Two Canadian banks turn down cannabis businesses

Scotiabank and Royal Bank of Canada have decided to stop providing bank accounts to businesses associated with the cannabis industry, leaving some entrepreneurs scrambling to find an alternative.

After 10 years with Scotiabank, Nathan MacLellan, owner of Hemp Country, a consumer accessories store, received a letter last month announcing that his account had been closed.

«It's really insulting, especially when legalization is in sight,» he told Canadian media, recalling that the legalizing cannabis in Canada should arrive in 2017. «Nothing we sell is illegal. Every department store today sells pipes or bongs. Why are they suddenly excluding us?»

Since receiving this letter, MacLellan has managed to secure an account with a local bank, albeit with some difficulty. The first bank he contacted told him «the same story» as Scotiabank.

Earlier in August, a fledgling medical cannabis company received a phone call from Scotiabank announcing that it would no longer be doing business with cannabis-related companies.

The company, which is currently in the process of obtaining a license to cultivate medical cannabis, does not want its name to be given out to avoid possible repercussions on its future license.

Scotiabank does not comment specifically on these decisions. The reason given is risk management. However, the bank adds that it will continue to monitor the industry and may change its mind in the future.

For its part, the Royal Bank of Canada (RBC) confirms that it does not provide banking services to companies «engaged in the production and distribution of cannabis».

«We confirm that as part of our business practices, the bank periodically reviews the relationships it has with its customers by analyzing the benefit/risk factors of providing them with banking services,» justifies the bank spokesperson. «Please be aware that decisions such as these are not taken lightly and only after careful evaluation».

Bruce Linton, CEO of Canopy Growth, one of Canada's largest medical cannabis plantations, also received a letter from RBC a year ago, informing him of the closure of his account. And he recalls he wasn't the only one at the time.

The Canadian situation is similar to the experience of American entrepreneurs. As cannabis is still illegal at federal level, banks don't want to take the risk of having money from its industry, forcing all businesses to operate on cash and therefore take risks in storing or transporting the money.