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.
New Hampshire Lawmakers Approve Marijuana Legalization Bill
A New Hampshire House committee approved a bill on Tuesday that would legalize marijuana for adult use in the state.
While the legislation doesn’t provide for retail sales, it would allow individuals 21 and older to possess and gift up to three-fourths an ounce of cannabis and grow up to six plants. The model would be similar to neighboring Vermont’s non-commercial cannabis system.
The Criminal Justice and Public Safety Committee advanced the bill in a 13-7 vote.
“I think that the legalization of cannabis is more popular than the legislature itself or the governor or any other political entity in the state of New Hampshire,” Chairman Renny Cushing (D) said prior to the vote. “This is something that the people of the state of New Hampshire want. They don’t want to be treated like they’re criminals if they have a plant.”
Watch New Hampshire lawmakers discuss the marijuana legalization bill below:
This vote comes a week after the panel held a hearing on the proposal, with advocates and stakeholders testifying in favor of the reform move.
“Like most Granite Staters, this committee understands that it’s time for New Hampshire to stop prohibiting cannabis,” Matt Simon, New England political director for the Marijuana Policy Project, said in a press release. “Adults in the ‘Live Free or Die’ state should not be punished for their choice to use a substance that is objectively less harmful than alcohol.”
“Now that New Hampshire is literally surrounded by jurisdictions where cannabis is legal for adults, our current policies can no longer be justified in any way,” he said. “It’s time for the House, Senate and Gov. Chris Sununu to work together and move cannabis policies into the 21st century.”
A floor vote by the full House of Representatives is expected on February 6.
Tax-and-regulate marijuana legislation has advanced in the legislature in prior sessions, but it never arrived on the governor’s desk.
Even if it did make it that far, however, it’s unclear if Sununu, a Republican, would sign it. He’s voiced opposition to commercial legalization, and he vetoed a bill last year that would’ve allowed medical cannabis patients to cultivate their own marijuana, raising questions about whether he’d be willing to support this latest measure extending that right to all adults over 21.
In any case, the New Hampshire development comes amid a flurry of legislative activity around cannabis in the Northeast.
New York Gov. Andrew Cuomo (D) included legalization in his budget last week, as did Rhode Island’s governor, who pitched a state-run cannabis model in her plan. In New Jersey, the legislature approved a referendum to put the question of recreational legalization before voters during the November election. Top lawmakers in Connecticut are also confident that marijuana reform will advance this year. In Vermont, advocates are hopeful that lawmakers will add a legal sales component to the state’s current noncommercial cannabis law.
Photo courtesy of Philip Steffan.
AOC Says Colorado Is Doing A ‘Great Job’ With Marijuana Legalization
Rep. Alexandria Ocasio-Cortez (D-NY) says Colorado is an example of a state that’s effectively taxing and regulating marijuana.
At a town hall event in Iowa on Saturday, the congresswoman, who serves as a surrogate for Sen. Bernie Sanders’s (I-VT) presidential campaign, was asked if revenue from legal sales of cannabis and other drugs would be used to fund the senator’s Medicare for All proposal.
While she said the economic benefits of legalization are secondary concerns, she acknowledged that “Colorado is doing a great job of taxing it to fund schools.”
That said, funding large programs such as universal health care would require a diverse financing strategy, Ocasio-Cortez said.
“In terms of financing, I think the financing for our health care program would potentially come from different sources,” she said. “Senator Sanders has outlined how he would pay for Medicare for All.”
“I would just say the financing is a different question,” she said. “But when it comes to decriminalization and legalization, I know that the senator believes in the legalization of marijuana and, frankly, having that part of a decarceral approach” to the criminal justice system.
Listen to the conversation below, starting around 1:45:
“We need to not only have a conversation about decriminalization and a conversation about legalization, but we need to have a conversation about the harm done during the war on drugs,” she said in comments that were first flagged by The Washington Post’s Dave Weigel.
First actual Q for AOC as a Sanders surrogate: Would she legalize drugs to pay for M4A?
"The funding is going to come from a lot of sources," she says, clarifying that Sanders supports legalizing only marijuana and is focused on ending war on drugs.
