NCUA is Excited for Hemp Banking

Last year National Credit Union Administration (NCUA) Chairman, Rodney Hood, encouraged credit unions to thoughtfully consider serving hemp-related businesses within their field of membership[1]. Now in 2020, Chairman Hood sees hemp as an exciting new opportunity for rural communities![2]

This month NCUA released additional guidance for credit unions considering banking the hemp industry. This is a follow up to its 2019 hemp guidance from the Regulatory Alert memo 19-RA-02. The newest guidance is found in the Letters to Credit Unions memo 20-CU-19. This memo does not provide a significant amount of substantive information but provides information the credit union needs to consider.

Understanding the Law:

Hemp regulations are all over the map, literally. The U.S. Department of Agriculture (USDA) is currently operating under interim regulations that are in effect until November 1, 2021. These regulations allow State and Tribal Governments to submit plans to the USDA that will allow them to regulate the hemp industry in their jurisdictions.  Many State and Tribes have submitted such plans. States also have the option to continue to operate an industrial hemp pilot program under the 2014 Farm Bill until November 1, 2020. A few states prohibit production of hemp altogether. Because of this patchwork of regulations, it is important credit unions understand the regulations applicable to their members and continue to monitor those regulations as the industry matures.

Understanding the Industry

Another key consideration a credit union needs to understand is the complexities and the risks across the industry. The memo makes clear that the credit union can offer a broad array of services to the hemp industry, so the risk associated with deposit accounts are substantially different than offering large commercial loans. In order to serve this niche, the credit union must have the experience and resources to ensure they can bank each member in a safe and sound manner.

Banking Secrecy Act (BSA) Requirements

The compliance burden for hemp is substantially lower than banking marijuana-related businesses. Specifically, there is no requirement to file the marijuana specific Suspicious Activity Reports (SARs). That’s not to say that SARs are not required, the credit union needs to establish a due diligence program to ensure its hemp members are not engaged in illicit or unusual activities. The USDA regulations and many State and Tribal regulations only apply to hemp growers/producers and not to other hemp related businesses. Despite the lack of regulations, the credit union must still establish a due diligence program to ensure these businesses are not engaged in illicit or unusual activities as well.

If you have any questions on developing a hemp banking program or on your existing hemp banking program, Gleam Law is happy to help with your banking needs.

[1] NCUA Regulatory Alert 19-RA-02

[2] NCUA Letters to Credit Unions 20-CU-19