Federal financial regulatory agencies are clarifying that banks no longer have to take extra steps to track accounts for hemp-related businesses.
Before hemp and its derivatives were federally legalized under the 2018 Farm Bill, financial institutions were required to file suspicious activity reports (SARs) for accounts associated with the crop because it was a Schedule I controlled substance treated the same as marijuana.
But the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Financial Crimes Enforcement Network (FinCEN) and the Office of the Comptroller of the Currency, as well as the Conference of State Bank Supervisors, issued a statement on Tuesday updating banks on the legal status of hemp.
— Federal Reserve (@federalreserve) December 3, 2019
“Because hemp is no longer a Schedule I controlled substance under the Controlled Substances Act, banks are not required to file a Suspicious Activity Report (SAR) on customers solely because they are engaged in the growth or cultivation of hemp in accordance with applicable laws and regulations,” the memo states. “For hemp-related customers, banks are expected to follow standard SAR procedures, and file a SAR if indicia of suspicious activity warrants.”
In essence, the financial agencies said that while banks don’t have to accept hemp accounts, if they do, those clients shouldn’t be treated any differently than customers from any other legal industry.
FDIC, @FederalReserve, @USOCC, and the Financial Crimes Enforcement Network, along with @CSBSNews, have clarified reporting requirements for banks with customers involved in hemp-related businesses. https://t.co/C6OuTvByAG
— FDIC Gov (@FDICgov) December 3, 2019
“When deciding to serve hemp-related businesses, banks must comply with applicable regulatory requirements for customer identification, suspicious activity reporting, currency transaction reporting, and risk-based customer due diligence, including the collection of beneficial ownership information for legal entity customers,” they wrote.
Federal guidance on dealing with marijuana businesses, which was outlined in a 2014 Treasury Department memo, remains in place, the letter added. Banks must still file SARs for those firms, regardless of the legal status of cannabis under state law.
Senate Majority Leader Mitch McConnell (R-KY), a chief proponent of hemp legalization, took credit for the release of updated guidance. In April, he and Sen. Ron Wyden (D-OR) sent a series of letters to federal financial regulators requesting clarification on the legality of servicing hemp businesses.
At @senatemajldr Mitch McConnell’s request, federal banking regulatory agencies issue joint guidance to assist legal #hemp industry: https://t.co/KB43C4cq2X @FDICgov @USOCC @federalreserve @CSBSNews + Financial Crimes Enforcement Network (FinCEN)
— Senator McConnell Press (@McConnellPress) December 3, 2019
“Today’s multi-agency announcement represents continued progress as we work to ensure hemp is treated just like any other legal agricultural commodity,” McConnell said in a press release on Tuesday. “Even after President Trump signed my initiative in last year’s farm bill to fully legalize hemp and remove it from the list of federally controlled substances, I heard from hemp producers around Kentucky about their ongoing challenges, including the lack of access to the financial system.”
“I’m proud federal banking regulators agreed to my request to issue new guidance that affirms hemp’s legality,” he said. “I look forward to more Kentucky producers having the ability to grow their hemp businesses with the help of the Commonwealth’s financial institutions.”
Wyden also cheered the development.
“Hemp was legalized almost a year ago, yet Oregon farmers and producers have been forced to ride the roller coaster of uncertainty,” he said in a press release. “Slowly but surely federal regulators are starting to catch up, and these new banking guidelines are an important step toward giving hemp businesses the certainty they need. The work doesn’t stop here, however, and more must be done to make sure hemp businesses are treated fairly and allowed to fully realize this legal crop’s economic potential in our state and nationwide.”
The recent legalization of hemp presents big opportunities for small businesses. Ensuring they have access to banking is an important step in building a business. https://t.co/OJuACz8fIe
— House Committee on Small Business (@HouseSmallBiz) December 3, 2019
The American Bankers Association (ABA) said that the regulators’ hemp move has been “long sought” by the financial services industry.
