The hemp industry, legalized in the U.S. under the 2018 Farm Bill, offers significant opportunities for financial institutions, but navigating the hemp banking frontier remains complex due to regulatory uncertainties. Although hemp and its derivatives like CBD are federally legal as long as they contain less than 0.3% THC, banks must still exercise caution when serving hemp-related businesses.
Next Upcoming Live event: Tuesday, July 15, 2025 – 1pm-2pm ET
Event Description
Financial institutions are required to verify that hemp businesses operate within legal parameters, following strict compliance procedures such as enhanced due diligence (EDD) and ongoing transaction monitoring. This includes confirming that businesses are licensed under state law, tracking their adherence to THC limits, and ensuring that no illicit activity occurs within their operations.
Hemp banking is fraught with challenges due to overlapping federal and state regulations, and some banks remain hesitant to engage with the industry. Financial institutions that choose to bank hemp businesses must stay up to date with evolving guidelines from the Financial Crimes Enforcement Network (FinCEN), the U.S. Department of Agriculture (USDA), and the Food and Drug Administration (FDA). These guidelines inform how banks manage the risks associated with serving hemp businesses, from product legality to potential reputational damage. Despite the regulatory complexity, hemp banking offers potential rewards, given the industry’s projected growth. By establishing clear policies, compliance frameworks, and consistent monitoring, banks can safely and profitably serve the hemp sector.
Key Learning Objectives:
- Regulatory Compliance: Banks must ensure that hemp businesses comply with both federal and state laws, particularly regarding THC limits and licensing.
- The recent crackdown on intoxicating hemp
- Enhanced Due Diligence (EDD): Banks need to conduct thorough background checks and verify licensing and operational compliance for hemp businesses.
- Ongoing Monitoring: Continuous monitoring of transactions is necessary to identify any suspicious activities or non-compliance with legal requirements.
- Evolving Regulations: Financial institutions must stay informed of the latest guidance from federal agencies such as FinCEN, USDA, and FDA to navigate the legal gray areas.
- Potential for Growth: Despite regulatory challenges, hemp banking presents lucrative opportunities as the market for hemp products continues to expand.
