Lack of banking hinders R.I.’s cannabis sector

OPENING THE DOOR: Frederick Reinhardt, CEO and president of Greenwood Credit Union, says the Warwick credit union started providing services to cannabis-related businesses in part because of safety concerns over operating a large all-cash enterprise. / PBN PHOTO/MICHAEL SALERNO
OPENING THE DOOR: Frederick Reinhardt, CEO and president of Greenwood Credit Union, says the Warwick credit union started providing services to cannabis-related businesses in part because of safety concerns over operating a large all-cash enterprise. / PBN PHOTO/MICHAEL SALERNO

The cannabis industry may be expanding in Rhode Island, but these types of businesses still struggle to find financial institutions that will provide financing or even take their deposits and open checking accounts.

It’s a challenge that many in the industry say must be worked out as Rhode Island leaders consider legalizing recreational marijuana and licensing retail outlets. Without banking services, these businesses operate in all cash, which could fuel crimes such as theft and robberies.

The problem is that banks and credit unions are wary of getting involved with cannabis-related businesses because the growth, sale and use of the substance remain illegal on the federal level, possibly exposing financial institutions to legal trouble.

As a potential solution, banking reform was urged in 2019 by attorneys general in 33 states, including Rhode Island, Connecticut and Massachusetts.

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But even as Rhode Island prepares to expand the number of licensed medical-marijuana dispensaries from three to nine, the lending issue remains unresolved.

‘[Financial institutions are] concerned about their reputational risk.’
STEVEN J. HOFFMAN, Mass. Cannabis Control Commission chairman

Only two of Rhode Island’s 16 state-chartered banks and credit unions are so far open to working with cannabis-related businesses, but it’s a problem that Massachusetts officials have wrestled with since recreational marijuana was legalized in that state in 2016.

Steven J. Hoffman, chairman of the Mass. Cannabis Control Commission, said he is aware of six financial institutions in Massachusetts that provide cash management for cannabis businesses, meaning they only aid them with their deposits. There is no lending to these businesses, he said.

“They’re concerned about their reputational risk,” he said. “It’s still controversial – but we’re getting there.”

And, while federal laws outlaw marijuana, the U.S. government has held off cracking down on state-licensed businesses or banks that are servicing them, Hoffman noted.

Frederick Reinhardt, CEO and president of Greenwood Credit Union in Warwick, said he agrees with Hoffman’s assessment of the lending issues associated with the cannabis industry. He said Greenwood Credit Union provides banking services for cannabis-related businesses.

“Our willingness to support the industry with deposit services is based on public safety,” he said. “We do it because we believe it is the right thing to do to keep what would otherwise be a cash business safer.”

Greenwood started providing deposit and banking services for the cannabis businesses after a business client made an investment in the industry. Reinhardt said the credit union examined the sector, conducted a risk assessment and received approval from its board of directors and regulators before agreeing to provide the services.

“We primarily bank the cultivators – the farmers,” said Reinhardt, noting that the credit union does not provide those services to the state’s medical-marijuana dispensaries.

William DeWitt, a spokesman for the Middletown-based People’s Credit Union, said the credit union operates the same way. He said People’s maintains a deposit relationship with some marijuana-related businesses but is not involved in any financing of the industry.

Brian Williams, co-owner and president of Artic Green Inc., a licensed cultivator in Warwick, said it’s been tough to expand the business and make improvements without financing.

“With no available conventional lending, we have had to pay everything out of pocket, and with no real safety net like a line of credit like most businesses, it’s extremely stressful,” Williams said.

Although banking is limited for the cannabis industry, there is hope that the difficulties will ease.

Congress is considering legislation aimed at providing cannabis businesses with access to lenders and their services.

In April, the U.S. House passed the SAFE Banking Act, which would prohibit federal regulators from penalizing banks and depository institutions for providing services to state-authorized cannabis businesses. The legislation is being deliberated in the U.S. Senate.

Meaghan McCabe, spokesperson for U.S. Sen. Sheldon Whitehouse, D-R.I., said he is reviewing the legislation. “The senator understands that businesses need clearer guidance on this issue,” she said.

Elizabeth Dwyer, deputy director and superintendent of banking and insurance at the R.I. Department of Business Regulation, said the state has been working with its chartered banks and credit unions to encourage services to the legal cannabis ­industry.

Dwyer said DBR, which regulates the state’s cannabis industry, has an exam protocol gleaned from best practices established in Washington state and Colorado.

“In this, we examine [state-chartered institutions] for compliance and make sure they have instituted appropriate safeguards to ensure that the money laundering prohibitions are addressed,” she said. “At least two of our state charters are providing services to the cannabis industry and we believe more might become interested if the federal bill is enacted.”

Cassius Shuman is a PBN staff writer. Email him at

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