No cannabis sign-off by the banks

By Colville Mounsey colvillemounsey@nationnews.com

Despite the historic opening of Barbados’ first medicinal cannabis dispensary, the banking sector remains unable to fully support the fledgling industry because of persistent constraints tied to international banking regulations.

President of the Barbados Bankers’ Association (BBA) Shimon McIntosh said the long-standing issue of correspondent banking – specifically tied to the federal illegality of cannabis in the United States – continues to present a major obstacle for local financial institutions when it comes to banking proceeds from the industry.

He noted that while the local legislative landscape has evolved to accommodate medical marijuana, this shift has not been matched by corresponding adjustments at the international level.

“I saw that they opened up this medical cannabis dispensary, but as far as I’m aware, correspondent banking is still one of the challenges. It’s still a problem for us because, as you know, it’s not legal on a federal level in the US and that’s where the correspondent bank issue arises. So nothing really changes for the banking sector,” McIntosh told the Saturday Sun in an interview.

Correspondent banking refers to arrangements where local banks rely on larger international banks – many based in the US – to process international transactions. Since cannabis remains classified as a controlled substance under US federal law, financial institutions risk losing access to these critical relationships if they are found to be facilitating transactions linked to the cannabis trade, even if that trade is legal under domestic laws.

McIntosh stressed that the BBA was not aware of any efforts by local banks to negotiate workarounds or exceptions to facilitate cannabis-related transactions.

“For me to say that a bank will seek an exception and onboard such a client would be speculation. I don’t know if that’s going to happen,” he said. “I’m not aware that any of the banks in Barbados are trying to find a loophole or an exception to bank this sector.”

The uncertainty around the banking of cannabis proceeds also raises questions about how licensed dispensaries will manage and move their money, with McIntosh admitting that he does not yet have a clear answer.

Possible solution

“How are they going to move the money? I remember sometime ago, someone was looking at Bitcoin or Crypto as a possible solution, but that raises its own set of complications. If they can get Crypto overseas, maybe it solves their problem. But, at some point, if the sector grows and the revenue is substantial, you just can’t move that money easily.”

He said individual banks might consider limited exceptions in specific cases where the revenue generated is not significant, but this too would carry risk.

“Maybe somebody, if it’s not a big amount of revenue, might try and see if they can get an exception to onboard. But then you’re still running the risk of running afoul of your correspondent banking relationship,” he cautioned.

The banking dilemma also casts a long shadow over the financing prospects for future entrants into the industry. According to McIntosh, companies hoping to open dispensaries or invest in cultivation may struggle to access commercial loans if their revenue models rely on proceeds from cannabis.

“If the proceeds of the loan repayment come in from cannabis, then the answer would be yes, they would have a challenge. But if I buy a building and I’m not banking on the cannabis proceeds to spruce up that building, then a bank might look at that on a stand-alone basis. It really comes down to how integrated the loan or investment is with the cannabis side of the business.”

The caution from the banking sector highlights the regulatory tension faced by countries like Barbados that are moving ahead with cannabis legalisation at the national level, while remaining dependent on international financial systems that operate under different legal regimes.

Barbados passed its Medicinal Cannabis Industry Act in 2019 and established the Barbados Medicinal Cannabis Licensing Authority to regulate the sector. The country has since granted several licences for cultivation, processing and retailing. However, despite this regulatory infrastructure, stakeholders have long expressed concerns that the inability to bank legally earned cannabis proceeds could stifle growth and innovation.

Asked whether any behind-the-scenes discussions are taking place to engage US banks or explore inter-country payment channels that bypass traditional correspondent systems, McIntosh said there was no such activity to his knowledge.

“I would have to check with my colleagues to confirm, but as far as I know, no one is pursuing that right now because the correspondent bank issue is still the main barrier.”