Monday, September 23, 2019

Puerto Rico Cannabis Industry Left Without Financial Institution Backing

By on January 25, 2019

Editor’s note: The following originally appeared in the Jan. 24-30, 2019, issue of Caribbean Business.

Tu Coop, the only banking institution in Puerto Rico providing financial services to the medical cannabis industry, will no longer offer these services and is leaving the industry without banking service on the island.

“This has left the industry in shock,” noted Ingrid Schmidt, president of the Medical Cannabis Association.

While the medical cannabis industry is legal in Puerto Rico, it is illegal at the federal level. Therefore, commercial banks and many financial institutions refuse to provide any financial services to the many medical cannabis clinics across the island. The cooperative or credit union sector, which is regulated by local laws, was the only one providing such financial services to the industry. At first, two credit unions provided the service. However, Sol Coop stopped providing services to the industry in 2017, leaving Tu Coop as the sole service provider.

With Tu Coop dropping medical cannabis clinics from its roster of clients, the industry will be left without any financial services for electronic payments such as the ones the industry has to make to the Treasury Department.

Schmidt noted that the move will create immense problems for the industry, which will be forced to operate on a cash-only basis. “This brings a whole host of problems, such as security, and promotes money laundering,” she said.

Goodwin Aldarondo, CEO of Puerto Rico Legal Marijuana, said the move will not wipe out the industry, which “is here to stay,” but will make medical cannabis clinics targets of robberies because burglars will know they have cash.

The industry generates millions in revenue, with 56,000 people in Puerto Rico possessing a license to use medical cannabis.

“In Colorado, some clinics have to make underground safe-deposit boxes,” Aldarondo said.

“This will be a huge public-safety problem,” Schmidt said.

The decision will prevent the ever-increasing industry from paying the sales & use tax or from paying the Municipal Revenue Collection Center [CRIM, by its Spanish acronym]. “The question now is whether these institutions will accept cash,” Aldarondo said. “This will make it more difficult to regulate the industry,” he added.

Tu Coop’s decision was prompted by a decision from Banco Cooperativo, which said it would no longer provide services to the industry.

“The problem was that no checks issued by Tu Coop were being accepted,” Aldarondo said.

Tu Coop has submitted in court an injunction to try to halt the decision.

“Banco Cooperativo is very adamant about it. We know Tu Coop is doing what it can to stop this. Meanwhile, we would have to operate on a cash-only basis,” Schmidt said.

Caribbean Business contacted Banco Cooperativo, but its president was not available for comment. Israel Menchaca, executive director of Tu Coop, was also contacted, but he also was unavailable for comment.

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