Financial advisers may want to rethink some of the investment strategies they pitch to their clients, especially if it involves an industry as controversial as marijuana.
Scotiabank and the Royal Bank of Canada (RBC) have just announced they won’t let businesses involved in the marijuana industry continue to use their services. Peripheral businesses that aren’t involved in the production or sale of marijuana, such as stores that sell pipes and bongs, have also been told they wouldn’t be served by these banks.
This new policy has left some business owners scrambling to find alternative arrangements. After a decade-long relationship with Scotiabank, Nathan MacLellan, the owner of Hemp Country, says he received a letter from the bank last month informing him that his account was being cancelled. According to MacLellan, his store sells marijuana-related paraphernalia, such as bongs and pipes, but no actual marijuana.
"It's kind of insulting really, especially when legalization is right on the horizon," he says. "Nothing in the store that we sell is illegal. Every single variety store sells pipes and bongs nowadays, so why are they singling us out all of a sudden?"
Following this incident, MacLellan managed to secure an account with a local credit union, but not without some difficulty. The first credit union he contacted gave him the “same rigmarole” as Scotiabank, he alleges.
According to Scotiabank spokesman Rick Roth, the bank cannot comment on specific instances due to privacy issues. In general, however, Scotiabank aims to "manage risks soundly while making prudent business decisions," he said.
"We consider our stringent risk management practices a key strength of our business," he said. "This is why the bank has taken the decision to close existing small business accounts and to prohibit the opening of new accounts for customers classified as [a] 'marijuana-related business."'
Roth assured that Scotiabank would continue to monitor the industry and may change its policy towards marijuana-related businesses in the future.
RBC has also confirmed it won’t continue to provide banking services to businesses engaged in the production and distribution of cannabis.
"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," spokesman AJ Goodman told CBC News in an email.
Goodman said that the bank came to this decision after careful deliberation. “Decisions like these are not taken lightly and are only done after a careful assessment, " he says.