The NAFCU Journal November-December 2019 - 44

COMPLIANCE CENTRAL

Hemp Banking and
Other Developments
By Elizabeth M. Young LaBerge

S

tate legislatures around the country continue to pass a variety of
legalization laws related to marijuana, hemp and other cannabisderivative products. At the federal level,
the 2018 Farm Bill legalized certain hemp
products. The result is a growing national
market for hemp and a state-by-state market of quasi-legal medical and recreational
marijuana and other cannabis-derivative
products. While the state of play regarding marijuana banking has not changed
significantly since 2013, there have been
a few developments worth reviewing: the
passage of the 2018 Farm Bill, NCUA's issuance of hemp guidance and NCUA's reaffirmation of its prior position on marijuana.

The 2018 Farm Bill:
Industrial Hemp and
Cannabis-Derivative Products

The 2018 Farm Bill included the Hemp
Farming Act of 2018, which legalized
industrial hemp. The bill defines hemp
as a derivative of cannabis sativa. The key
difference between hemp and marijuana
is the THC level. THC is the compound
found in cannabis that creates an intoxicating effect. Industrial hemp may not
contain more than 0.3 percent THC and
does not cause a "high" effect. Under
the bill, industrial hemp products are
legal. Further, industrial hemp has been
removed from the Controlled Substances
Act's (CSA's) definition of marijuana and
thus allows for a more expansive cultivation of industrial hemp.
Cannabidiol, also referred to as CBD, is
a derivative of the cannabis plant that
can be extracted from hemp. CBD is also
44

not intoxicating, though many use it to
soothe pain, mood or mental conditions.
The farm bill does not explicitly legalize
CBD, but it is a legal substance under the
bill only if it is extracted from industrial
hemp containing less than 0.3 percent
THC and is produced in a manner
consistent with the bill. The Food and
Drug Administration maintains control
over hemp where it is contained in food,
drugs and cosmetics. The agency remains
steadfast in its position that it is illegal
to market CBD in food or as a dietary
supplement.
Hemp cultivation will be strictly regulated
by both state and federal powers. The
bill establishes a multilayered process for
a state to begin cultivation of hemp. To
begin farming hemp, the state department
of agriculture must seek approval from
the governor, who must curate a plan
for hemp cultivation to be submitted to
the secretary of the U.S. Department of
Agriculture (USDA). Once the USDA secretary approves of the plan, the state must
implement a regulatory system to comply
with federal hemp cultivation procedures.
The intention of the USDA and the FDA
is to ensure that states regulate, track and
license hemp production from "seed to
sale." USDA must issue rules and regulations for providing a structure that state
governors and agricultural departments
should emulate when drafting their own
hemp cultivation plans. Prior to release of
the rules, the USDA noted hemp producers should not rely upon the 2018 Farm
Bill hemp production provisions until the
rules on production are finalized. These

regulations provide critical guidance for
credit unions performing due diligence
regarding whether hemp producers are in
compliance with the law.

NCUA Releases Hemp Banking
Guidance

In a recent regulatory alert, NCUA
provided some considerations for
credit unions when serving lawfully operating hemp businesses. The agency expects
these credit unions to be aware of all the
applicable laws and regulations as well
as the unique risks involved with serving
these businesses. Updates should be made
to the credit union's BSA/anti-money laundering compliance program to mitigate
the risks involved, including maintaining
appropriate due diligence procedures,
monitoring for any illicit or unusual activity and ensuring appropriate Suspicious
Activity Reports (SARs) are completed.
NCUA also stresses that any lending to
hemp businesses should conform to its
business and commercial lending rules
and to safe and sound commercial lending
practices, including underwriting that
evaluates the business's management, experience and financial condition.

NCUA's Position Following
Rescission of the Cole Memo

Stuck between conflicting state and federal
laws, the U.S. Department of Justice under
the Obama administration issued the Cole
memo in 2013, indicating the department's
intention to prioritize prosecutions of marijuana activities that pose actual risks to the
safety and health of the public, rather than
activities conducted under state laws that
include sufficient regulations and controls.

THE NAFCU JOURNAL  NOVEMBER-DECEMBER 2019



The NAFCU Journal November-December 2019

Table of Contents for the Digital Edition of The NAFCU Journal November-December 2019

The NAFCU Journal November-December 2019
Contents
Conferences
From the Chair
Washington and Industry Briefs
The Bottom Line
Welcome, New Members
Leading the Charge
Test for Success
Test for Success
Executive Spotlight
Management Insight
Compliance Central
Inside NAFCU Services
From the President’s Desk
The NAFCU Journal November-December 2019 - The NAFCU Journal November-December 2019
The NAFCU Journal November-December 2019 - Cover2
The NAFCU Journal November-December 2019 - Contents
The NAFCU Journal November-December 2019 - 2
The NAFCU Journal November-December 2019 - Conferences
The NAFCU Journal November-December 2019 - From the Chair
The NAFCU Journal November-December 2019 - 5
The NAFCU Journal November-December 2019 - Washington and Industry Briefs
The NAFCU Journal November-December 2019 - 7
The NAFCU Journal November-December 2019 - The Bottom Line
The NAFCU Journal November-December 2019 - 9
The NAFCU Journal November-December 2019 - 10
The NAFCU Journal November-December 2019 - 11
The NAFCU Journal November-December 2019 - 12
The NAFCU Journal November-December 2019 - Welcome, New Members
The NAFCU Journal November-December 2019 - 14
The NAFCU Journal November-December 2019 - 15
The NAFCU Journal November-December 2019 - 16
The NAFCU Journal November-December 2019 - 17
The NAFCU Journal November-December 2019 - Leading the Charge
The NAFCU Journal November-December 2019 - 19
The NAFCU Journal November-December 2019 - 20
The NAFCU Journal November-December 2019 - 21
The NAFCU Journal November-December 2019 - 22
The NAFCU Journal November-December 2019 - 23
The NAFCU Journal November-December 2019 - 24
The NAFCU Journal November-December 2019 - 25
The NAFCU Journal November-December 2019 - Test for Success
The NAFCU Journal November-December 2019 - 27
The NAFCU Journal November-December 2019 - 28
The NAFCU Journal November-December 2019 - 29
The NAFCU Journal November-December 2019 - 30
The NAFCU Journal November-December 2019 - 31
The NAFCU Journal November-December 2019 - Test for Success
The NAFCU Journal November-December 2019 - 33
The NAFCU Journal November-December 2019 - 34
The NAFCU Journal November-December 2019 - 35
The NAFCU Journal November-December 2019 - 36
The NAFCU Journal November-December 2019 - 37
The NAFCU Journal November-December 2019 - 38
The NAFCU Journal November-December 2019 - 39
The NAFCU Journal November-December 2019 - Executive Spotlight
The NAFCU Journal November-December 2019 - 41
The NAFCU Journal November-December 2019 - Management Insight
The NAFCU Journal November-December 2019 - 43
The NAFCU Journal November-December 2019 - Compliance Central
The NAFCU Journal November-December 2019 - 45
The NAFCU Journal November-December 2019 - Inside NAFCU Services
The NAFCU Journal November-December 2019 - 47
The NAFCU Journal November-December 2019 - From the President’s Desk
The NAFCU Journal November-December 2019 - Cover3
The NAFCU Journal November-December 2019 - Cover4
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