Banking customers in the commercial hemp industry

We have been approached by potential business customers who are in the commercial hemp industry to open accounts with our bank. One owns AG land that is in the production of hemp and cultivates it for health products (topical creams) as wells as clothing and paper by-products. The other makes cannabidiol (CBD) oil and hemp products. While we know the production of hemp and its by-products are not legal in all states, we are researching the risks in considering banking commercial accounts in this business line in a state where this is legal. Our policy is to not bank marijuana related businesses and understand the difference between those facilities and ones in the hemp industry. I'd appreciate any feedback from banks who have considered banking these customers and the risks that have been contemplated in reaching that determination.

We are in the same boat, customer is asking to open account for commercial hemp test plots. I am just starting my research did anyone respond to you privately? Is this something like the legalization of marijuana where you will have to still file a SAR if you bank them?

There is no way to discuss banking hemp growers without knowing where your bank is located; i.e. what state. This non advocacy web site illustrates the amount of variety possible. Banks in my home state were initially reluctant to bank them, but most eventually decided that it was easy to verify state registration and, beyond that, it was just another customer.

A post in your state's forum might generate some useful information.

Hemp is a variety of cannabis. While it has a tremendous physical resemblance to marijuana, it contains no THC. The FinCEN and DOJ guidance talks about "marijuana," not hemp. Providing services to growers or sellers of a plant that can be grown legally under both state and federal law would not trigger a SAR filing responsibility.

We recently had an individual move out to TN from Colorado. In Colorado, this person was one of the founding members of a medicinal marijuana company, now publicly traded. The individual moved here to rural TN (his sister lives here), opened a consumer DDA, and stated he sold his interest in that company. He still states he owns and operates an online website for retail sales of cannabidoil (CBD) products (dog food, infused water, creams, etc). However, the funds going into his account are wires and VISA card advances from his BofA account. Do we continue to file on this customer, based on the Cole II memo, every 90 days using the "Marijuana Limited" distinction since the source of funds is assumed to be from his sale of interest in a medical marijuana company? Thanks in advance!

We have chosen to not bank marijuana businesses. We do and have chosen to bank Hemp growers. No issues with Hemp it is not marijuana.

My research found that production & sale of hemp is not legal in all states. Some of our branches are located in Colorado, where it is legal with a very rigorous and controlled registration process.

Prior to receiving these posted remarks, I contacted the Colorado Banker's Association (CBA) for guidance. She said that environmental conditions (rain, temperature, etc.) that are outside the hemp producer’s control could easily turn the cannabis plant from hemp to marijuana by increasing the THC content of the plant. A field sampling inspection by the Dept. of Ag (DOA) could reclassify the crop as marijuana with catastrophic results of the crop having to be destroyed. The DOA conducts site inspections and tests harvested hemp. The THC level must be at 0.3% or below. If the THC level is above this threshold, the farmer must destroy the crop. This would be a major risk if a bank was lending to hemp farmer. Basically eliminates the repayment source.

Due to numerous calls on this subject the CBA contacted federal regulators for guidance. While no official guidance exists, hemp is considered part of the cannabis plant and contains THC and is therefore considered Schedule 1 drug by the Controlled Substance Act (CSA). As such, any bank engaged with a Hemp grower would be subject to the same requirements as that of a MRB. Meaning abiding by all FinCEN guidance, Cole Memo, filing of SARs, etc.

The CBA sees the same risks having a business customer in the CBD oil industry as the hemp industry and perceives this as a very compliance heavy risk.