FRANKFORT, Ky. (KT) - Federal banking regulatory agencies issued guidance Tuesday to assist the legal hemp industry, and Kentucky Agriculture Commissioner Ryan Quarles calls it a step in the right direction.
“I applaud Senate Majority Leader Mitch McConnell’s ability to secure this opinion from four major financial regulators in Washington,” he said. “Moves like this are steps in the right direction for our infant hemp industry and I hope it will provide clarity to those looking to do business in Kentucky.”
McConnell announced that, at his request, the Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, the Federal Reserve, and Financial Crimes Enforcement Network, joined by the Conference of State Bank Supervisors, issued the guidance clarifying the legal status of hemp and the relevant requirements for banks providing financial services to hemp related businesses.
“Today’s multi-agency announcement represents continued progress as we work to ensure hemp is treated just like any other legal agricultural commodity," McConnell said. “Even after President Trump signed my initiative in last year’s farm bill to fully legalize hemp and remove it from the list of federally controlled substances, I heard from hemp producers around Kentucky about their ongoing challenges, including the lack of access to the financial system. I’m proud federal banking regulators agreed to my request to issue new guidance that affirms hemp’s legality. I look forward to more Kentucky producers having the ability to grow their hemp businesses with the help of the Commonwealth’s financial institutions.”
Many hemp farmers and producers in Kentucky faced challenges accessing capital and other important financial products as they have explored the crop’s economic opportunities, despite passage of McConnell’s hemp-legalization initiative in the 2018 Farm Bill.
Hearing these concerns from his constituents, McConnell was joined by Senator Ron Wyden, D-Oregon, earlier this year in contacting several federal banking and financial regulatory institutions, reiterating hemp’s legality and requesting timely guidance and clarification to help ease concerns from lawful hemp farmers and producers about the lack of access to financial services.
The guidance emphasizes that banks are no longer required to file suspicious activity reports for customers solely because they are engaged in the growth or cultivation of hemp in accordance with applicable laws and regulations. For hemp-related customers, banks are expected to follow standard procedures and file a suspicious activity report if there are indications of suspicious activity.
It provides banks with background information on the legal status of hemp, the U.S. Department of Agriculture's interim final rule on the production of hemp, and Bank Secrecy Act considerations when providing banking services to hemp-related businesses.
This statement also indicates that the Financial Crimes Enforcement Network will issue additional guidance after further reviewing and evaluating the USDA interim final rule.
Banks can contact the USDA and state departments of agriculture with further questions regarding the 2018 Farm Bill and its implementing regulations.
On Oct. 31, the USDA issued an interim final rule establishing the domestic hemp production regulatory program to facilitate the legal production of hemp, as set forth in the 2018 Farm Bill.
Under the interim final rule, state departments of agriculture and tribal governments may submit plans for monitoring and regulating the domestic production of hemp to the USDA for approval. The interim final rule establishes a federal licensing plan for regulating hemp producers in states and tribal territories that do not have their own USDA-approved plans.
The Kentucky Department of Agriculture is currently putting together such a plan, which will likely include changes to Kentucky Administrative Regulations, following public input and possibly legislation.
“Once again, Senator McConnell showed why he is an indispensable voice for Kentucky in Washington,” said Kentucky Bankers Association President and CEO Ballard W. Cassady, Jr. “By affirming hemp’s status as a legal commodity, this federal guidance can provide much-needed clarity and reassurance to Kentucky banks exploring opportunities in our state’s growing hemp industry. For years, Senator McConnell has championed the cause of hemp, helping overcome numerous challenges at the federal level so Kentuckians are able to take full advantage of this exciting crop. Without the Senate Majority Leader throwing his weight behind this Kentucky priority, we might never have gotten it done.”