Like the plague! - Banks will not touch cannabis players, still refuse to open accounts for them
Despite being assessed by the Cannabis Licensing Authority (CLA) as “fit and proper” to do business in the local regulated cannabis industry, at least 238 business interests in the sector have been shut out of the banking system.
Chairman of the Cannabis Licensing Authority (CLA), Hyacinth Lightbourne, told Parliament’s Public Administration and Appropriations Committee (PAAC) Wednesday that local banks have rejected applications from more than 200 proposed players in the industry to open bank accounts.
For about a year, the CLA could not open a bank account, Lightbourne disclosed.
She also made reference to an individual in the sector who partnered with foreign investors, but money could not be wired to the country to carry out business activities. She noted that the investors had to “fly people in with an ‘under amount’ in order to get in”.
“The only system that I know that operates without a banking system and flourishes is an illegal one,” Lightbourne quipped.
Local banks have expressed concerns in the past about their correspondent banking relationships, and as such, have refused to risk severe sanctions.
Correspondent banking facilitates certain services by banks in other jurisdictions. The services may include wire transfers, business transactions, and deposits.
In some instances, international financial institutions have restricted or ended their relationship with banks in the region owing to concerns such as money laundering and fraud.
Committee member Marisa Dalrymple Philibert wanted to know whether there was a future for the industry with such an intractable problem.
Lightbourne said that in meetings with Bank of Jamaica officials, the CLA was told that the central bank could not force financial institutions to take an individual’s money.
“And right now, the risk of losing their correspondent banking – they will not touch it,” the CLA chairman insisted.
She was at pains to explain that people who operate agricultural companies, “if the bank even smells that ganja is related to it, they lock down the (company’s bank) account.”
PAAC Chairman Wykeham McNeill said that the issue facing the sector needed urgent policy initiatives to break the deadlock.
Dermon Luke Spence, permanent secretary in the Ministry of Industry, Commerce, Agriculture and Fisheries, said that the minister, along with his foreign affairs colleague, has been lobbying the US authorities to address the problem.
The US House of Representatives passed the Secure and Fair Enforcement Banking Act in September which seeks to amend federal law to allow for banks and other financial institutions to work with state legal cannabis businesses.
It is believed that this is a first step in paving the way for tackling the correspondent banking issue, which affects the cannabis industry in countries like Jamaica.