“We are pleased that the guidance also notes that bank customers are responsible for complying with regulatory requirements surrounding hemp, not the banks who serve those customers,” ABA President Rob Nichols said. “We appreciate the steps regulators have taken today to clarify regulatory expectations for banks, and we look forward to working with them as they develop additional guidance.”
New ABA statement from @BankersPrez applauds regulatory guidance issued today on hemp banking, which “provides greater clarity on banks’ obligations related to hemp producers.” Read it here: https://t.co/oLpv9RQRCv pic.twitter.com/tyHg36xsi3
— American Bankers Association (@ABABankers) December 3, 2019
Though financial institutions are still required to file SARs for marijuana businesses, the rate of those reports being submitted seemed to level off in the last quarter.
It’s possible that’s connected to industry expectations about the potential passage of a bipartisan bill that would shield banks servicing marijuana firms from being penalized by federal regulators.
While the House overwhelmingly approved the legislation in September, that was months later than some had anticipated, and it’s possible banks had been holding off on accepting new cannabis clients and were discouraged that lawmakers hadn’t acted prior to the summer recess, as was expected.
It’s not clear whether the bill has enough support to clear the Senate, but the chair of that chamber’s Banking Committee has said he’s interested in holding a vote on it in his panel before the year’s end—and that he’d also like to see certain changes made.
Should the cannabis banking bill ultimately be enacted, it’s likely that financial services providers would eventually see a similar update on SAR reporting guidance for marijuana companies.
Read the federal hemp banking memo below:
This story was updated to include comment from Wyden and ABA.
Photo courtesy of Brendan Cleak.
Trinidad And Tobago Lawmakers Approve Marijuana Decriminalization Bill
A bill to decriminalize low-level marijuana possession in Trinidad and Tobago was approved by the nation’s House of Representatives on Wednesday.
The recently introduced legislation would remove criminal penalties for possession of up to 30 grams of cannabis. A fixed fine would be imposed for possession of more than 30 but fewer than 60 grams, and it would not impact an individual’s criminal record if the debt is paid.
The proposal would also provide a pathway for expungements of prior cannabis convictions and allow individuals to cultivate up to four plants for personal use. An earlier version specified that they must be male plants, which do not produce flower, but that was amended after lawmakers received public input.
Representatives spent about eight hours debating the bill, and its approval comes after a series of amendments were made in committee. It’s expected to get a vote in the Senate later this month.
There are some provisions that don’t sit well with reform advocates. Specifically, the measure imposes new penalties against possession and distribution of other substances such as LSD, MDMA and ketamine.
The decriminalization bill is one part of a package of marijuana reform proposals that the government brought before Parliament last month. Another piece of legislation, the Cannabis Control Bill, would legalize cannabis for medical, research and religious purposes and establish a regulatory body to approve licenses for marijuana businesses.
That proposal was also discussed during the House session on Wednesday and has been referred to a Joint Select Committee, which is tasked with delivering a report on the bill by February 29, 2020, local journalist Clydeen McDonald reported.
The JSC on the Cannabis Control Bill will report to the @TTParliament by February 29, 2020. Trinidad & Tobago's government only required a simple, however, the bill received the support of the country's opposition in its amended form, the context here: https://t.co/o6ibF39KRS
— Clydeen Seeorne McDonald 🇹🇹 (@ClydeenMcDonald) December 12, 2019
Prime Minister Keith Rowley and Attorney General Faris Al-Rawi have advocated for the policy changes, arguing that legalization and decriminalization will free up law enforcement resources, promote research into the therapeutic potential of cannabis and address racial justice.
“The history of cannabis is rooted in our country and, in fact, in our culture,” Al-Rawi said in his opening remarks. “Cannabis certainly be traced to several ethnic, religious and cultural traditions relevant to Trinidad and Tobago.”
“There are some who say legalize, there are some who say decriminalize, there are some who say do nothing at all, enhance the functions and penalties,” he concluded. “This is not an easy balance to be had, but commonsense tells us that it is by far past the time to make sure that the criminal justice system and the people most at risk are not exposed to the inevitability of just being processed through, after a whole lot of time, exposed to danger for a mere fine.”
