The hemp industry is allowed to do business with banks
The number of banks in the United States willing to lend to hemp growers is counted on the one hand. It’s about to change.
Federal and state bank regulators said on Tuesday they were removing a onerous requirement that banks say kept them away from the hemp trade. Banks will no longer have to treat their hemp customers as suspects and file tons of documents with anti-money laundering authorities for every interaction.
The change could give a niche product a boost that began its own legalization process last year.
“Banking services are an ongoing problem,” said Erica McBride Stark, executive director of the National Hemp Association, a trade group for producers. “So that should be very helpful. “
Hemp products are made from the same plants that produce marijuana, but they are grown to have much less tetrahydrocannabinol, or THC, the chemical that produces a “high” when ingested. The stems of plants can be woven into cloth and their seeds made into oils for use in food, but they cannot be made into medicine.
Even so, federal law has long considered hemp to be as prohibited as cocaine and heroin. But with the legalization of marijuana spreading across the country – 33 states have legalized the drug for medical use and 11 states will allow recreational sales by January – lawmakers in Washington have decided to remove the designation of its milder sibling.
Congress last year hemp legalized as a crop and ordered the Ministry of Agriculture to start regulating hemp production. It took nearly a year for the agency to develop rules for the industry, but once they were released on October 31, banking regulators prepared to take action. Tuesday declaration, the Federal Reserve, Federal Deposit Insurance Company, and other state and federal regulators, advises banks that they can now treat hemp growers like other customers, as long as companies can prove they are following licensing requirements.
The restrictions on the industry had held back even Ms Stark’s organization, a nonprofit that does not actually produce hemp. The trade group had problems obtaining basic services because the banks feared that it would receive the proceeds of crime when it collected membership fees.
The agriculture ministry rule change alone did not help. “They understood that hemp had been taken out of the federal Controlled Substances Act, but because of the paperwork involved, a lot of them were like, yes, it just isn’t worth it,” she declared.
Daily business briefing
Rob Nichols, president of the American Bankers Association, a business group, said its members have been pushing for change for some time.
Last month, the association surveyed 1,800 agriculture-focused banks in the country and found that nearly half had received questions from their farmer customers about whether they would still do business with them if they were. started growing hemp.
“We appreciate the steps regulators have taken today to clarify the regulatory expectations of banks, and we look forward to working with them as they develop additional guidance,” Nichols said.
While the change helps companies that make clothing and other hemp products, it doesn’t affect legal marijuana companies that deal with it. the same problems. The federal government still considers marijuana illegal, and even local banks are too worried about getting into trouble to deal with it.
But banks big and small have come together to support a bill in Congress, the SAFE Banking Act, that would legalize marijuana banking by stipulating that proceeds from a state-sanctioned marijuana business would not be. considered illegal under federal anti-money laundering laws. .
The House of Representatives passed a version of the bill and the banking industry is pushing the Senate to pass it. If this became law, it would allow banks to embark on a lucrative new industry that has been plagued by security concerns and in desperate need of the most basic of services, like checking accounts and credit card processing.
While banks have been slow to embrace the cannabis industry, investors have been preparing to cash in on it. Analysts who follow listed companies have added pot producers to their portfolios, to help investors decide where to maximize their exposure to the industry. Ultra-rich venture capitalists have started to treat pot companies like technology start-up.
Banks have been the buzzkills. When Uruguay became the first country in the world to legalize cannabis two years ago, U.S. banks warned their Uruguayan counterparts that they would cut them off if they provided services to pharmacies selling the drug. Banks in Canada, where marijuana has been legal for a year, are still worried about doing business with cannabis producers in case it causes them problems south of the border.
Still, it was not clear on Tuesday that the change in hemp regulations would immediately influence the attitude of bankers. Bankers will still have to study the complex licensing requirements that states and the Department of Agriculture have devised for hemp growers.
In the meantime, the hopes of hemp growers could still be dashed. Ms Stark said she had heard Wells Fargo was considering offering banking services to hemp companies, but a Wells Fargo spokesperson said the bank was not taking such steps.