Even though it’s legal, the big banks are balking at weed money, one Newfounland and Labrador seller found.
Thomas H. Clarke’s independent cannabis shop in Portugal Cove-St. Phillip’s went cash-only Wednesday after being cut off by the bank.
Clarke opened an account with the Royal Bank of Canada before getting his cannabis licence, saying he was a cannabis accessories wholesaler. A few weeks ago, Clarke said, RBC deemed his business “high risk” and sent a letter saying it would be cancelling his account.
That sent Clarke on a hunt for a new financial institution. But, he said, every bank he went to turned him down.
“Most of them are saying that we are not taking cannabis clients right now due to us having dealings with America and America putting pressure on us to not have cannabis industries in our bank,” Clarke told CBC’s St. John’s Morning Show.
The Royal Bank said in a statement that it does not comment on “banking relationships” but that decisions are based on several criteria.
“RBC evaluates banking relationships within the sector on a case-by-case basis. Decisions are made against a number of factors, including: the nature of their business, their financial position, creditworthiness, their ability to comply with legal and regulatory requirements, as well as other factors relevant to their specific business.
“This issue has many dimensions, and the law and regulatory framework for the sector continue to evolve. We will continue to take all factors into account within the context of our banking policies.”
Trina Fraser, an Ottawa-based lawyer specializing in Canada’s legal weed sector, said Alterna Bank has emerged as an option for many of the nation’s legal weed retailers — but that’s no help to Clarke because there’s no Newfoundland and Labrador branch.
“This is the first I’m hearing of someone literally having no options and potentially having to resort to a cash business,” she said of Clarke’s operation, THC Distribution.
She said there’s a theft risk when businesses handle large amounts of cash, and it’s not clear why financial institutions aren’t getting on board with the legal weed business.
“I don’t know that we’ve gotten any complete transparency on why the banks’ policy haven’t really evolved and kept up with the industry,” she said.
“Is it just lingering stigma and reputational risks fears? Has it got to do with U.S. subsidiary banks and pressure from the U.S.? I don’t know.”
In Labrador West, it was down to the wire. The High North shop in Labrador City also struggled to get a bank on board, and only secured its account with the Newfoundland and Labrador Credit Union two hours before opening at 4:20 p.m. on legalization day.
Co-owners Trevor and Brenda Tobin, said they were upfront about what they’d be selling and had a number of banks turn them down.
“Obviously the banks knew that this was going to be a huge market and someone was going to have to do it,” Trevor Tobin said. “We’re not going to put the money under our mattresses — we needed somewhere to deposit — so I’m surprised they didn’t have anything in place.”
High North was cash-only for the first few months because even though the business had a bank account, the mother-son duo couldn’t find a credit and debit machine provider.
The company they used at their convenience stores wouldn’t get involved with cannabis sales.
“We knew there was going to be some potholes,” Brenda Tobin said. It took about three months to find a debit machine provider, but there’s one in place now.
Clarke said the Newfoundland and Labrador Credit Union told him it wasn’t taking on any new cannabis clients.
He said he’s applied to some other credit unions he wasn’t familiar with and is waiting to hear back.
He estimates about 60-70 per cent of his sales went on either credit or debit, but for now his shop in Portugal Cove-St. Philip’s is cash-only.