Hemp, CBD and Banking: An Ongoing Struggle for L.A. Cannabis Companies

California hemp and CBD businesses continue to struggle with the lack of access to banking – despite removal from the list of U.S. Controlled Substances Act by the 2018 Farm Bill. As Los Angeles CBD business attorneys can explain, federal lawmakers expressly called for businesses selling CBD and industrial hemp products to be treated as any other legitimate, lawful business. But that isn’t happening.Los Angeles CBD business lawyer

We can thank the lack of clear federal banking law and the reticence of financial institutions. Worse is that ramping up access to these critical business services appears to be happening in fits-and-starts.

This regulatory gray area has caused all kinds of headaches. CBD companies will have access to things like processing of credit card processing one day and the next, the institution has changed its mind, leading to a host of practical problems for businesses in terms of customer satisfaction but also just practically tracking expenses.

Baking Confusion Over Hemp, CBD

Recently, the American Bankers Association (ABA) submitted correspondence to federal regulatory agencies overseeing finance to request additional clarification on when/how banks can service businesses that sell hemp and hemp-derived CBD products.

In the association’s letter, it was stated that financial institutions want to serve legal businesses in support of local economies, but require more unequivocally clear direction and assurance from the federal government that hemp and CBD businesses are distinguished from cannabis companies under federal law. Otherwise, they fear they may be subject to harsh penalties under civil and and criminal law as well as regulatory sanctions.

The letter further sought confirmation that CBD and hemp are no longer deemed controlled substances under the law for purposes of requiring financial institutions to file suspicious activity reports, as they are required to do if/when servicing businesses that sell cannabis and related products.

It should be noted that both Sens. Ron Wyden, D-Oregon and Mitch McConnell, R-Kentucky, submitted letters to four major federal banking agencies asking that they open the door to financing and processing services for hemp and CBD businesses.

The senators sent those letters to the Office of the Comptroller of the Currency as well as the Farm Credit Administration, the Federal Reserve System and the U.S. Federal Deposit Insurance Corp. (better known as the FDIC). In their letters, Wyden and McConnell underscored that hemp was legal post-2018 Farm Bill. They specifically sought guidance from these agencies, urging them to help ease whatever concerns banks and other financial services providers may have in catering to hemp farmers, CBD product manufacturers and sellers. They stated point-blank that hemp and CBD companies are to receive equal treatment and that discrimination against them is not the intention of the legislature in passing the 2018 Farm Bill.

Although the FDIC has yet to respond directly to these letters, the agency head did tell members of the U.S. House and Financial Services Committee last month that it is conducting extensive training and that examiners with banks should know understand that hemp and its derivatives are legal and thus purveyors should have access to banking services.

Additionally, as our Los Angeles CBD business attorneys can explain, a memo from 2014 from the FinCEN reportedly already sets forth a guideline for how banks can serve BOTH marijuana and hemp clients (if and when the products became legal).

Hemp and CBD Entrepreneurs Feel Unfairly Jilted

Numerous hemp and CBD companies in California and throughout the U.S. say their understanding was that with the 2018 Farm Bill passed, they’d be able to sale through the regulatory and banking process necessary to truly get operations off the ground. That hasn’t happened.

In fact, some even report being instructed to lie on their applications in order to get them approved. This is almost never recommended. Before taking any such measure (which could result in both criminal and civil penalties) we recommend a thorough discussion with an experienced Los Angeles CBD business lawyer.

We understand that the inability to access banking services for many means they are stuck, unable to truly launch their businesses, sometimes with thousands of dollars of hemp and CBD products at risk of expiration.

CBD companies facing some of the most significant challenges are those that sell their products online through e-commerce. Fast and efficient e-commerce requires online payment processing. Most medical marijuana dispensaries that sell cannabis and CBD allow the products to be ordered online, but payment is processed in-person to delivery personnel – and in-cash.

But considering CBD and hemp at least are now legal under federal law, there is no reason for this, and it puts businesses that choose to be above-board at a significant disadvantage.

Business owners that sell hemp and the CBD derived from it say they are grateful for the additional input in stressing the legality of their products, but are frustrated that so many banking institutions continue to drag their feet on this critical issue.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 714-937-2050.

Additional Resources:

Acknowledging hemp ‘uncertainty,’ FDIC chief says banking rules sufficient, May 20, 2019, Hemp Industry Daily