A federal financial agency released updated guidelines on banking in the hemp industry on Monday, following up on requests from multiple lawmakers to provide clarity on the issue.
The National Credit Union Administration (NCUA) said in its interim guidance that providing banking services to hemp businesses is allowable since the crop and its derivatives were federally legalized under the 2018 Farm Bill. The notice also emphasized the economic potential of hemp and the role credit unions can play as the industry continues to develop.
“Lawful hemp businesses provide exciting new opportunities for rural communities,” NCUA Chairman Rodney Hood said in a press release. “I believe today’s interim guidance keeps with the mission of the nation’s cooperative credit system to serve people who have been overlooked and underserved.”
“Many credit unions have a long and successful history of providing services to the agriculture sector,” he said. “My expectation is that credit unions will thoughtfully consider whether they are able to safely and properly serve lawfully operating hemp-related businesses within their fields of membership.”
Growth in hemp-related commerce will create a need for capital & financial services. Interim guidance gives #creditunions the ability to step in & provide hemp-related businesses these customary financial services. Learn more: https://t.co/otTzUt3tL7
— The NCUA (@TheNCUA) August 19, 2019
— The NCUA (@TheNCUA) August 19, 2019
In a letter sent to Sen. Michael Bennet (D-CO) last month, which the presidential candidate’s Senate office shared exclusively with Marijuana Moment, Hood noted that NCUA was “working on possible future guidance to financial institutions” but that such guidance would be subject to change depending on what regulations the U.S. Department of Agriculture (USDA) ultimately develops.
In the meantime, the new interim guidance notes that “growth in hemp-related commerce could provide new economic opportunities for some communities, and will create a need for such businesses to be able to access capital and financial services” while clarifying that credit unions “may provide the customary range of financial services for business accounts, including loans, to lawfully operating hemp related businesses within their fields of membership.”
While NCUA said that it is “generally a credit union’s business decision as to the types of permissible services and accounts to offer,” it highlighted the need to comply with the Bank Secrecy Act (BSA) and with Anti-Money Laundering (AML) requirements, in particular:
—Credit unions need to maintain appropriate due diligence procedures for hemp-related accounts and comply with BSA and AML requirements to file Suspicious Activity Reports (SARs) for any activity that appears to involve potential money laundering or illegal or suspicious activity. It is the NCUA’s understanding that SARs are not required to be filed for the activity of hemp-related businesses operating lawfully, provided the activity is not unusual for that business. Credit unions need to remain alert to any indication an account owner is involved in illicit activity or engaging in activity that is unusual for the business.
—If a credit union serves hemp-related businesses lawfully operating under the 2014 Farm Bill pilot provisions, it is essential the credit union knows the state’s laws, regulations, and agreements under which each member that is a hemp-related business operates. For example, a credit union needs to know how to verify the member is part of the pilot program. Credit unions also need to know how to adapt their ongoing due diligence and reporting approaches to any risks specific to participants in the pilot program.
—When deciding whether to serve hemp-related businesses that may already be able to operate lawfully–those not dependent on the forthcoming USDA regulations and guidelines for hemp production–the credit union needs to first be familiar with any other federal and state laws and regulations that prohibit, restrict, or otherwise govern these businesses and their activity. For example, a credit union needs to know if the business and the product(s) is lawful under federal and state law, and any relevant restrictions or requirements under which the business must operate.
“Hemp provides new opportunities for communities with an economic base involving agriculture,” the notice states. “The NCUA encourages credit unions to thoughtfully consider whether they are able to safely and properly serve lawfully operating hemp-related businesses within their fields of membership.”
“Lending to a lawfully operating hemp-related business is permissible.”
After USDA releases its rules for the hemp industry, which are expected to come ahead of the 2020 planting season, NCUA said it “will issue additional guidance on this subject.”
Senate Majority Leader Mitch McConnell, who like Bennet has also pressured federal regulators to clear up confusion around hemp banking, took credit for NCUA’s response and celebrated the new guidance.
At @senatemajldr’s request, @TheNCUA issues guidance to assist legal #hemp industry. Hearing concerns from his constituents, McConnell urged NCUA to provide clarification to help address this barrier in #Kentucky. @KYCreditUnions applauds the positive news https://t.co/5kaQmxJE1x
— Senator McConnell Press (@McConnellPress) August 19, 2019
“I’m delighted to hear the NCUA has answered my call on behalf of Kentuckians to ensure the legal hemp industry can access much-needed financial services,” McConnell said in a press release. “Although President Trump signed into law my initiative last year to remove hemp from the federal list of controlled substances, many of my constituents have told me about their difficulty receiving loans and other services that are necessary to successfully run a hemp business.”
“Through this guidance by the NCUA, I look forward to more hemp farmers, processors and manufacturers starting or growing their operations with the help of Kentucky’s credit unions,” he said. “As Senate Majority Leader, I’ll continue advocating for Kentucky’s priorities throughout the federal government, and I’m proud of today’s positive news.”
Credit unions have generally been friendlier to the marijuana and hemp industries than have conventional banks, and NCUA has similarly taken a more proactive role in evolving to meet the demands of these burgeoning markets.
