As a company that works to reduce risk, every aspect of cannabusiness puts us on edge. It’s not that we’re against it, but it is fraught territory for financial institutions.
But the fact is that many credit unions have considered cannabusiness and hemp banking. And for understandable reasons, too. It’s a growing industry with a lot of promise. Getting in at the ground floor would no doubt be very profitable.
But there are all sorts of federal issues surrounding hemp banking. Frankly, there are enough issues around it that we’re not ready to even weigh in yet. But here’s what we can do: we can let you know about newer developments in NCUA hemp banking guidance.
Thrilling stuff.
High Risk, High Reward
The Agricultural Improvement Act—often called the Farm Bill—is a continually renewed bill in congress. Every five-ish years, congress renews it, thus shaping federal food and agricultural policy.
The most recent Farm Bill passed in 2018. And, because cannabis legislation has the spark it needs to catch fire, the new Farm Bill has a little bit in there about cannabusiness. Marijuana with tetrahydrocannabinol (or THC) is still federally illegal…
But hemp—marijuana without THC—is now federally legal. That means cannabidiols (CBDs) and any industrial uses of the plant are fair game.
And naturally, credit unions and other financial institutions are looking into it. Because, well, cannabusiness represents one heck of a growth opportunity. (Really, we’re not sorry about our puns here.)
Is It Safe to Go Green?
Usually when credit unions talk green, they’re talking about money or environmental sustainability. But credit unions interested in serving the hemp industry would be in uncharted territory. Fortunately, the NCUA provided a little guidance.
On August 19, 2019, the NCUA released interim guidance for credit unions interested in serving hemp businesses. Here are the basics:
Yes, your credit union can provide service to cannabusinesses. You’ll have to do your due diligence about federal, state, local, and tribal laws.
Your credit union needs strong Bank Secrecy Act (BSA) / Anti-Money Laundering (AML) program. Credit unions will need to assiduously ensure that they have the knowledge and framework in place to legally serve hemp-related business.
You can lend to hemp business. However, you might expect pretty strict standards for that lending.
Don’t Get Burned
Credit unions can work with cannabusiness, but they must be careful. Laws and regulations surrounding hemp and hemp business are different all over the country. It would be a shame to eagerly jump into serving cannabusiness without fully understanding what it requires.
Basically, if you get on the wrong side of the law in any way?
All your plans will go up in smoke.
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