Financial institutions remain wary of banking for hemp-related cannabis businesses

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Hemp may be legal at the federal level, but that doesn’t mean banks will necessarily start banking the proceeds from the crop, or go near businesses that service the hemp industry.

That is according to some legal experts who said that despite a recent statement from multiple federal agencies that banks no longer have to file a suspicious activity report if they believe deposits are connected to hemp. Financial institutions are required to file a Suspicious Activity Report with the U.S. Treasury Department’s Financial Crimes Enforcement Network whenever cash transactions exceeding $10,000 are made.

Banks may delay making any changes to their banking services until issuance of such additional Michael Weiner of Dorsey & Whitney

Hemp is a type of cannabis that, unlike marijuana, is legal at both the federal and state levels and does not contain significant levels of THC, the compound in marijuana known for its psychoactive effects. Hemp is prized for its oils, particularly nonpsychoactive cannabidiol (CBD), which some claim has medicinal properties.

Last month Sonoma County planning commissioners voted to recommend a new governing framework that would allow cultivation to move forward.

In August Santa Rosa Junior College said its agriculture department is developing a hemp agriculture certificate and degree program — the first such program among community colleges in the state.

Neither Napa nor Marin counties allow the cultivation of industrial hemp.

“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 in accordance with applicable laws and regulations,” said guidance from the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Financial Crimes Enforcement Network.

Because of hemp’s legalization in the 2018 farm bill, it can be grown in the U.S. with a valid U.S. Department of Agriculture issued license or under a USDA-approved state or tribal plan.

The guidance and legalization of the plant may still not be enough to convince some financial institutions to bank the industry’s money however, according to attorney Michael Weiner at Dorsey & Whitney LLP.

“To me it’s very narrow guidance which actually then raises questions as to the rest of the hemp world,” he said, noting the guidance applied only to licensed hemp growers but not other companies that handle and process the plant.

“Outside of the growers, this statement doesn’t apply to them,” Weiner said. “It does not say for instance, ‘Hey banks, if you are providing services to a hemp business you don’t have to file a SAR’ just because they’re a hemp business.”

Weiner added that he does not think the guidance from banking regulators is likely to change the decision making of many banks or credit unions, many of whom are wary of going near anything labelled cannabis while marijuana remains a federally outlawed drug.

“For the banks who are really in the business of working with farmers, essentially this clarification or statement may provide comfort to them to continue to provide banking services to those farmers without getting into the practice of filing SARs.”

Weiner said some credit unions, which can be smaller institutions deposit-wise than many banks, may now take a second look at hemp however in light of the statement from regulators.

In an email, the National Association of Federally-Insured Credit Unions welcomed the guidance.

“We thank (National Credit Union Administration) Chairman Rodney Hood for issuing guidance clarifying that credit unions may assist businesses legally serving the hemp industry,” said association President and CEO Dan Berger. “This guidance will provide credit unions more certainty as they work to help their members. As noted in the guidance, credit unions must make a business decision as to whether to serve hemp businesses that are legal under federal law and, at a minimum, have strong risk measures in place, including ensuring they follow all Bank Secrecy Act requirements.”

Last month the USDA issued an interim final rule, which is in effect but still up for public comment, on hemp cultivation in the U.S. Weiner noted that he expected federal banking regulators to weigh in further once that process is finished.

“(The Financial Crimes Enforcement Network) stated that it would issue additional guidance following further review of the USDA interim final rule, perhaps following issuance of final rules from the USDA following the current public comment letter,” Weiner said in an emailed statement. “Banks may delay making any changes to their banking services until issuance of such additional guidance,” he added.

Staff Writer Chase DiFeliciantonio covers technology, banking, law, accounting, and the cannabis industry. Reach him at or 707-521-4257.

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