In 2013, the Obama administration signed the Cole Memorandum, which formed a federally protected shelter for marijuana companies to operate by employing a hands-off approach of non-prosecution against cannabis businesses and users who comply with state laws. However, in January 2018, Donald Trump appointed former attorney general Jeff Sessions revoked the Cole Memo, generating an atmosphere of skepticism, especially among financial institutions.
Nevertheless, hope lingers for the cannabis industry. In September 2019, the House overwhelmingly voted 321 to 103 and passed The SAFE (Secure and Fair Enforcement) Banking Act. This law seeks to grant protections to financial institutions that work with state-licensed cannabis companies, extending them the same safeguards afforded other businesses.
But, the House passing The SAFE Banking Act is only half the battle. The real uphill battle is with the Republican-majority Senate. In the past, the GOP had a more negative outlook on marijuana than the Democratic or Independent party. And, Senate Majority Leader Mitch McConnell has been known to block bills regarding cannabis.
In able for this bill to become a law, it has to be voted on and passed by the Senate then the President has to sign the bill into law or he can veto it. If it is vetoed, it is sent back to the House and it starts all over again. The process can be very long.
While The SAFE Banking Act awaits for its faith in Washington, D.C., businesses like Sheepscot General of Whitefield, Maine continue to struggle to attain access to bank services.
Sheepscot General grows organic hemp which technically is legal under the 2018 Farm Bill that legalized hemp at the federal level. This bill revised the Controlled Substances Act to clear hemp from the definition of marijuana. Hemp contains less than 0.3% or less THC content (by dry weight). So, while it isn’t entirely lacking psychoactive compounds, it will not get you high.
Recently, Sheepscot General owners Ben and Taryn Marcus informed me that their bank terminated their bank and loan accounts. So, why did this happen?
According to the bank’s correspondence with Ben and Taryn, “there are lengthy and burdensome requirements for federally chartered banks to be sure the product meets federal regulations for financing. The Farm Bill changes mean it might become less difficult for banks to work with hemp-related customers from an operational and compliance standpoint. But neither the Financial Crimes Enforcement Network (FinCEN) nor federal bank regulators have issued updated guidance on working with hemp businesses following this change.”
The communication also mentioned, “We are waiting on the hemp amendments in the SAFE Banking Act, which passed 321-103 and now heads to the Senate, which instruct federal banking regulators to issue guidance to financial institutions confirming the legality of hemp and hemp-derived CBD products within 90 days of the enactment of the law.
We understand the impact to our customers, thus we are actively working on a solution to serve our local hemp farmers, but at this time, we do not have the process in place to also meet federal regulations. We look forward to more clarity and direction from our regulatory agencies as this is a complex and evolving situation, and we hope to serve local hemp farmers soon.”
In my opinion, therein lies the problem. Hemp is being used in CBD products and production of these products is in boom. CBD is associated with cannabis which is still a Schedule I drug under CSA. Main is also one of the states the legalized marijuana for recreational and consumption use. At the end of the day, banks are still banks and financial constitutions are conservative by nature.
The 2018 Farm Bill became law in December 2018. Here we are in the last quarter of 2019 and still, banks have not received guidance from the government on how to proceed to work with hemp businesses.
I asked Taryn how this will affect their business’ operation, she said “We are struggling to find another bank that will work with us that is in reasonable distance since we do cash deposits more than once a week because of our farm store. We may have to hobble something together that will take more time and energy than the set up we have now. Luckily we have a great network and we have been quickly connected to people that are helping us put a plan together hopefully this will not affect our staff or customers.”
If you want to make sure your local hemp farmers and cannabis producers and shops stay in business, help the hemp and cannabis industries fight their struggle to have access to bank services. Contact your senator’s office – write, email, call, and tell them you want the SAFE Banking Act to pass and to quit stalling with the 2018 Farm Bill.
This is the 2nd of a 2-part story. You can read part one – Why Banks Do Not Want To Work With Cannabis Companies – Part I.