuana sales puts federally insured banks at risk of drug racketeering charges. Because of the threat of criminal prosecution, financial institutions often refuse to let marijuana-related businesses open accounts. This has become a huge problem in states that have laws permitting medical use of marijuana, as well as those that allow recreational use.

In 2011, American Express announced it would no longer handle medical marijuana-related transactions because of fear of federal prosecution. A month later, Cole gave banks an explicit directive on medical marijuana that stated: "Those who engage in transactions involving the proceeds of such activity may also be in violation of federal money laundering statutes and other federal financing laws."

Committee Chairman Patrick Leahy, D-Vt., said Tuesday that as a result of the banking constraints, legitimate marijuana businesses are operating on a cash-only basis and "that's a prescription for problems, tax evasion" and other criminal activity. Cole agreed and said there is a public safety component to the problem because the cash-only business can result in the presence of guns.

Progress!