Cannabis businesses rally behind banking lawsuit

| Staff

The Canadian cannabis industry is reacting to a recent lawsuit filed against several Canadian lending institutions.

Following the announcement of the lawsuit on February 10, people operating different businesses within the Canadian cannabis industry have been sharing their own frustrations about working with banks in Canada.

The biggest challengesays Paul Hakimi, owner of The Hash Guild, a micro processor in Ontariois not only being refused by banks, but also being accepted only to have the rug pulled out from under them sometime later. 

“When we first started The Hash Guild in 2019, the banks, and RBC in particular, were very supportive in setting up our accounts,” explains Hakimi. “Now in 2023, with all of our federal licensing as well as overcoming the challenges of the pandemic, banks have withdrawn their support and even closed our accounts.”

Although he has been able to find other banks willing to work with his business, he says they tend to charge very high rates for cannabis businesses. 

“Other financial institutions are now charging exorbitant rates to licensed producers while black market producers are finding ways to grow with these same institutions. As a federally licensed producer, our hands are tied with the banks. It is our hope that the government, which created this industry five years ago, will step in and mandate that the discrimination against our market stops.”

John Karroll, CEO of Trichome Consulting Services Inc., which has assisted different cannabis businesses through the licensing process, says he’s seen these same challenges arise again and again for new cannabis companies trying to find a bank to work with. 

Karroll says his company has helped more than 200 companies through the commercial licensing process and estimates that around 60% have run into challenges finding or keeping a bank account. 

“This issue is significant and widespread across Canada. It impacts many legally registered cannabis companies, from retail to micro & standard licenses, and creates financial hardship for these companies. In addition, the majority of companies that are in the application process with Health Canada are also victims to this banking issue, as they cannot open accounts if they state openly to the bank they are in the cannabis industry”.  

“These companies are spending thousands of dollars to be part of this industry and meet all regulatory requirements, municipal, provincial and federal,” he adds. “They are compliant and go through the stringent licensing requirements. Yet they have to process these operational funds through personal bank accounts or other companies that are not listed as cannabis operations.”

Karroll says he suspects some of the challenges could be related to banks and other lending institutions that also do business in places like the United States, where cannabis remains federally illegal. 

However, Joshua Reynolds, President of CapitalNow Cannabis, a small financing company focused exclusively on small-to-medium-sized licensed operators in the Canadian cannabis sector, tells StratCann he thinks this may often be an easy excuse some banks use when they simply don’t want to work with cannabis companies.

“I think they have conveniently been able to blame those rules, but I don’t think they would jump into it. I think they see it as too risky still, that it’s not mature enough. I think they would be concerned about the business acumen, and a few other things.”   

Highlighting how widespread the issue is, following the announcement of the class action lawsuit against Desjardins Federation, National Bank, Royal Bank, Bank of Montreal, TD Bank, Royal Bank (RBC), and CIBC, numerous cannabis companies also left comments online mirroring similar experiences across Canada. Here are just a few: