Feds Take Steps to Increase Hemp Producers’ Access to Capital

The Department of Treasury released new guidance yesterday that makes it much easier for banks to serve hemp producers. This comes on the heels of the USDA interim rules governing hemp nationwide. 

Basically, the new guidance says that banks no longer need to file ‘suspicious activity reports’ with Treasury for hemp producers since the crop is now largely legal under federal law. Suspicious Activity Reports (or SARs) are a fairly burdensome regulatory requirement for banks that require a great deal of diligence. This new guidance not only reduces the regulatory burden; it also reduces legal exposure banks may face by working with clients in the hemp industry. This should mean a greater willingness on the part of federally chartered banks to work with hemp producers, which, in turn, will result in greater access to capital.

This is also important because of likely trickle down effects. Insurers, for example, will likely become more eager to work with the hemp industry as access to capital increases.

Of course, banks will still need to ensure that their clients are complying with state and federal laws governing hemp, and will need to conduct necessary diligence to avoid banking illegal marijuana operations with products containing THC in excess of 0.3%. In addition, banks will need to remain cautious about clients who work with CBD in food products given the FDA’s hostility to that practice.

All in all, I see this as another positive step in the long game toward broader legalization.