Oh HEMP!!! -NCUA Issues Guidance on Serving Hemp Businesses

On 8/19/19, the NCUA issued guidance for federally insured credit unions on how they can serve lawfully operating hemp businesses.  As the 2018 Farm Bill made a number of changes to how hemp is treated under federal law, some credit unions have lawfully operating hemp businesses within their fields of membership.  The NCUA explains 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.

In the guidance, the NCUA explains that the intent of the document is to help credit unions better understand what they should consider in providing financial services to lawfully operating hemp businesses and provides a few key takeaways in understanding hemp businesses.

First, it is important to point out that the NCUA is focusing their guidance on hemp businesses that are operating lawfully.  The NCUA explains that while hemp is no longer a controlled substance at the federal level (due to the December 20, 2018 Farm Bill), hemp may not yet be produced lawfully under federal law unless it is produced under the industrial hemp pilot provisions of the Agricultural Act of 2014.  The NCUA guidance explains that, for hemp production to be legal under federal law beyond the 2014 Farm Bill pilot, the USDA must first create regulations and guidelines (which are not yet finalized) to implement the hemp production provisions of the 2018 Farm Bill. The NCUA also uses the outline to briefly highlight some of the challenges relating to other laws and regulations - like state laws, Indiana Tribes, the Federal Food, Drug, and Cosmetic Act, and the Public Health Service Act.  For example, certain hemp-derived products may now or in the future be regulated by state health departments and/or the U.S. Food and Drug Administration.

Secondly, the NCUA provides a list of BSA/AML considerations that need to be incorporated into BSA/AML policies when serving hemp businesses.  Specifically, the NCUA has stated that credit unions need to incorporate the following into their BSA/AML policies, procedures, and systems:

  • 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.

In their release, the NCUA explained that their interim guidance will be revised and updated once the United States Department of Agriculture finalizes forthcoming regulations and guidelines.

It should also be noted that the NCUA is the first of the regulators to issue guidance on banking hemp businesses and in comments earlier this week, it is not certain whether the other regulators are even planning to issue future guidance on the issue.

The full NCUA guidance can be found here. 

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