Federal Regulators Ease Banking Restrictions on Hemp Industry


Federal and state regulators this week clarified rules around banking for hemp-related businesses, paving the way for more financial institutions to back growers and cultivators without filing burdensome paperwork.

In a press release, the Federal Reserve Board, the Federal Deposit Insurance Corporation, FinCEN, the Office of the Comptroller of the Currency and the Conference of State Bank Supervisors said banks would no longer need to file Suspicious Activity Reports (SAR) when conducting business with hemp producers.

“Because hemp is no longer a Schedule I controlled substance under the Controlled Substances Act, banks are not required to file a Suspicious Activity Report (SAR) on customers solely because they are engaged in the growth or cultivation of hemp,” they wrote.

For other hemp customers, however, banks are expected to follow standard SAR procedures, the agencies noted.

With the passage of the 2018 Farm Bill, industrial hemp – defined as cannabis sativa plants containing less than 0.3 percent THC -- was decriminalized, opening up business opportunities across the food, beverage, textiles, construction and cosmetics industries, among others.

However, many banks remained on the sidelines in part because rules around the domestic production of hemp had not been finalized by the U.S. Department of Agriculture (USDA).

That changed on October 31, 2019, when the USDA issued an interim final rule establishing a hemp production regulatory program and a federal licensing plan for hemp producers.


In a note to THCnet, Hemp Federation of America co-founder Chris Thorne called the announcement a “good first step.”

“We’re working with the Administration and Congress on a range of regulatory matters, clarifying that hemp is a legal commodity,” he wrote. “There is still great confusion in the states, and growers need certainty.”

For his part, American Bankers Association (ABA) president and CEO Rob Nichols praised Tuesday’s guidance saying that it “makes clear that banks are not required to file Suspicious Activity Reports on hemp producers operating under an approved federal, state or tribal license or plan.”

“We are pleased that the guidance also notes that bank customers are responsible for complying with regulatory requirements surrounding hemp, not the banks who serve those customers,” he said in a statement.

Meanwhile, Senator Majority Leader Mitch McConnell (R-KY), a longtime hemp supporter, also welcomed the announcement.

“Today’s multi-agency announcement represents continued progress as we work to ensure hemp is treated just like any other legal agricultural commodity,” McConnell said via a press release. “I’m proud federal banking regulators agreed to my request to issue new guidance that affirms hemp’s legality. I look forward to more Kentucky producers having the ability to grow their hemp businesses with the help of the Commonwealth’s financial institutions.”

According to McConnell’s release, hemp is now grown in 101 of Kentucky’s 120 counties. Meanwhile, the global hemp market is predicted to grow from $4.6 billion in 2019 to more than $26 billion in 2025.

While the announcement is no doubt a victory for hemp producers, the majority of cannabis companies engaged in the growing, cultivating, packaging and sale of higher THC products still struggle with access to traditional banking services because the federal government classifies marijuana as a schedule I controlled substance.

There are efforts to legalize marijuana and open up banking services to those companies, however.

Last month, the U.S. House Judiciary Committee approved the Marijuana Opportunity, Reinvestment, and Expungement (MORE) Act of 2019, which would decriminalize marijuana and create a 5% tax on all cannabis products.

And earlier this year, the U.S. House of Representatives passed the Secure and Fair Enforcement (SAFE) Banking Act of 2019, which prevents federal financial regulators from punishing banks and credit unions that provide services to state-legal cannabis operations.

Efforts to advance a companion bill in the Senate have stalled, however.

Cannabis industry stakeholders have pushed for federal marijuana legalization and a loosening of banking restrictions in part because the sector is poised to create hundreds of thousands of jobs over the next two years.

According to Arcview Market Research, the legal cannabis industry is expected to contribute 414,000 full-time jobs to the U.S. economy by 2021, nearly double the amount of jobs (211,000) that currently exist.

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