For example, the agency’s head clarified earlier this month that credit unions wouldn’t be punished simply for serving hemp businesses so long as they were following standard procedures. NCUA also released a draft rule in July that would allow people with past drug convictions to work at credit unions.
Cannabis banking issues have received significant congressional attention this session, with a bipartisan consensus emerging around creating a legislative fix so that hemp and marijuana businesses are able to access financial services.
The hemp industry in particular has enjoyed bipartisan support since the crop was legalized, but while marijuana remains a federally controlled substance, more lawmakers from across the aisle are expressing interest in affording cannabis businesses the same access in order to increase financial transparency and mitigate public safety risks associated with operating on a largely cash-only basis.
The House Financial Services Committee approved a bill in March that would protect banks that service marijuana businesses from being penalized by federal regulators, and the Senate Banking Committee also held a hearing on the issue last month.
Banking Chairman Mike Crapo (I-ID), who suggested earlier this year that his panel wouldn’t convene to discuss the matter as long as cannabis is federally illegal, has since taken a stance that the issue needs to be resolved.
But while advocates hoped that legislation to address marijuana banking problems would be taken up by the full House ahead of the August recess, that window closed and attention is now turned to a potential hearing in the fall.
Photo courtesy of Brendan Cleak.
Mitch McConnell Presses FDA Nominee On CBD And Hemp
Senate Majority Leader Mitch McConnell (R-KY) met with the nominee to become the next Food and Drug Administration (FDA) commissioner on Wednesday and discussed the need for a regulatory framework for CBD products.
While there are few specific details available about their conversation, McConnell said he emphasized the importance of hemp legalization for Kentucky farmers and pointed out that those producers are also facing challenges given the lack of FDA regulations concerning CBD.
“I look forward to working closely with Dr. Hahn on several important issues for Kentucky,” McConnell said in a press release. “Like many Kentuckians who are taking advantage of hemp’s legalization, I am eager for FDA’s plans to create certainty for CBD products.”
As @senatemajldr, Senator Mitch McConnell advocates for #Kentucky priorities with the Trump Administration and discussed his Tobacco 21 legislation, #hemp, and CBD with President @realDonaldTrump’s nominee for @US_FDA Commissioner: https://t.co/GZhkVgPeFV pic.twitter.com/a0gBs9z42u
— Senator McConnell Press (@McConnellPress) November 20, 2019
The majority leader has previously pressed FDA to issue enforcement discretion guidance that prioritizes action against only CBD companies making especially unfounded medical claims about their products while allowing responsible businesses to continue to market their products as the agency continues to develop rules.
McConnell similarly raised his concerns about the importance of expediting CBD regulations during a separate meeting with Acting FDA Commissioner Ned Sharpless in June.
Stephen Hahn, the FDA nominee, was also pressed on CBD issues during a confirmation hearing on Wednesday. Sens. Jacky Rosen (D-NV) and Pat Roberts (R-KS) noted that there’s wide consumer interest in the cannabis products but stressed that more research is needed, barriers to research should be lifted and public health interests should be balanced with policies that support the industry.
Hahn replied that he believed there’s untapped therapeutic potential in the cannabis compound, but he also agreed that there are “unanswered questions that need to be filled in by data and science and research.”
In related developments, several consumer groups have recently expressed concerns about the current status of the CBD market.
Three groups—National Consumers League, Consumer Federation of America and Community Anti-Drug Coalitions of America—announced on Tuesday that they are launching an initiative called “Consumers for Safe CBD” that is designed to “warn the public of the potential risks related to CBD products.”
According to a press release, the coalition will also encourage FDA “to use its existing authority to protect consumers, provide guidance to manufacturers, and encourage further research for FDA-approved CBD treatments.”
Another group, the Consumer Healthcare Products Association (CHPA), launched a citizen petition to FDA last week that implores the agency to quickly develop rules for CBD so that the products can be lawfully marketed as dietary supplements.
“Intense consumer demand and commercial interest has resulted in a flood of CBD products of uncertain quality and unapproved claims already in the marketplace, and this scenario has created an urgent need for FDA action,” CHPA President Scott Melville said in a press release.
“The request in our petition seeks to have FDA utilize the authority it already has to establish a lawful regulatory pathway for manufacturers to bring dietary supplements containing CBD to market,” he said. “Only then will consumers be able to purchase CBD-containing dietary supplements in a manner that ensures product quality, safety, and a level-playing field for enforcement.”
Photo courtesy of Twitter/Senate Majority Leader.
Senators Push USDA To Adopt Five Changes To Proposed Hemp Regulations
Sens. Ron Wyden (D-OR) and Jeff Merkley (D-OR) sent a letter to the head of the U.S. Department of Agriculture (USDA) on Wednesday, requesting a series of changes to draft rules for hemp that the department released last month.
The senators said they appreciate that USDA issued the proposed regulations, which is a “necessary step to establish a domestic federal hemp production program.” However, they wanted to highlight “several concerns about the unintended and potentially harmful effects this interim final rule would have on hemp production in Oregon and across the country.”
