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FOS Blog

01 Apr

CBD Oil Product Retailers – What’s the Buzz?

CBD Oil Product Retailers – What’s the Buzz?

Have you seen them yet – the neon signs, plastic banners, billboards, and pop-up ads flashing “We Sell CBD!”?  Since the Farm Bill passed in December 2018, the sales signs are popping up everywhere, from wellness stores to gas stations to convenience stores.  The bill removed industrial hemp, a “cousin” of marijuana, from the controlled substances list paving the way for online and storefront retailers to offer a wide range of products derived from industrial hemp, including CBD (cannabidiol) oil products designed to relieve anxiety, improve sleep, and alleviate some aches and pains.

If only the oil could relieve the aches and pains of retailers, who need to ensure the products they sell meet the legal standards!  To be sold legally, CBD oil products must be made from industrial hemp and must contain less than .3% tetrahydrocannabinol, better known as THC.  While CBD is a non-intoxicating compound, THC is an intoxicating compound which, in increased amounts, can lead to a “high.” Retailers have run into problems with product labels inaccurately stating the content of CBD and THC, putting the legality of their products in jeopardy.  Other road bumps include refusal of merchant processors to accept payment and the refusal of website platforms to host sites.  Despite the bumps, retailers, including CVS, have seen the potential dollar signs in CBD oil products and forge ahead.

How do banks factor in?  Although legal CBD oil products are not marijuana-based, they are a close relative of marijuana and may fall under the umbrella of direct or indirect marijuana-related businesses (MRB).  With the legalization of industrial hemp, banks do not face the same risks as banking MRBs, but should still consider the following while we wait for further regulatory guidance:

  • Training – Have the Board, BSA Officer, and bank personnel received adequate training about the CBD oil industry? Training leads to better policy decisions when deciding whether to and how to bank a new industry.
  • Policy – How does your BSA policy address this business type regarding new and existing customers? The ability to sell the product in a wide variety of venues increases the chance your existing customers may already be selling this product.  Like money service businesses, existing customers offering the service are harder to identify and engage than new.
  • “Are you a marijuana-related business?” – Are your customer due diligence (CDD) questions designed to elicit enough information from a customer to determine whether they sell this product? If you’re asking a “yes” or “no” question about marijuana, a customer may not consider CBD or may see a red light to getting an account, leading to a vague or inaccurate response.  Ask additional questions about products, services, and clientele.  And make sure the questions are asked for personal accounts, too – a personal customer may be selling the product from their home as a side business.
  • Ongoing Due Diligence – When you identify a new or existing customer selling CBD oil products, what’s your next step?
    • Initial and periodic site visits provide the opportunity for trained personnel to look at product labels and to verify the range of products sold is the range the customer disclosed – the same could be said for website visits!
    • Has the customer obtained a copy of the supplier’s Certificate of Analysis (COA)? The COA confirms CBD and THC levels to ensure the product is pure and labeling is accurate.
    • Due diligence should be risk-based. Consider the different risks posed by home-based CBD oil retailers versus brick-and-mortar – you won’t likely perform a site visit for a home-based business, so how will you get comfortable with the legality of products sold?

Financial institutions should take a proactive approach towards education and understanding in order to mitigate the potential risks in banking CBD oil retailers – effective mitigation allows the industry to be banked in the spirit of transparency.  Make sure your CDD and EDD program let you keep the buzz of your institution’s regulatory compliance! For additional information contact the author at