At long last, the hemp industry is cleared to do business with banks.
A statement on Tuesday from the Federal Reserve, as well as other federal and state regulators, confirms that banks may treat hemp producers like any other customers. The sole requirement is to only work with companies that can prove they’re following licensing requirements.
“We appreciate the steps regulators have taken to clarify regulatory expectations for banks,” said Rob Nicholas, President of the American Bankers Association, to the New York Times. “We look forward to working with them as they develop additional guidance.”
The change only applies to companies making hemp-derived CBD products or hemp clothing. The new guidelines might also not result in immediate changes throughout the banking industry. A spokesman for Wells Fargo confirms they have no plans to offer banking services to hemp businesses.
Why Is This Important?
Most federally governed credit unions and banks had felt working with the hemp industry would result in steep financial penalties.
There are only 300 financial institutions in the country which work with hemp businesses. Most of them are credit unions or state-chartered banks. Because of this, many hemp businesses operate solely in cash.
The Dangers Of Cash-Only Businesses
Being unable to utilize banks creates problems with processing payments, record keeping and tax collection. It also presents a significant public safety issue. Because businesses are subject to public record disclosure laws, cash-only businesses run higher risks for robbery. Many successful all-cash operations have to hire 24-hour security or purchase expensive safes.
Data from the Denver Police Department shows that “burglaries and theft comprise almost 80% of Denver’s cannabis industry-related crime.” The American Bankers Association also notes that “in Denver, [the roughly 500] cannabis businesses make up less than 1% of all local businesses, but have accounted for 10% of all reported business burglaries from 2012-2016.”