Financial institutions have been cleared to work with hemp businesses, and the Federal Reserve Bank set out recently to remind the banking industry of this. 

Though banks had been given the green light to work with hemp-related businesses in late 2019,  they haven’t been flocking to support this industry yet. Hemp businesses were treated exactly like other cannabis-related businesses until the Agriculture Improvement Act of 2018 (2018 Farm Bill) effectively legalized hemp and clarifications for financial institutions were issued in 2019 by the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, the Financial Crimes Enforcement Network (FinCEN), and the Office of the Comptroller of the Currency.

Banks no longer have to contend with the burdensome levels of monitoring and paperwork that still comes with working with cannabis-related businesses, but there are still hemp businesses that cannot get a bank to work with them. Other cannabis-related businesses continue to be flagged, because federally it is still illegal. Guidance has been murky for banks who want to work with cannabis, but businesses that deal with hemp that contains less than 0.3 percent THC are fair game. 

The recent announcement outlined what the U.S. Department of Agriculture (USDA) put out last year as an interim rule. It allows states that permit hemp production to maintain records on the land where hemp is grown, test the hemp for THC, dispose of hemp that exceeds the 0.3% limit, and license hemp producers. States don’t have to regulate it, though that will defer to the USDA if they choose to go that route.

“Hemp producers in a state that does not obtain a USDA-approved plan will be directly regulated by the USDA. States and tribal governments are not required to allow hemp production, even though it is now legal under federal law.

In new and growing markets, the risk levels can be unknown or change frequently, which can lead to banks being less likely to take on hemp businesses as customers. But with the new rules and guidance in place, it may be a matter of educating financial institutions better on what they are legally allowed to do. 

The Secure and Fair Enforcement (SAFE) Banking Act was introduced in 2019 to provide similar guidance and clarity for cannabis, but that bill has not yet passed and may not in this cycle. The House of Representatives passed it, and although securing millions of dollars of a rapidly growing industry is a bipartisan issue, there are still significant hold ups from Republicans in the Senate. While the SAFE Banking Act may not pass, it is the furthest that a bill of its type and scope has ever achieved before. 

Hemp is a growing industry, though it isn’t likely to mirror the cannabis industry exactly as it is allowed to expand.

Do you think more banks will begin to work with hemp businesses in the near future? If you already have an account for a hemp business, how difficult was it to get one? Share your thoughts and experiences in the comments.