Federal and state bank regulators announced Tuesday that they were scrapping a burdensome requirement that banks said kept them away from the hemp business. Banks will no longer have to treat their hemp customers as suspicious and file reams of paperwork to anti-money-laundering authorities for each interaction.
Even so, federal law long considered hemp to be as forbidden as cocaine and heroin. But with the legalization of marijuana spreading across the country — 33 states have legalized the drug for medical use and 11 states will allow sales for recreational use by January — lawmakers in Washington decided to do away with the designation for its milder sibling.
Last year Congress legalized hemp as a crop and directed the Agriculture Department to start regulating hemp production. It took the agency almost a year to devise rules for the industry, but once they were released, on Oct. 31, bank regulators prepared to take action. Tuesday’s statement, from the Federal Reserve, the Federal Deposit Insurance Company and other state and federal regulators, informs banks that they can now treat hemp producers like other customers, as long as the companies can prove they’re following licensing requirements.
Rob Nichols, the president of the American Bankers Association, a trade group, said his members had been pushing for the change for some time.
Last month, the association surveyed 1,800 agriculture-focused banks in the country and found that almost half had gotten questions from their farmer-customers about whether they would still do business with them if they started growing hemp.
“We appreciate the steps regulators have taken today to clarify regulatory expectations for banks, and we look forward to working with them as they develop additional guidance,” Mr. Nichols said.
But banks large and small have come together to support a bill in Congress, the SAFE Banking Act, that would legalize marijuana banking by stipulating that the proceeds of a state-sanctioned marijuana business would not be considered illegal under federal anti-money-laundering laws.
The House of Representatives passed a version of the bill, and the banking industry is pushing the Senate to take it up. If it were to become law, it would let banks dive into a lucrative new industry that has been plagued by security concerns and is desperate for even the most basic services, like checking accounts and credit card processing.