Pub. 14 2019-2020 Issue 1

WWW.NEBANKERS.ORG 24 L AST YEAR THE MOST FREQUENTLY ASKED TOPIC OVER AT Compliance Alliance was, without a doubt, beneficial ownership. With the effective date for that rule well behind us, today the top BSA question we are getting is about how the heck to deal with marijuana banking. Now the issue withMarijuana Banking is that there are no set definitions and conflict between state and federal laws. Therefore, it’s impor- tant to discuss both the definitions that do exist and strategies for the bank to make their own interpretations. First, the 2018 FarmBill clarified, from a federal perspective that hemp cultivation is legal and not just restricted to pilot pro- grams for research purposes which it was before. Importantly, the Act also allows interstate transfer of hemp products. Also, the passage of the law allows for the sale and possession of hemp- based products, as long as those products are consistent with the parameters of that rule. So, what are the parameters? There are still tight restrictions on this type of product. Hemp under this rule is limited to less than 0.3% THC. Second, the Bill asks state departments of agriculture to create a regulatory framework that would be collaboration between the state’s governor, law enforcement and the United States Department of Agriculture in order to license and regulate hemp. That plan will have to be approved by the USDA so we’re not free and clear yet. Farmers in states that choose not to have a USDA-approved programwill still have the opportunity to growhemp and produce hemp-based product, but they will be regulated at the federal government level. As can be expected from those last two parameters, hemp producers will have to be licensed and regulatedwhichwill mean some level of enhanced due diligence for institutions that choose to bank those customers. How does any of this help us? It helps us because hemp is derived of the same plant as marijuana – the cannabis plant. However, hemp does not have the same effects as marijuana simply because it does not contain as much of the chemical compound known as THC. This creates a category of product that is legal and not classified as marijuana under the controlled substance act Products that are derived of the same plant but havemore THC than allowed that would no longer be considered hemp and instead, would be consideredmarijuana. Asmarijuana is still an illegal controlled substance, at the federal level, under the Controlled Substance Act this makes a critical difference to banks that are not banking marijuana-related businesses but will bank legal hemp businesses. As the prevalence of marijuana businesses continues to in- crease, banks have to make risk-based decisions as to whether Marijuana Banking in 2019 Silvia Garcia Maggio, Deputy General Counsel