The prime minister acknowledged that there’s ongoing debate about the extent to which the country should pursue reform and said “this matter is not a simple matter, but it also not a matter that we need to be frightened of.”
“We’re not going to please everybody by doing this,” he said. “There’s a body of opinion that says it shouldn’t be done at all, people should have to behave themselves. If we don’t do it, it is already an integral part of our societal behavior.”
“There are those who say we shouldn’t do it all, there are those who say we haven’t done enough, we should just legalize it and let the bush grow freely. That is not the position of the majority. The majority view in this country is we should decriminalize but we should not legalize. That may change in the future, I don’t know, but at this time, we decriminalize.”
The vote to advance these bills comes one year after the heads of 19 Caribbean nations announced they would be reviewing marijuana reform proposals. Since then, several regional countries such as St. Kitts have moved to change their country’s cannabis laws.
Photo courtesy of YouTube/ParlView.
New Jersey Lawmakers Take First Steps To Put Marijuana Legalization On The 2020 Ballot
New Jersey Assembly and Senate committees held hearings on Thursday to discuss a resolution that would put the question of marijuana legalization before voters on the 2020 ballot.
The Oversight, Reform and Federal Relations Committee debated the legislation at a morning hearing, which featured testimony from advocates, stakeholders and opponents, while a companion proposal was later discussed before the Senate Commerce Committee.
Both versions of the resolution have been scheduled for floor action in their respective chambers on Monday.
"If we are successful in placing this question on the ballot next year, the voters will make the final decision," says @JoeDanielsen17 on today's public hearing on legislation that would allow voters to decide to amend the State constitution to legalize adult-use cannabis pic.twitter.com/1Mlt8gcrzg
— NJAssemblyDemocrats (@njassemblydems) December 12, 2019
Separately, legislators in the Assembly Appropriations Committee approved a bill to revise and streamline the expungement process. It has also been listed for floor consideration on Monday.
The proposal to hold a cannabis referendum next November comes after top lawmakers failed to rally enough support to get legalization done legislatively, despite Gov. Phil Murphy (D) actively engaging in negotiations with the Senate and Assembly leaders. One of the main contentions was over how to tax marijuana sales.
“We had hoped to get this done legislatively, but that proved to be too tall of an order,” Assembly Judiciary Chairwoman Annette Quijano (D) said at the start of the Oversight panel hearing. “This is a seismic shift. I do not take that lightly.”
— NJAssemblyDemocrats (@njassemblydems) December 12, 2019
After Senate President Steve Sweeney (D) announced that lawmakers would be approaching legalization through a voter referendum, Murphy said that while he was disappointed, he felt confident New Jersey residents would do what the legislature was unable to accomplish.
In the meantime, the governor said he would work with both chambers to quickly pass more limited legislation decriminalizing cannabis possession.
“We believe prohibition has been a spectacular failure,” Karen O’Keefe, director of state policies for the Marijuana Policy Project told lawmakers on Thursday, adding that regulated markets mitigate public safety and workplace risks that exist under prohibition.
Assembly Panel Hosts Public Hearing on @AnnetteQuijano, @jamelholley, @AswTimberlake and @AswMcKnight Measure Amend State Constitution to Legalize Adult-Use Cannabis: https://t.co/IfEf98LO43 pic.twitter.com/h6gfT9CDwQ
— NJAssemblyDemocrats (@njassemblydems) December 12, 2019
Representatives from ACLU New Jersey, New Jersey CannaBusiness Association, Law Enforcement Action Partnership, Doctors for Cannabis Regulation and Clergy for a New Drug Policy also testified in favor of the measure.
Marijuana reform activist Chris Goldstein argued in his testimony that the language of the proposed ballot question should be revised to emphasize that it would end prohibition and remove criminal penalties associated with cannabis.
— Chris Goldstein (@freedomisgreen) December 12, 2019
In order to put changes to the state’s constitution on the ballot, as would be the case with the legalization referendum, the legislature must approve the proposal with a simple majority in two consecutive years, or once with a three-fifths supermajority.
