If Barbados is serious about embarking on a medical marijuana industry, then Government and banks will need alternative corresponding banking services to those currently provided by the United States, whose federal Government still outlaws the herb.
Declaring that such a move is not without precedent in some European nations, the respected economist, Jeremy Stephen, proposed that banks here build ties with banking systems in Canada and western Europe.
In an interview with Barbados TODAY, he suggested that from the moment Barbados sticks its toe into the burgeoning medical marijuana industry, it runs the risk of more US banks dropping links in a bid to conform with laws to prevent financing drug trade and terrorism.
The practice, known as de-risking involves mostly American financial institutions exiting relationships with, and closing the accounts of, clients perceived to be high risk, including banks here.
Stephen said: “It certainly puts the onus on the banking sector to reform and it is important for the Government to ensure that they reforms as well.”
The UWI lecturer and former economic society president explained that legal marijuana establishments in the United States are finding great difficulty in banking their proceeds due to federal regulations.
He suggested Barbados set up its correspondent banking links through more liberal jurisdictions, in an apparent reference to Canada and western European states.
“If you are banking with a credit union that is using corresponding banking from a US state-run bank, that has a state or regional charter, then you could escape de-risking.
“Furthermore, if you have a corresponding bank that is in Canada, it shouldn’t be a problem because federally marijuana is legal.
“However, if you have corresponding bank that has a US federal charter in the United States, then that would be threatened.”
He said that all it would take is for a major bank, such as Bank of America, to cease business relations with Barbados, to kickstart a domino effect.
He added: “We need to use other banks as corresponding banks such as German, French, Dutch, Swiss and Canadian banks.
“The point is that in order to get around the general issue of de-risking, Barbados is going to have to open up its banking relations across the globe.
“We are going to have to find more partners than just those within the United States.”
But the economist warned that such a move could result in a little more expense for accessing US dollars for the purposes of trade.
He also noted that the switch could also be a bit more costly but suggested that given the size of the economy, the cost would be spread among the citizens.
Stephen further argued that a transition from US corresponding banking would not necessarily mean that Barbados would be locked out of the American banking services, as Canada, which has fully embraced the marijuana industry, provides an avenue for continued relations with the US banking system.
He told Barbados TODAY: “The back door into the US would be through Canada. The Canadian banks have reformed towards having a healthy relationship towards the burgeoning marijuana industry over there and they have significant presence in the US with respect to investment banking and correspondent banking.
“Those relationships have not been shut off with respect to the federal legalization of marijuana for medicinal and recreational usage in Canada. We have Canadian banks here, so that allows us some form of cover.”
The economist pointed out that what he is proposing is not without precedent, as several countries have successfully made such banking reforms in order to facilitate their involvement in the marijuana industry.
“The likes of Uruguay have dealt with this, as they were the first to legalise marijuana. Then there is also Portugal, which would have dealt with that as well.
“So, you can find corresponding banking relationships in Europe and Canada without much issue,” He said.