Ask Our Experts: Banking Services
Q: Since I am now cultivating hemp, I discover that I am having difficulty in refinancing my farmland; why should that be, after the government’s blessing in the 2018 Farm Bill?
By William Sumner, Hemp Content Manager, New Frontier Data
A: Last December, four federal agencies issued guidance to financial institutions serving hemp cultivators and relevant requirements under the Bank Secrecy Act (BSA). Notably, banks were specifically no longer required to automatically file suspicious activity reports (SAR) on hemp cultivators based solely on the premise of one’s being a “marijuana-related business.”
The move was hailed both by policy makers and the media, leading many to believe that the hemp industry’s banking woes were solved. However, hemp businesses are again encountering obstacles to gaining access to basic financial services.
Those reasons are threefold:
First, a general ignorance persists on the part of lenders regarding the differences between hemp and cannabis, leaving lenders unnecessarily leery of perfectly legitimate customers.
Second, the memo pertains only to hemp cultivation, a delineation which leaves hemp-CBD companies burdened with nebulous legal liabilities pending clarification by the Food and Drug Administration regarding the regulatory status of CBD. Pending such formalized guidance, financial institutions will remain reluctant to engage with the industry.
Last, and for hemp cultivators specifically, the issue of banking gets murkier yet. Though the guidance memo removes SAR requirements, the memo stresses that financial institutions must follow “standard SAR procedures” to determine whether there is any indication of suspicious activity. Pragmatically, though the BSA saved them a step, banks nevertheless must conduct additional due diligence whenever dealing with hemp cultivators. For many financial institutions, the extra work is not worth the trade-off, and cultivators consequently get left in the cold. Ultimately, either additional guidance from federal regulators or action from Congress will be required before the hemp industry finally enjoys unfettered access to banking services.