The industrial hemp industry is set to make a major move forward as federal banking regulations are being amended to reflect the legal status of hemp. Federal financial regulators will now play a role in helping hemp businesses grow instead of treating them as suspicious entities. This constitutes overcoming a major roadblock for the industry and helps to open up traditional financial services.
Up until now, banks had to file Suspicious Activity Reports with the federal government when opening up a hemp-related business account. This caused many banks to refuse service for these customers because of the hassle and assumed risk for their branch. The four agencies involved said the changes are coming after the USDA published its interim rules that allow states to establish legal hemp programs.
The New York Times reports that these reforms will help to clarify the regulatory expectations for banks moving forward. The Financial Crimes Enforcement Network issued the initial guidance in 2014. At the time the agency wanted to allow some access for marijuana related businesses to banking systems. After that legislation was rescinded in 2018, the industry was at a loss to find any kind of banking solutions despite industrial hemp becoming decriminalized in the 2018 Farm Bill.
Having access to reliable funding will lower the barrier to entry for many companies and simplify the process for finding business funding. The industry will have many more tools at its disposal to face the upcoming challenges it faces, and it will have the federal financial backing that other industries rely on.