National Credit Union Administration Permits Banking and Lending Services to Hemp Businesses

Miller & Martin PLLC Alerts | August 23, 2019

On August 19, 2019, the National Credit Union Administration (“NCUA”) released Interim Guidance on Serving Hemp Businesses to federally insured credit unions on the developing federal law and regulation related to the hemp industry. In part, the guidance permits credit unions to provide customary financial services such as business bank accounts and loans to hemp businesses under certain conditions.

Under this guidance, to provide customary financial services to hemp businesses, credit unions must consider the laws and risks associated with hemp-related businesses. As a primary requirement, credit unions must have Bank Secrecy Act (“BSA”) and Anti-Money Laundering (“AML”) compliance programs that consider the following measures:

  1. Lawful Operation. Hemp business must be engaged in lawful operations under the 2014 Federal Farm Bill until the United States Department of Agriculture (“USDA”) releases regulations pursuant to the 2018 Federal Farm Bill.
  2. Hemp Laws. Credit unions must be knowledgeable of the laws and regulations under which its hemp business customers operate and other applicable laws and regulations related to its hemp-related business customers (i.e. retailers, manufacturers, distributors, shippers, etc.) that are not necessarily reliant on USDA regulations (i.e. the Food and Drug Administration and the Food Drug and Cosmetic Act). Particularly, credit unions must know if a customer’s business and its product(s) are lawful under applicable federal and state laws, and whether there are any relevant restrictions or requirements under which the business must operate.
  3. Due Diligence. Credit unions must maintain the appropriate level of due diligence procedures for hemp businesses and adjust their ongoing due diligence and reporting needs accordingly. Although Suspicious Activity Reports (“SARs”) are not required so long as the hemp business is operating lawfully, SARs remain required if there is any indication of illicit or unusual business activity.

The NCUA has a long history of providing financial services to agricultural businesses. Since the enactment of the 2018 Farm Bill in December, the hemp industry has been met with several challenges with respect to banking, lending, and other financial services for their businesses. The NCUA’s guidance provides several considerations to permit credit unions to provide financial services to hemp and hemp-related businesses. Notably, such considerations put the burden on credit unions to be knowledgeable of the hemp industry and understand the laws and regulations applicable to such hemp businesses in which financial services are provided. Hemp businesses should understand that the NCUA’s guidance is interim guidance intended to be updated as hemp laws and regulations continue to develop. Hemp businesses should also understand that this guidance is permissive. Although, this guidance is not intended to be a requirement of credit unions to provide such services nor intended to be a one size fits all, overall it is encouraging. Credit unions and other financial services providers should seek legal guidance when considering service to hemp businesses.

For more information about the Georgia Hemp Industry or Tennessee Hemp Industry, contact Miller & Martin attorney Stephanie Savage.

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