This past Monday, the National Credit Union Administration (NCUA) officially declared that credit unions are safe to service law-abiding hemp companies.
Here’s the groundbreaking Federal announcement in the NCUA’s own words:
“Federally insured credit unions may provide certain financial services to legally operating hemp businesses under new guidance published today by the National Credit Union Administration.”
The NCUA explained that servicing businesses in the hemp industry is acceptable because the hemp crop and its derivatives became federally legal under the 2018 Farm Bill, and because of the economic potential that hemp represents for agricultural-based communities and the U.S. at large.
“Lawful hemp businesses provide exciting new opportunities for rural communities,” says NCUA Chairman, Rodney Hood. “I believe today’s interim guidance keeps with the mission of the nation’s cooperative credit system to serve people who have been overlooked and underserved. 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.”
Compliance Will be Key
The NCUA hammered home the point that hemp-related commerce growth represents major economic opportunities for many communities, and these businesses will need to access capital and financial services. However, while the NCUA stressed that it’s generally up to the credit unions to determine whom to service and what to offer, the case with the hemp industry is unique.
Credit unions are responsible for ensuring that any and all hemp businesses they service carefully adhere to the Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) requirements.
“Credit unions need to maintain appropriate due diligence procedures for hemp-related accounts and comply with BSA and AML requirements to file Suspicious Activity Reports (SARs) for any activity that appears to involve potential money laundering or illegal or suspicious activity,” states the NCUA notice. “It is the NCUA’s understanding that SARs are not required to be filed for the activity of hemp-related businesses operating lawfully, provided the CBD activity is not unusual for that business. Credit unions need to remain alert to any indication that an account owner is involved in an illicit activity or engaging in activity that is unusual for the business.”
Additionally, the NCUA underscored the importance of credit unions respecting state rules and regulations when dealing with financial clients in the hemp industry.
“If a credit union serves hemp-related businesses lawfully operating under the 2014 Farm Bill pilot provisions, it is essential the credit union knows the state’s laws, regulations, and agreements under which each member that is a hemp-related business operates,” explains the NCUA notice. “For example, a credit union needs to know how to verify the member is part of the pilot program … and needs to know how to adapt their ongoing due diligence and reporting approaches to any risks specific to participants in the pilot program.”
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Senate Majority Leader Rejoices
Senate Majority Leader Mitch McConnell, who’s been applying pressure on the NCUA to clarify confusion related to financing the hemp industry, celebrated the announcement in the form of a press release.
“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,” said McConnell. “Although President Trump signed into law my initiative last year to remove hemp from the Federal list of controlled substances, many of my constituents have told me about their difficulty receiving loans and other services that are necessary to successfully run a hemp business.”
McConnell continued to praise the NCUA decision, both in terms of what it means for the agricultural-based economy in his state of Kentucky, as well for being a positive step forward for the U.S. hemp industry generally.
“Through this guidance by the NCUA, I look forward to more hemp farmers, processors and manufacturers starting or growing their operations with the help of Kentucky’s credit unions,” McConnell continued. “As Senate Majority Leader, I’ll continue advocating for Kentucky’s priorities throughout the Federal Government, and I’m proud of today’s positive news.”
💡Read: U.S. Credit Unions Receive Green Light to Work with Cannabis Companies💡
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