Canadian Banks Remain Wary About Legal Marijuana Sellers

Marijuana legislation is not expected to be introduced until the spring of 2017 and experts anticipate that while they are now trying to stay as far from weed sellers as they can, banks will get more involved when the industry grows bigger.

Banks like Scotiabank and Royal Bank of Canada will not give accounts to companies associated with the legal trade of marijuana. The companies which are shunned will include medical marijuana producers and stores that sell pipes and bongs.

The risks in the industry are not worth the rewards, experts say. Since the banking sector is based on reputation it can be a huge risk for conservative banks to have dealings with the marijuana industry.

This decision comes even as the country is heading towards the legalization of recreational marijuana, and could be taken as a indicator of the fact that banks are not going to be welcoming recreational weed sellers as clients.

Other experts also add that the market will not be big enough initially to actually bring in significant revenues for the bank that will outweigh the reputational risks posed.

Banks are looking to protect their brand and being involved with the marijuana trade brings in unnecessary attention that could tarnish banks’ reputation, they feel. Due diligence from the banks is only expected in such a situation.

Legalized recreational pot is a topic that has been discussed by the media and its viewers alike for a while now. The subject still remains touchy to some while others openly support legalization.

Once the industry matures, marijuana will be a very important market for the banks and other financial institutions, Walid Hejazi, associate professor of international business at the University of Toronto’s Rotman School of Management said.

He added that however the industry is not yet at that stage. Another aspect of the issue is that the legal marijuana related business in the country is worth around $250 million a year, that in addition to being spread thin among the banks in Canada is not a major revenue earner.

Marijuana legislation is not expected to be introduced until the spring of 2017 and experts anticipate that while they are now trying to stay as far from weed sellers as they can, banks will get more involved when the industry grows bigger.

As of now there may be businesses being shut down, arrests being made, and reputations being tarnished, the very kind of things banks want to stay really distant from.

Bankers also say they are concerned about the various standards that have to be met while dealing with marijuana sellers. U.S. federal laws make it illegal to hold funds derived from the sale of marijuana, this too could be a contributing factor in the decision made by Canadian banks, some experts say. The challenges that recreational marijuana sellers in the U.S. face could soon be seen in Canada too, they said.

So what happens when banks won’t take these marijuana dealers as their clients? If sources from the U.S. are to be believed weed sellers actually spend significant amounts of money on buying safes and locked spaces to guard their money.

The U.S. Treasury Department and the Department of Justice has guidelines that allow pot dealers to work with banks. There are many regulations and checks in place to ensure the transactions were not part of money laundering schemes.

Will Canada follow a similar path? Only time will tell.

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