Payments Law Tool Kit

Venable / 10 9 / Venable Cannabis, Hemp, and CBD Hemp and CBD Pursuant to the 2018 Farm Bill, Congress amended the CSA to exclude “hemp” from the definition of marijuana, provided the hemp contains 0.3% or less tetrahydrocannabinol (THC). With hemp no longer a controlled substance under federal law, a payments company may, in theory, provide services to hemp-related businesses without violating the CSA. There remain, however, a number of federal and state laws that govern the manufacture, distribution, and sale of hemp, and which make processing for the industry a compliance challenge. In particular, all hemp and CBD products subject to the U.S. Food and Drug Administration’s (FDA) jurisdiction (e.g., food, dietary supplements, cosmetics, etc.) must still comply with FDCA and FDA regulations. Given the prevalence of the marijuana and hemp industries, all financial institutions should develop and implement policies and procedures that address how the financial institution will handle marijuana and hemp- related funds or customers, even if the financial institution has no interest in providing services to such industries. For those banks and payments companies that decide to provide services to the marijuana, hemp, or CBD industries, it is critical that they do so in a safe and sound manner and pursuant to the guidance and best practices suggested by FinCEN and other regulators. It’s not often that new industries develop overnight, but that’s the case with the state-legalized marijuana and hemp industries (collectively, cannabis). While marijuana remains illegal under the federal Controlled Substances Act (CSA), a majority of states have legalized the sale and use of marijuana in some form, even if just for limited medical purposes. At the same time, the 2018 Farm Bill amended the CSA to exclude hemp from the CSA’s definition of marijuana and established a new regulatory framework for the production of hemp and hemp-derived substances, such as CBD. Nevertheless, there remain significant risks for payments companies that are interested in providing services to these industries. Of course, marijuana remains illegal, and the facilitation of illegal transactions under the CSA may serve as the basis for the prosecution of other crimes, such as those prohibited by the money laundering statutes. And while hemp is no longer a controlled substance under the CSA, the legal framework for hemp and CBD derived from hemp is complicated. Given these complexities, payments companies interested in these industries should do their homework to understand the applicable laws, risks, and best practices for mitigating risks. Marijuana The Department of Treasury, Financial Crimes Enforcement Network (FinCEN) has issued guidance on how financial institutions can provide services to the marijuana industry consistent with their Bank Secrecy Act (BSA)/anti-money laundering (AML) obligations. The FinCEN guidance explains that the decision to open, close, or refuse any particular account for a marijuana-related business should be made based on business objectives and an evaluation of the risks associated with offering a particular product or service. These risks can be evaluated only through a combination of rigorous due diligence on applicants and comprehensive, ongoing monitoring throughout the life of the account.