In the letter to Agriculture Sec. Sonny Perdue, they listed five issues with the regulations and suggested potential fixes. Many of the concerns echoed those that stakeholders have submitted to USDA as part of a public comment period the department launched on October 31. Here’s what the senators highlighted:
—As written, the draft rules call for hemp to be tested within 15 days before harvest. Farmers have argued that’s far too little time, and the senators said it presents an “impossible obstacle for growers to overcome.” Oregon regulations require testing within 28 days, so they said USDA should adopt a similar timeline.
—USDA said that testing must be completed at a laboratory registered with the Drug Enforcement Administration. The senators said that will produce a bottleneck and delays for hemp producers, and that independent laboratories such as those operating in Oregon should be allowed to conduct the tests.
—The senators said that USDA should allow for forms of THC concentration testing that do not involve post-decarboxylation and also argued that the congressional intent of hemp legalization was not to require testing of all THC compounds but rather just delta-9 THC in particular.
—USDA requires that testing samples come from the top one-third of the flower portion of the plant. Instead, the senators said, samples should follow established protocol in states like Oregon, which stipulates that samples should be taken from the flowering tops when they’re present and be eight inches long.
—While the Farm Bill defines hemp as cannabis containing no more than 0.3 percent THC on a dry weight basis, USDA gave slight margin of error and considers any plants with more than 0.5 percent THC to be in violation of the regulations. Farmers have called that limitation arbitrary and the senators said it would be more reasonable to set the negligence threshold at 1 percent, if there must be a THC restriction at all.
“Farmers in Oregon and across the country are on the precipice of an agricultural boom that, with the right regulatory framework, stands to boost rural economies in every corner of the country,” they wrote.
Wyden and Merkley have been some of the most vocal proponents of developing USDA regulations that bolster the hemp industry since the passage of the Farm Bill, through which they worked to legalize the crop in the first place. As early as February, Wyden and Senate Majority Leader Mitch McConnell (R-KY) were knocking at USDA’s door, urging the department to expedite the rulemaking process.
Read the full senators’ letter to USDA on hemp regulations below:
Photo courtesy of Brendan Cleak.
Virginia Attorney General Hosts ‘Cannabis Summit’ To Advance Reform In New Democratic Legislature
Virginia’s attorney general is inviting state lawmakers to a “Cannabis Summit” next month as talk about advancing marijuana decriminalization and other reforms during the 2020 legislative session picks up.
Officials from other states that have legalized or decriminalized cannabis will speak at the event, as will academics who study the issue.
“This upcoming General Assembly Session policymakers will be considering legislation related to cannabis use in the Commonwealth,” an invitation states. “This summit is designed to better inform those discussions and offer perspectives from states that have implemented similar changes at the state level.”
“The summit will consist of 4 panels of experts from around the country to speak on the following topics related to cannabis policy: decriminalization of marijuana, social equity, regulating CBD & Hemp products, pathways towards legalization through legislative efforts and other topics that will better inform the upcoming legislative work,” reads the invitation sent out by the attorney general’s office, which was first reported by The Virginia Mercury.
Attorney General Mark Herring (D) said last month that the legislature will first move to pass a cannabis decriminalization bill—something that Gov. Ralph Northam (D) had campaigned on and talked about in his State of the State address.
Lawmakers will then “get to work on a larger study about how and when we could move toward legal and regulated adult use,” Herring said.
It's time for Virginia to decriminalize, address past convictions, and move toward legal, regulated adult use.https://t.co/aqWxQCVPIg
— Mark Herring (@MarkHerringVA) November 20, 2019
“Criminalizing marijuana possession is not working. It is needlessly creating criminals, saddling people with convictions and costing taxpayers millions each year,” the attorney general wrote in an op-ed for the Virginian-Pilot this week. “The social and human costs are tremendous, and the weight of the system falls disproportionately on African Americans and people of color. There are smarter, better ways we can handle cannabis and that begins with decriminalizing simple possession of small amounts, addressing past convictions and moving towards legal, regulated adult use.”
The chances of getting cannabis reform policies through the General Assembly significantly increased after this month’s election, which saw Democrats reclaim control of both chambers for the first time in decades.
Accordingly, a lawmaker prefiled a cannabis decriminalization bill this week that would make possession of up to one ounce of marijuana punishable by a maximum $50 civil penalty.
The announcement of the Cannabis Summit, which will take place in Richmond on December 11, is another signal that political support for reforming Virginia’s marijuana laws is strong. And while Northam has not endorsed adult-use legalization, the inclusion of that issue in panel discussions indicates that decriminalization is just the beginning of the conversation. Advocates are also pushing the state to expand its limited medical cannabis program.
“The attorney general’s public support for advancing evidence-based cannabis policy, coupled with the recent formation of the Virginia Cannabis Caucus, set the stage for a robust and unprecedented exploration of real-world experiences with decriminalization, legalization and regulation in other states,” Jenn Michelle Pedini, executive director of Virginia NORML, told The Virginia Mercury.
NORML honored Herring with its “Vanguard Award” as part of its national conference in September.
Photo courtesy of Mike Latimer.