Federal agencies issue hemp banking guidance

In guidance Tuesday, four federal agencies in concert with state bank regulators released a statement clarifying the legal status of hemp, a move intended to make it easier for the sector to access capital through financial institutions.

Per the guidance, banks no longer must file suspicious activity reports (SARs) for customers "solely because they are" growing or cultivating hemp consistent 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 guidance stated.

The guidance was issued by the Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System and Financial Crimes Enforcement Network (FinCEN). The Conference of State Bank Supervisors joined in the document.

Congress in 2018 removed hemp with a THC concentration of no more than 0.3% from the Controlled Substances Act (CSA), though the nascent industry has reported continuing challenges accessing capital. The federal agencies released the guidance a little over a month after USDA issued interim regulations for the U.S. production of hemp.

FinCEN, an agency within the U.S. Treasury Department that aims to combat financial crimes, plans to release additional guidance after further review of USDA’s regulations.

“Today’s multi-agency announcement represents continued progress as we work to ensure hemp is treated just like any other legal agricultural commodity,” Senate Majority Leader Mitch McConnell, Republican from Kentucky, said in a news release.

McConnell and Sen. Roy Wyden previously requested that regulatory bodies provide guidance to institutions under their jurisdictions to alleviate any concerns over providing financial services to the hemp industry.

“We have consistently heard from lawful hemp farmers and producers about the lack of access to financial products from banks,” McConnell and Wyden wrote in an April 2 letter to Jelena McWilliams, the chairwoman of the FDIC, an independent agency whose objective is to maintain public confidence and stability in the country’s financial system. “Many of them have faced difficulty securing financial and credit products to start or expand their businesses, and difficulty establishing accounts to manage cash flow and business expenses.”

Ballard Cassady, president and CEO of the Kentucky Bankers Association, hailed the new guidance issued by FDIC and other agencies.

“By affirming hemp’s status as a legal commodity, this federal guidance can provide much-needed clarity and reassurance to Kentucky banks exploring opportunities in our state’s growing hemp industry,” Cassady said in McConnell’s news release.

However, attorney Michael Weiner noted the guidance has limited impact.

"This statement is limited to hemp growers and not to other businesses related to hemp or CBD from hemp," said Weiner, a partner at the international law firm Dorsey & Whitney LLP and the chair of its cannabis practice group, in a statement. "For banks that are already providing banking services to hemp growers, the word 'solely' may cause banks to hesitate to cease filing suspicious activity reports for these customers. For banks that are reluctant to provide banking services to hemp growers, this statement is unlikely to provide sufficient comfort to enter the market."