The announcement is expected to encourage more credit unions to assist hemp businesses, furthering the growth of an industry already booming.
The National Credit Union Administration (NCUA) announced recently they will allow credit unions to accept hemp businesses as clients since hemp was legalized in the Farm Bill last December.
“Lawful hemp businesses provide exciting new opportunities for rural communities,” said NCUA Chairman Rodney Hood. “Many credit unions have a long and successful history of providing services to the agriculture sector. My expectation is that credit unions will thoughtfully consider whether they are able to safely and properly serve lawfully operating hemp-related businesses within their fields of membership.”
The NCUA is tasked with regulating, chartering, and supervising federal credit unions. The federal agency published interim guidance for federally insured credit unions interested in providing service to legally operating hemp businesses. The notice also spotlighted the economic potential of the nation’s new legal hemp industry.
Senate Majority Leader Mitch McConnell (R-KY) expressed pleasure regarding the NCUA’s announcement.
“I’m delighted to hear the NCUA has answered my call on behalf of Kentuckians to ensure the legal hemp industry can access much-needed financial services,” McConnell said.
He noted that many individuals within the U.S. hemp space had complained about the difficulty they had in securing a loan for their respective businesses.
The hemp farming industry is booming throughout the U.S., but in particular in McConnell’s native state of Kentucky. The Bluegrass State is among the top in farmers who have begun growing hemp.
McConnell had pushed for guidance on hemp banking, along with Sen. Michael Bennett (D-CO).
Acquiring access to financial services has been an issue for hemp-related businesses for some time.
In their announcement, the NCUA highlighted the need for credit unions to comply with the Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) to assure the federal government they are not doing business that is engaging in illegal practices. Historically, the BSA has made credit unions and traditional banks hesitant to take on hemp businesses as clients.
Federally insured #creditunions may provide certain financial services to legally operating hemp businesses under new guidance released today. Learn more: https://t.co/5xVnkF3C3E pic.twitter.com/XPgKqOoEiz
— The NCUA (@TheNCUA) August 19, 2019
Earlier this month, Hood announced that credit unions would not face penalties for doing business with hemp-related businesses, provided they followed the law. The new guidance builds on that announcement by encouraging credit unions to do business with those in the industry.
Banking for Cannabis Increasingly Accepted
Hemp is not the only member of the cannabis family that is now receiving banking access. As marijuana has become increasingly legalized at the state level, more banks have started providing services to businesses in the legal medical and recreational marijuana industries. Data from the Treasury Department published in July indicated that banks and credit unions in the Pacific Northwest and California have been among the first to accept such businesses as customers.
The lack of banking has been a major issue in the industry, hindering its growth. Many businesses have been forced to operate on a cash-only basis, causing a number of serious issues in terms of meeting payroll obligations and maintaining sufficient security to guard the large amount of cash they possess.
Credit unions have been more eager than traditional banks to give loans to hemp and marijuana-related businesses.
Congress is working on a remedy for such issues. The Secure and Fair Enforcement (SAFE) Banking Act, currently being considered, has been estimated by the Congressional Budget Office to save the federal government $4 million over 10 years if it were signed into law. Federal enforcement would likely spend less on law enforcement.
The SAFE Act is currently being held up in the Senate. It passed the House of Representatives earlier this year.
Cannabis Banking and More
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