Most cannabis operators do not have a bank account because federal regulations do not allow banks to accept their proceeds. In fact, Union Bank reportedly shut down the accounts of several clients they suspected were involved in the cannabis industry. So how will that impact the City of Santa Barbara, which banks with Union, when it starts accepting tax dollars from cannabis businesses next year?
For decades, the city had banked with Santa Barbara Bank & Trust. But several years ago Union acquired the local bank and soon after “significantly” increased fees associated with the city’s account, according to Finance Director Bob Samario. He said the city was already planning to terminate Union’s contract two years ago; it had nothing to do with the cannabis issue.
In the coming weeks, the city will put out a request for proposal for a new bank to handle funds and investments. Among the “thousands of things” the city will ask about will be the banks’ policies on dealing with cannabis tax receipts. The city will also inquire about the banks’ investments. Union Bank came under fire with city councilmembers for investing in the Dakota Access Pipeline and other industries they did not deem socially conscious.
When asked, Samario said, “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]. They have since changed their posture. They will be submitting a proposal.” Union did not respond to requests for comment.
But the City Council very well may favor a local bank. “I know we definitely have been talking to them,” said Laurel Sykes of Montecito Bank & Trust. Sykes said no area banks are openly accepting clients who “touch the plant.” They are deterred because U.S. Attorney General Jeff Sessions considers marijuana a dangerous narcotic. “Absent the federal government addressing it, I don’t know what the answer is,” Sykes said.
On Tuesday, the State Treasurer’s cannabis working group released recommendations for banks to address the problem. They included contracting with armored vehicles to receive cash, creating a one-stop portal with licensing and regulatory information, establishing a public bank, and pooling resources with other states where cannabis is legal.