Legal Cannabis Sales in Uruguay Face an Unexpected Obstacle

After a month of legal cannabis sales, pharmacies in Uruguay are being forced to make a decision. In 2013, Uruguay completely legalized the production and sale of cannabis. But after recent warnings from Banco Republica—the largest bank in Uruguay—and a local branch of Spanish bank Santander, pharmacies selling cannabis are having their accounts closed.

In a statement for Agence France-Presse, Santander said its decision to abstain was based on international standards. “We decided not to participate in this activity . . . because we are a global bank with customers who use banks in different countries, we must respect the various local standards.”

The refusal of banks to participate with the 16 pharmacies offering cannabis, renders commercialization impossible. To make matters worse, Uruguayan law requires employees be paid by direct deposit—cash or checks are illegal.

Speaking on conditions of anonymity, a government official told The Associated Press last week that Uruguayan banks are at risk of violating laws that ban receiving money tied to drugs and could be sanctioned.

Diego Olivera, secretary-general of Uruguay’s National Drugs Council, told The Associated Press that authorities are investigating the number of pharmacies affected and are looking for solutions. “Without doubt, in these processes of changing paradigms, they run up against moments of difficulty,” Olivera said. “We are working on alternatives.”

Sen. Jose Mujica, former guerilla leader and president of Uruguay, noted that he would commence a “gridlock” in parliament if authorities are unable to find a solution. The legalization of cannabis in 2013 was a signature policy of his administration.

Uruguay, of course, is not the first nation to encounter setbacks after legalization. In the U.S, cannabis is illegal on a federal level—so in states where sales are legal, cannabis retailers are forced to pay employees and suppliers in cash. All profits must be reviewed and handled in cash, and even income taxes must be made in cash.  Since banks are federally regulated, cash generated by cannabis sales are deemed untouchable. As recent as 2015, an estimated 60 percent of American cannabis retailers operated without banking services.

Even if Uruguayan authorities are unable to find a solution to the banking issue soon, the 2013 law that legalized cannabis also allows Uruguayans to grow up to six cannabis plants at home. And up to 45 people can form “grow clubs” to collectively grow a maximum of 99 plants for its members’ use.