Banking Hemp Businesses! Really?
For a long time, Hemp was listed on the Controlled Substance List the same a Marijuana. But the world of Hemp has been changing on a different and faster track from Marijuana. The PA Department of Agriculture first legitimized an industrial hemp research project in 2016. This paved the way for a pilot program to study the “growth, cultivation or marketing of industrial hemp.” Industrial hemp was defined as having not more than 0.3% “tetrahydrocannabinol concentration,” also known as THC. The statute authorized the Secretary of Agriculture to establish permit requirements and the ability to inspect growing facilities.
More recently, the 2018 Farm Bill removed industrial hemp from regulation under the Controlled Substances Act and provides for commercial production of industrial hemp. This allowed PA to modify its program standards by lifting acreage caps (previously capped at 100 acres) and removing a cap on the number of applications accepted into the program. The 2019 program parameters can be found at https://www.agriculture.pa.gov/Plants_Land_Water/industrial_hemp/Documents/2019%20Revised%20Program%20Parameters_1.22.2019.pdf
Some important controls for customer due diligence is that applicants must pass an FBI Background Check, apply for permits, submit a statement listing the names and addresses of persons involved in the cultivation of hemp, have a notarized attestation that those persons do not have felony drug convictions, and cannot produce hemp plant material with THC levels greater than 0.3% (otherwise materials cannot move offsite and must be destroyed). The 2018 Farm Bill also allows for interstate transportation of hemp plants and products and the control there is that a copy of the permit should be attached to shipping documents. PA has also published an FAQ on Industrial Hemp at https://www.agriculture.pa.gov/Plants_Land_Water/industrial_hemp/Pages/Industrial-Hemp-Program-FAQs.aspx
So, the question remains – Can you bank a hemp grower or associated business? A PA Department of Banking memo speaks to this. https://www.dobs.pa.gov/Documents/Secretary%20Letters/Banks/6.28.18%20Hemp%20Production%20BSA%20AML.pdf As with other types of businesses, it remains a risk-based question. Since hemp is no longer listed on the Controlled Substances List (a privilege that Marijuana doesn’t enjoy – yet) that prohibition has been removed. Do you have the due diligence and high-risk customer monitoring ability? Do you have activity monitoring capability in your current BSA program to manage the risks associated with industrial hemp production and sales? Are you prepared to deal with the regulatory scrutiny that is sure to follow? Is your Board willing to take the risk as you modify your BSA Policy? These are questions only your bank management can answer.
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