As NJBiz reported, however, it’s unclear whether the two-year rule means it must be approved in two consecutive calendar years or two legislative sessions. The former would give lawmakers until the end of December to pass it the first time and the latter would give them until Murphy’s State of the State address on January 14, 2020.
Photo courtesy of Philip Steffan.
Senators Demand Update From DEA On Marijuana Growing Applications
A group of senators are pressing top federal drug and health agencies to provide an update on the status of efforts to increase the number of authorized marijuana manufacturers for research purposes.
A letter from the lawmakers—led by Sen. Elizabeth Warren (D-MA) and addressed to the heads of the Drug Enforcement Administration (DEA), Office of National Drug Control Policy and Department of Health and Human Services—emphasizes the need to expand the supply of research-grade cannabis as more states opt to legalize the plant for medical or recreational use.
It notes that DEA announced more than three years ago that it would begin to approve additional marijuana growers and has since continually delayed that process. While the agency said in August that it is taking steps to make approvals, it argued that the volume of applications received requires it to develop alternative rules before issuing any new licenses.
It made that announcement just before a court deadline mandated that DEA take action in response to a lawsuit brought against it by researchers who had applied for approval to produce cannabis for studies. Because the agency gave the update, however, the suit was dismissed in October.
But the senators aren’t satisfied and wrote that they’re “requesting written guidance on how the DEA will make these licenses available to qualified researchers in a timely manner.”
“While millions of Americans are now lawfully able to use marijuana for recreational and medicinal purposes, there remains limited research on its therapeutic benefits,” the letter, sent on Wednesday, states. “With an ever-growing number of Americans consulting their doctors about marijuana treatment options for conditions such as chronic pain, post-traumatic stress disorder, and terminal illnesses, it is imperative that your agencies make a concerted effort to improve our understanding of cannabis, its potential health benefits, and its health risks.”
The senators also noted that the fact that cannabis remains a Schedule I drug under the Controlled Substances Act “is, in itself, a significant barrier to conducting research.”
“Hampering these research opportunities and discouraging qualified, independent researchers attempting to conduct studies on the benefits of medical marijuana is detrimental to states that wish to thoughtfully implement their own marijuana laws,” they argued. “This research is crucial to developing a thorough understanding of medical marijuana and would be invaluable to doctors, patients, and lawmakers across the nation.”
The letter lists five questions that the agencies are being asked to respond to by January 10.
The group wants the government to provide 1) the status and timeline of application approvals by DEA, 2) details on the existing supply of research-grade cannabis and whether additional varieties are being cultivated, 3) information on any plans to consider rescheduling marijuana, 4) a description of the application process and 5) particulars on any efforts to support research into the therapeutic potential of cannabis, particularly as an alternative to opioid painkillers.
“With millions of American adults having access to recreational marijuana and a growing number seeking the drug for medicinal purposes, the federal government is not providing the necessary leadership and tools in this developing field,” they wrote. “Evidence-based public policy is crucial to ensuring our marijuana laws best serve patients and health care providers.”
“Federal agencies have a unique opportunity to collaborate with one another to expand our nation’s understanding of marijuana’s potential to create safe and effective therapies,” they said.
Sens. Ron Wyden (D-OR), Kamala Harris (D-CA), Kirsten Gillibrand (D-NY), Cory Booker (D-NJ), Jeff Merkley (D-OR), Ed Markey (D-MA) and Jacky Rosen (D-NV) also signed the letter.
Last week, DEA received a separate letter from a bipartisan coalition of House and Senate lawmakers urging them to change policy so that researchers can obtain marijuana from state-legal dispensaries. This would help resolve one problem that scientists have identified in the past, expressing frustration over a lack of diversity in the federal government’s cannabis supply.
One study found that the government’s marijuana is chemically more similar to hemp than what’s available in commercial markets.
DEA will likely find is useful to expand the number of cannabis manufacturers given the quota it released on how much marijuana it plans approve for cultivation in 2020: 3.2 million grams, which represents a 30 percent increase from this year’s quota.
Read the senators’ full marijuana letter below:
Photo courtesy of Brian Shamblen.