Top news this morning with Federal Regulators relaxing hemp banking protocols. Federal financial regulatory agencies announced that banks no longer have to take extra steps to accept accounts for hemp-related companies.
Banks will no longer have to treat their hemp customers as suspicious and file extra paperwork to anti-money laundering authorities for each transaction.
The statement emphasizes that banks are no longer required to file suspicious activity reports (SAR) for customers solely because they are engaged in the growth or cultivation of hemp in accordance with applicable laws and regulations. For hemp-related customers, banks are expected to follow standard SAR procedures, and file a SAR if indicia of suspicious activity warrants.
The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Financial Crimes Enforcement Network (FinCEN), and the Office of the Comptroller of the Currency statement
What does this mean for hemp banking?
The financial agencies said that while banks don’t have to accept hemp accounts if they choose to do so, hemp clients shouldn’t be treated any differently than customers from any other legal industry.
This is great news for our industry which is suffering from lack of banking and merchant processing at a time when customers are excited to buy Hemp-derived CBD products.
Erica McBride Stark, the executive director of the National Hemp Association, told the New York Times that “Banking has been an ongoing problem, so this actually should be quite helpful.”
The American Bankers Association (ABA) said that the regulators’ hemp move has been “long-sought” by the financial services industry.
This is positive for hemp banking, but don’t rush to your local bank yet
This is great news, but it comes with a caution. The Agriculture Improvement Act of 2018 which removed hemp as a Schedule I controlled substance was signed into law on December 20, 2018.
The 2018 Farm Bill directs the USDA, in consultation with the U.S. Attorney General, to regulate hemp production. The 2018 Farm Bill states that hemp production is subjected to a hemp production regulatory plan established by the USDA.
The USDA plan puts small Hemp farms at risk. If THC content is found to be unacceptable, however, it must be destroyed by someone authorized under the Controlled Substances Act to handle marijuana, such as a DEA registrant.
The product is then considered marijuana and banks are subject to heavy regulations when it comes to selling marijuana products.
“When deciding to serve hemp-related businesses, banks must comply with applicable regulatory requirements for customer identification, suspicious activity reporting, currency transaction reporting, and risk-based customer due diligence, including the collection of beneficial ownership information for legal entity customers,” the report stated.
Federal guidance on dealing with marijuana businesses, which was outlined in a 2014 Treasury Department notice (PDF), remains in place. Banks must still file SARs for those firms, regardless of the legal status of cannabis under state law.
US Senate has yet to vote on the Secure and Fair Enforcement (SAFE) Banking Act
The US Senate has yet to vote on the Secure and Fair Enforcement (SAFE) Banking act. Mitch McConnell, the key player in making hemp legal hasn’t fully supported the bill.
Banks are concerned that marijuana companies will use “hemp” to funnel marijuana funds through a legal hemp entity.
Ms. Stark stated that she heard Wells Fargo was considering offering banking services to hemp businesses, but a Wells Fargo spokesman asserted that the bank was taking no such steps.
On November 21st, The New Food Economy reported that Wells Fargo won’t back hemp farmers. The combination of canceled accounts and regulatory confusion has farmers shocked, angry and scrambling to recover their investments.
Yes, this is great news, but don’t go rushing to your local bank yet. Let’s see what happens over the next 2-6 months.