By Jon Hiltz
The marijuana industry has become cash rich, and without access to basic banking services, many of its businesses are victims in waiting. A 2014 NBC News report found that dispensaries in Denver had an “annual robbery and burglary rate of about 50 percent.”
An anonymous and verified source within Canada’s largest financial institution, the Royal Bank of Canada, revealed to Marijuana.com that RBC employees were instructed not to lend money or open an account with any cannabis-related businesses. Employees received this instruction through an internal document disseminated in September of 2015. According to the source, “It’s not written in the policy procedure library; it’s just a notice that was sent out.”
According to the source, “[The memo] reads, due to the legal and reputational risks posed to the bank and potentially vulnerable to criminal involvement and money laundering, staff members are forbidden from opening business deposit accounts for marijuana or medical marijuana businesses.”
The same major financial institutions facing revived lawsuits from a federal appeals court in New York, over a multi-trillion-dollar global price-fixing scheme, view the legal and regulated marijuana industry as too vulnerable to criminal involvement. According to a CBC News report, RBC and 15 other global banks are facing significant damages for their alleged role in LIBOR-rigging that may have affected “hundreds of trillions of dollars worth of consumer loans and savings rates around the world.”
When asked if RBC is likely to change its policy once marijuana is legal, the source did not believe that they would. “I don’t think that they’ll do it even then because it poses a reputational risk.” A 2016 U.S. Gallup poll places confidence in banks at “below 30% for the eighth straight year;” The Associated Press-NORC Center for Public Affairs Research finds that marijuana legalization has reached an all-time high, citing support from 61% of Americans.
Canada’s second largest bank, TD (Toronto Dominion), didn’t rule out the possibility of the cannabis market in their official statement to Marijuana.com:
While we generally don’t comment on individual businesses, our consistent approach is to assess banking applications from all businesses in all industries on a case-by-case basis.
National Bank of Canada also weighed in on the issue in an official statement to Marijuana.com:
We do have a framework in place for medical marijuana producers. However, for any other funding request related to the cannabis industry, we are waiting for further guidance from the legislator.
John Conroy is a legendary lawyer in Canada for civil rights and was the man responsible for fighting to get the Allard decision, which earlier this year deemed that Canadians do not have proper access to their medical marijuana. That decision has been the catalyst for dispensaries, delivery services, and even patients growing their own across Canada, with some form of legal leverage to protect them. He believes that if RBC and others make this decision that it will be a foolish one. “If one particular bank takes that position; I would expect that other banks would not. Certainly not all the banks or credit unions especially in a legal market.”
Conroy went on to add that this policy within RBC is counterproductive to what the bank is open for, and that is to make money. “I thought banks operated in order to try and make a profit for their shareholders and not just take [that]position. It smacks of the bank taking a political position as opposed to making a business decision.” Legal marijuana sales in Colorado raked in $996,184,788 in 2015, nearly $1 billion that Big Banking didn’t care to touch.
In regards to the internal document stating RBC’s reasons for not getting involved in “possible criminal involvement and money laundering,” Conroy also believes that argument is counterproductive to a business-minded, profit-based organization. “The whole point of legalizing is to remove the incentive for not just organized crime but any criminals and to take them out of the market.” By forcing a billion-dollar industry to function outside of the traditional banking structure, it has invited crime at an alarming rate.
The challenge for cannabis entrepreneurs getting credit and bank accounts to store their profits is an ongoing problem in the U.S. as well. Hopefully, once marijuana in Canada is legal on a national level, our banks won’t turn away from people who want to put their hard-earned cash in something other than the mattress they sleep on.
We contacted RBC for a statement on our source’s information. They requested 48 hours to prepare a response:
RBC currently does not provide banking services to companies engaged in the production and distribution of marijuana. We confirm that as part of our normal business practices, the bank periodically reviews the client relationships we have against several factors used to balance the benefits and risks associated with providing them with banking services. For business banking clients, including those engaged in the production and distribution of medical marijuana, these factors include the nature of their business, their financial position and creditworthiness as well as other factors relevant to their specific business.
Please know that decisions like these are not taken lightly and are only done after a careful assessment.
While we are not in the position to comment on legislation that has not passed, the bank will consider such legislation at the appropriate time and consider whether it would impact our business.
Marijuana.com contacted licensed producers to investigate if they had experienced problems with RBC or any other Canadian financial institution. Of the six we spoke with directly, four confirmed they experienced banking problems of this nature.
By not touching marijuana money with a 10-foot pole, the major banks are propping a criminal enterprise. While RBC has not been convicted of any wrongdoing, this bank and their powerful cronies have earned a rich portion of the blame — there’s plenty go to around.
This article was written by reporter Jon Hiltz and editor Jeff Hale.
