Regulators announce all hemp businesses should be treated with the same respect as other banking customers.
Federal and state bank regulators announced on Tuesday 3rd December 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 cannabis, 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 statement, from the Federal Reserve, the Federal Deposit Insurance Company and other state and federal regulators, informs banks that they can now treat hemp producers like other business owners, as long as they adhere to following all licensing requirements.
The change is the boost the industry needs after years of fighting to be taking seriously and having to scramble for alternative financing solutions.
“Banking has been an ongoing problem,” said Erica McBride Stark, the executive director of the National Hemp Association, a trade group for growers. “So, this actually should be quite helpful.”
The fact that hemp and marijuana can often appear similar in appearance has led to Numerous issues of law enforcement officers making arrests and seizing hemp that is 100% legal because it looks exactly like “marijuana.” Although both products are made from the same plants there are major differences and they are cultivated to contain less tetrahydrocannabinol (THC) which is the chemical that produces a “high” when ingested.
Hemp was previously regulated as an illegal substance under the Controlled Substance Act of 1970, until it was removed as an illegal substance under the Agricultural Improvement Act of 2018, where hemp and hemp-derived products that contain no more than 0.3% THC were federally legalized.
Marijuana, on the other hand, is still treated as a controlled substance and is federally illegal under the Controlled Substance Act.
Although positive steps are being taken to change the industry businesses should still be mindful that FinCEN will issue additional guidance after further reviewing and evaluating the interim final rule. The USDA is accepting public comment on the proposed Domestic Hemp Production Program until December 30, 2019.
The industrial hemp market is projected to grow from USD 4.6 billion in 2019 to USD 26.6 billion by 2025, recording a CAGR of 34.0% during the forecast period. This is attributed to the growing number of chronic diseases such as diabetes; increasing usage of hemp seed oil & hemp seed in various food applications; rising usage of non-psychotropic cannabinoid cannabidiol (CBD)–CBD hemp oil in food & pharmaceutical segment; and increasing legalization in the cultivation of industrial hemp. Source: Markets and Markets
The aversion to risk from the banking sector is actually a welcome opportunity for companies that cater to "high-risk" industries, such as the rapidly expanding and lucrative legal cannabis market and will benefit greatly from this growth in the industrial hemp market.
Among the top players enabling marginalized cannabis-related businesses and other high-risk industries to thrive are Global Payout, Inc. USAEPay, SMGlobal, EasyPayDirect with new players coming into the market daily.
It is safe to say that the Hemp industry is going nowhere, and the financial industry needs to utilize the new guidance issued following Senator McConnell’s quest to help ease the barrier for the legal hemp industry to capitalize on the industry’s growth.
After the National Credit Union Administration fulfilled Senator McConnell’s request to issue guidance and the U.S. Department of Agriculture released its regulatory framework, Senator McConnell followed up with the federal banking regulatory agencies in October to reiterate his request for them to issue guidance
“Today’s multi-agency announcement represents continued progress as we work to ensure hemp is treated just like any other legal agricultural commodity,” said Senate Majority Leader McConnell, a senior member of the Senate Agriculture Committee.