— Dave Weigel (@daveweigel) January 25, 2020
“It exacerbated the racial wealth gap in America as well,” she said. “But not only that, it tore apart communities, it tore apart families and it was an explicit targeting of black and brown communities that dates back to the Nixon administration.”
“On one hand it’s an economic issue, but much deeper, it’s a justice issue. This is an issue of justice, this is an issue of mass incarceration. The United States has historically incarcerated more people per capita than any other country in the world. We need to live up to our values about what ‘Land of the Free’ means and transitioning to that means dismantling the system of mass incarceration. That’s an incredibly important part of this agenda.”
While Sanders has been a long-standing champion of cannabis reform, his views on broader drug policy proposals diverge from those of his surrogate, who believes that possession of all currently illicit drugs should be decriminalized and federal laws around psychedelics should be loosened to promote research.
Despite being widely regarded as the most progressive candidates in the race, both Sanders and Sen. Elizabeth Warren (D-MA) have so far declined to back comprehensive decriminalization for simple drug possession, a policy changed favored by former South Bend, Indiana Mayor Pete Buttigieg.
Rep. Tulsi Gabbard (D-HI), another 2020 contender, recently said that she’s in favor of legalizing and regulating controlled substances.
Photo courtesy of C-SPAN.
USDA Approves Hemp Plans For Texas, Nebraska And Delaware
The U.S. Department of Agriculture (USDA) announced on Monday that it has approved hemp regulatory plans for three more states and four additional Indian tribes.
This is the latest in a series of approvals that USDA has doled out since the crop and its derivatives were federally legalized under the 2018 Farm Bill. Texas, Nebraska and Delaware—in addition to the Colorado River Indian Tribes, the Fort Belknap Indian Community, the Iowa Tribe of Kansas and Nebraska and the Yurok Tribe—each had their regulatory plans cleared.
“USDA continues to receive and review hemp production plans from states and Indian tribes on an ongoing basis,” the department said in a notice. “Plans previously approved include those for the states of Louisiana, New Jersey, and Ohio, and the Flandreau Santee Sioux, Santa Rosa Cahuilla, and La Jolla Band of Luiseno Indian Tribes.”
While hemp is no longer a federally controlled substance, farmers interested in cultivating and selling the crop must live in a jurisdiction where USDA has approved a proposed regulatory scheme. The process was outlined in an interim final rule USDA published late last year. If a state or tribe does not have, or plan to propose, regulations for hemp, cultivators can apply for a USDA license instead.
“This is a victory for Texas farmers,” Texas Agriculture Commissioner Sid Miller said in a statement. “We are one step closer to giving our ag producers access to this exciting new crop opportunity.”
“We’ve got to get our rules approved and get our licensing program up and running, but the dominoes are dropping pretty quick,” he said. “We’re almost there.”
Heather Fazio, director of Texans for Responsible Marijuana Policy, told Marijuana Moment that “Texas has the potential to be the largest supplier of hemp in the U.S., providing farmers with an unprecedented opportunity.”
“With approval from the USDA and the Texas Department of Agriculture already moving forward with establishing licensing standards, it’s refreshing to see our government paving the way for legal cannabis cultivation in Texas,” Fazio said.
While lawmakers and industry stakeholders have widely celebrated USDA’s commitment to implementing hemp legalization, it has also received a significant amount of pushback over proposed rules such as THC limits and laboratory testing requirements. A public comment period for the department’s interim rule ends on Wednesday.
USDA maintains a website that tracks the status of state and tribal hemp plans.
Monday’s announcement sends another signal to the hemp industry that the federal government is committed to supporting the market and ensuring that farmers have the resources they need to see their businesses thrive since the crop was legalized.
That said, one of the most lucrative market opportunities that hemp farmers are hoping to take advantage of is the widespread interest in hemp-derived CBD products. The Food and Drug Administration (FDA) has jurisdiction over rules for marketing CBD, and the agency has made clear that the process may take several years without congressional action.
Earlier this month, a bipartisan coalition of lawmakers set out to do just that, filing a bill that would require FDA to allow CBD products to be sold as dietary supplements.
Photo courtesy of Brendan Cleak.