The rapidly growing army of U.S. hemp farmers have received a major boost after strict rules governing banking were eased.
Four senior federal financial regulatory agencies announced that banks no longer have to take extra steps to track accounts for hemp-related businesses. The difficulties hemp farmers have encountered are amply demonstrated by this tale of a farming family in Wisconsin, reported on the newfoodeconomy website.
Eight months after setting up their business, and associate bank accounts to run their hemp farm, they were told by the bank that their business activity was ‘outside its established risk tolerances’.
The report highlights how Republican Senator Mitch McConnell of Kentucky and Democratic Senator Ron Wyden of Oregon had written to four agencies responsible for finance to clarify this situation,
And now the four federal agencies, in conjunction with the state bank regulators, have responded by clarifying hemp farming’s legal banking status. The joint statement released Federal Reserve Board, the Federal Deposit Insurance Corporation, FinCEN, the Office of the Comptroller of the Currency and the Conference of State Bank Supervisors can be read here.
It says that 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 hemp in accordance with applicable laws and regulations’.
Before hemp and its derivatives were federally legalized under the 2018 Farm Bill, financial institutions were required to file SARs for associated accounts as it was a Schedule I controlled substance, treated the same as cannabis. Senator McConnell welcomed the news saying the ‘multi-agency announcement represents continued progress as we work to ensure hemp is treated just like any other legal agricultural commodity’.
“Even after President Trump signed my initiative in last year’s farm bill to fully legalize hemp and remove it from the list of federally controlled substances, I heard from hemp producers around Kentucky about their ongoing challenges, including the lack of access to the financial system. I’m proud federal banking regulators agreed to my request to issue new guidance that affirms hemp’s legality,” he said.
Legitimizing The Industry
The American Bankers Association (ABA) welcomed the announcement saying it had been ‘long sought’ by the financial services industry. Zak Garcia, CMO of CBD Venture Capital Firm CBDCapitalGroup told CBD Testers: “Loosening financial services regulations for hemp-related businesses, like those announced this week, will help to legitimize and standardize the hemp and cannabis industries.”
Nevertheless, the federal government still considers cannabis to be illegal, and this impacts businesses in states where it has been legalized and banks still defer from stepping into a potential criminal minefield. However, Congress is currently considering the SAFE Banking Act designed to normalise the cannabis industry and remove penalties associated with transgressing federal anti-money-laundering laws.
Hemp advocates see the crop as a replacement for tobacco and in Senator McConnell’s home state of Kentucky 101 of its 120 counties now have a hemp farm, while at one stage all but one of its counties had a tobacco farm. It has potential global market encompassing more than 25,000 products in agriculture, textiles, recycling, autos, furniture, food and beverages, paper, construction materials and personal care, reports the rollcall website.
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