Because the federal government refuses to legalize marijuana and change regulations currently prohibiting banks from accepting cannabis proceeds, most pot businesses do not even have bank accounts. Union Bank, in fact, closed several of its clients’ accounts recently, citing suspicion of involvement in the weed industry as its reason for doing so.
This leaves the City of Santa Barbara with a rather serious problem: The city banks with Union. Since the Union Bank does not wish to accept monies generated from the sale of marijuana, the city will have nowhere to bank its generous pot taxes when legal sales start next year. The Union Bank was never the city’s choice: For decades, it deposited its monies into accounts it had with Santa Barbara Bank & Trust.
However, Union Bank acquired Santa Barbara Bank & Trust several years ago. According to Bob Samario, the city’s Director of Finance, it was not long afterward that Union increased fees associated with the city’s accounts significantly. He claims that the city has had plans to terminate its contract with Union Bank for two years already, and not even because of the marijuana issue.
The coming weeks will be interesting for Santa Barbara residents. They city is now proposing another bank manage its investment and fund accounts. It wants to know exactly what policies the bank has in place for handling marijuana tax dollars. The city also wants to know what investments the bank involves itself in, and therefore, which investments the city will indirectly be sponsoring.
Not too long ago, the City Council discovered that Union Bank had large investments in the Dakota Access Pipeline, an issue it deemed morally bankrupt and socially unconscious. Furthermore, Samario said when asked, “At some point, Union Bank did mention that they may not be able to submit a proposal because they would not be able to accept any money related to the cannabis industry.”
Perhaps the bank is now becoming intimidated, because Samario also said that, “They have since changed their posture. They will be submitting a proposal.” The Union Bank, however, failed to respond to requests for comment validating this. Whether it submits a proposal is irrelevant at this stage, though, as the City Council may very well prefer having a local bank servicing its tax dollars anyway.
Of talks with the city, Laurel Sykes of Montecito Bank & Trust said, “I know we definitely have been talking to them.” Sykes confirmed that no banks in the area are willing to accept clients that “touch the plant.” The hesitancy of banks to offer financial services to the marijuana industry is a direct result of U.S. Attorney General Jeff Sessions mistakenly calling cannabis dangerous and refusing to legalize it.
The issue is a frustrating and perplexing one. “Absent the federal government addressing it, I do not know what the answer is,” confessed Sykes. A cannabis working team under the State Treasury released recommendations on Tuesday to help the banking industry address this issue, including contracting armored vehicles for receiving cash, establishing a one-stop portal with regulatory and licensing data, creating a public bank, and sharing resources with other states that permit the use of marijuana.