Banking has been an impediment for the cannabis industry because the Bank Secrecy Act of 1970 (BSA) and related regulations―which seek to prevent money laundering and other financial crimes―place onerous requirements on banks when a transaction is suspected to involve illegal activity. 12 C.F.R. Section 21.11. Notwithstanding billions of state-legal cannabis dollars exchanging hands, the commercial banking industry, which is largely federally regulated, is virtually nonexistent in the cannabis space. In 2014, the Treasury’s Financial Crimes Enforcement Network (FinCEN) provided guidance intended to enhance the banking of cannabis-related monies by establishing a category of suspicious activity reporting for “marijuana related businesses.” But, according to FinCEN, as of June 30, 2019, just 553 commercial banks and 162 credit unions had filed an SAR for a “marijuana-related business.”
“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,” says the National Credit Union Administration (NCRU) in its recently released guidance 19-RA-02.
While this is a significant step for hemp businesses seeking banking outlets, it is far from the relief proposed by Secure and Fair Enforcement Act (“SAFE Banking Act”) and does not represent a blanket permission. Still, the NCRU Guidance signals a recognition of the growing Cannabis industry and the practical need to provide financial services to businesses in the industry. Here are some key takeaways.
First, the guidance only applies to Federally Insured Credit Unions, not national banks.
Second, the guidance explicitly relates to credit unions serving “hemp” businesses as defined in the Agricultural Improvement Act of 2018 (2018 Farm Bill), which removed hemp from Schedule I of the Controlled Substances Act. Marijuana remains a Schedule I drug, which restricts banking access of marijuana businesses.
Third, because the USDA has yet to promulgate regulations and guidelines to implement the hemp production provisions of the 2018 Farm Bill, credit unions must ensure members in hemp-related business are operating under the industrial hemp pilot provisions of the Agricultural Act of 2014 (2014 Farm Bill).
Fourth, credit unions that elect to bank hemp-related businesses must maintain robust Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) compliance programs. This includes:
- Maintaining appropriate due diligence procedures for hemp-related accounts and complying 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.
- Remaining alert to any indication an account owner is involved in illicit activity or engaging in activity that is unusual for the business.
- Staying on top of state and tribal laws, regulations, and agreements under which each member that is a hemp-related business operates.
- Verifying that the member is part of the pilot program created in the 2014 Farm Bill.
- Adapting ongoing due diligence and reporting approaches to any risks specific to participants in the pilot program.
- Being familiar with any other federal and state laws and regulations that prohibit, restrict, or otherwise govern these businesses and their activity.
In sum, banking hemp-related businesses is permissible for credit unions. But they must be diligent in crafting BSA/AML policies. This is not a complete solution to the existing banking problems facing the Cannabis industry, but it does evidence a growing regulatory desire to provide access for the industry, which could sway policy makers down the road.
 The 2018 Farm Bill defines “hemp” as: “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.”