Hemp Guidance Released (Information about the 2018 Farm Bill Hemp)

Information about the 2018 Farm Bill Hemp

On Tuesday, the Agencies released Guidance on how to bank hemp-related businesses in the wake of the Agriculture Improvement Act of 2018 (2018 Farm Bill Hemp).  You may remember that the 2018 Farm Bill removed “hemp” from the definition of marijuana, under the Controlled Substances Act but that didn’t eliminate all the potential problems facing the industry.

First, the 2018 Farm Bill required states to develop the appropriate regulatory framework to create and govern programs for hemp production. The requirement of individual state action to develop the licensing programs made things very confusing.  In October, the USDA passed an interim final rule that allowed for regulation of hemp producers in states that did not have such a program.  In other words, even in States without a program, hemp producers will be subject to the rules of the USDA (unless State or tribal government prohibits hemp production).  For financial institutions, the other problem was that the only relevant guidance, BSA Expectations Regarding Marijuana-Related Businesses (FIN-2014-G001) really didn’t anticipate or address legal hemp production.  The newly released Guidance, Providing Financial Services to Customers Engaged in Hemp-Related Businesses, bridges that gap.

USDA Hemp Guidance

The Guidance does take the USDA interim final rule into account.  It acknowledges that hemp may be grown only with a valid USDA-issued license or under a USDA-approved State or tribal plan.   Hemp produced under a program would no longer be considered marijuana and banks would not be required to file a suspicious activity report (SAR) on customers solely because they were engaged in the growth or cultivation of hemp.

There are a few catches though!  The USDA Hemp Guidance stresses that banks are expected to follow standard procedures, comply with applicable regulatory requirements and have appropriate risk-based customer due diligence programs.  Banks need to conduct appropriate customer due diligence for their hemp-producing customers to verify that their customers are complying with appropriate state or federal laws.  Hemp produced outside one of the appropriate programs would not be outside the Controlled Substances Act and would still be considered marijuana under Federal Law.

So, what should your customer due diligence program look like?  Join us at our upcoming webinar, “Banking, Marijuana & Industrial Hemp” on January 9, 2020, where we will cover all the latest hemp news, the changes related to “legalized marijuana” and much, much, more!

Hemp Webinar

Kevin Edwards

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