Taken by the Bank

Some banks categorically refuse every form of financial services to coffeeshops. What are the arguments used to refuse or terminate bank accounts? What reasons do banks have to treat the cannabis sector as the new pariah? And finally: What can you do about this? Mr. Maurice Veldman explains.

_“ING thinks along with you”_, reads the slogan of the bank that once started as the Postbank and was kept afloat by the Dutch State during the banking crisis with no less than 32.5 billion euros in emergency aid. The bank indeed thought along with South American cocaine cartels whose money was neatly laundered through ING accounts held by strawmen. Also, a telecom provider that paid millions in bribes through Dutch ING accounts to a company owned by the daughter of the Uzbek president could rely on the service of the bank with the lion. Eventually, it started to become a bit too noticeable, and ING was slapped with a record fine of 775 million euros by the state. That fine was, of course, appropriate: banks are institutionalised investors of Dutch tax money and should distance themselves from laundering and facilitating drug money or bribery. In an attempt to polish its tarnished image, ING is now resorting to a tried-and-tested method: making life as difficult as possible for the small coffeeshop owner.

Coffeeshop owners are increasingly treated as pariahs by Dutch banks like ING and Rabo. They are labelled as high-risk clients when offering banking services. In this way, banks try to clear their own names. Through intensive customer due diligence, these small entrepreneurs must justify themselves monthly. The grip on these entrepreneurs is tightened every time.

A coffeeshop owner was instructed by his bank to install a debit card machine in his establishment because he was making too many cash deposits for the bank's liking. The arrival of this machine was greeted with cheers by customers, as after some time, the coffeeshop generated about 60 to 70 percent of its turnover via debit card. Consequently, there was insufficient cash to fund the purchase of cannabis, and the operator was forced to withdraw amounts from his account. This went well for a while, until he was ordered to stop withdrawing his own hard-earned money.

Withdrawing money from a business account by operators of coffeeshops leads to major objections from banks, but too much cash turnover being deposited is equally problematic.

Legal tender

But how does this stand legally? Isn't cash a legal tender? Case law determines that banks may not have objections towards a specific branch, so a coffeeshop owner may not be refused an account solely on the basis of their professional activities. A bank was allowed to terminate the account of a coffeeshop that still had an account at another bank. Various courts rule on different situations where it is the case that an entrepreneur, without individual culpability, may not be entirely excluded from financial services.

And what does the Minister of Finance think of the blunt refusal to provide hardworking entrepreneurs with financial services by, for example, refusing them a business account? The Minister of Finance has emphasised several times over the last ten years that banks may not exclude a specific sector from financial services. There must be specific objections against an account holder.

De Nederlandsche Bank informed me that entrepreneurs who carry an inherently increased risk may not be categorically refused. De Nederlandsche Bank urges other banks to provide custom solutions where integrity risks of clients are assessed on a case-by-case basis to see if they can be mitigated.

Pointless delay

In economic life, the bank fulfills a decisive role. When a bank does not fulfill that position properly, there is trouble brewing. For example, two young entrepreneurs want to start a theatre café in the heart of Amsterdam and applied for an account at the bank. The intake meeting was scheduled for two months later. The purchase of the theatre café is in great danger because financiers cannot deposit money and the buyers cannot make a payment. This pointless delay is a hurdle in the takeover of a catering business that has nothing to do with cannabis. For coffeeshops, these problems are much greater.

Coffeeshop owners receive a barrage of questions

Coffeeshop owners are constantly bombarded with letters containing questions. These mostly concern withdrawals and cash deposits, but personal details of the people who supply the cannabis are also requested. Purchase invoices do not have to be included in the administration, as the Hoge Raad determined long ago. This is the logical consequence of the fact that coffeeshop owners are forced to have cannabis supplied that originates from unregulated cultivation. This is difficult for banks to understand. I have to explain this weekly with reference to jurisprudence.

What do you do if you receive a letter with pages of questions?

I recommend that you take these seriously and fill them in (or have them filled in). These are questions to which you can give a clear answer. On questions you cannot answer because you simply do not know the answer yourself (where does the cannabis come from?), you really must explain why you must remain silent on the answer.

If you do nothing, you run the risk of the bank terminating the account. General terms and conditions often contain cryptically described possibilities for the bank to end the banking relationship.

My experience is that a well-motivated letter from a lawyer who can explain exactly what the legal and social position of coffeeshops and that of banks is, is sufficient. Every week I receive letters stating that the bank has been sufficiently informed and the file is being archived. Usually, the entrepreneur receives another letter after six months with similar questions, and then I refer briefly and concisely to the previous correspondence, and the bank backs down again. But it remains a struggle.

Prefer rogue states?

Banks are often willfully blind and deaf and frequently ignore the legal and political objections associated with the dismissive attitude with which coffeeshops are treated. They would rather turn to shady business with rogue states than provide financial services to respected catering entrepreneurs.

Amsterdam, 28 May 2020,

mr. Maurice Veldman