Many folks both in and out of the industry believed that with the passage of the 2018 Farm Bill by the U.S. Congress in December 2018 that banking and payment processing would quickly become a non-issue. However, even after the bill’s passage, FINCANN receives a continuous stream of inquiries from hemp and CBD companies seeking simple, transparent, compliant business checking accounts after being turned away from all the banks they’ve contacted.
Companies seeking retail and e-commerce merchant processing accounts so they can accept credit card payments from their customers are experiencing similar frustration. We were all relieved and elated when US Bank merchant services subsidiary Elavon began onboarding CBD merchants with reasonable pricing and next-day settlement, but when it became apparent that they had jumped in before carefully studying and resolving serious legal and compliance issues, they were obliged to exit the sector, leaving thousands of merchants without viable alternatives. And of course, their exit had a chilling effect on worthy competitors now obliged to reconsider their plans to enter the market.
Contrary to popular understanding, bankers -- including banks essential to supporting merchant processing -- are not restrained from serving our industry due to the tension between conflicting state and federal laws. Their ‘mainstream conservative’ boards of directors, whose endorsement is required for any institution to move forward, generally still consider marijuana to be a disreputable trade with which they do not wish to be associated. While it’s true that the ‘needle’ of acceptance has moved glacially towards more tolerance and acceptability over the past few years, especially in the sub-sectors of hemp and medical marijuana, and more banks are taking a more serious look at the industry, banking and merchant processing remains elusive to this day.
A great deal of FINCANN’s resources are devoted to educating financial institutions on the risks and opportunities of banking the industry, and when a particular bank is willing to further consider ‘dipping their toes in the water’ in sub-sectors such as CBD and marijuana ancillaries, FINCANN provides access to the necessary resources to build and implement a proven compliance and marketing program. These banks then become part of our Cannabis Banking Financial Network™ and we can introduce marijuana-related business (MRB) licensees, ancillaries, hemp and CBD companies, investment funds and payment solutions to them according to their current criteria and appetite.
The other bedrock issue is the popular misconception that the 2018 Farm Bill made CBD ‘legal’, and therefore the still-prevailing banking restrictions seem contradictory. The actual effect of the legislation was to remove hemp and hemp-derived products, including CBD, from the Drug Enforcement Agency (DEA)’s narcotic drug schedule and transferred legal jurisdiction over hemp and hemp-derived products from the DEA and the U.S. Department of Justice (DOJ) to the U.S. Department of Agriculture as a regulated agricultural crop e.g. tobacco & alcohol and the U.S. Food & Drug Administration (FDA) for products intended for human or animal consumption. However, the legal confusion arises from the fact that hemp is now a ‘regulated agricultural crop’ without a regulatory framework yet in place.
The U.S. Department of Agriculture has mandated that the individual states develop their own regulatory programs, including licensing and registration where appropriate, and submit those programs for their approval. This process is well underway. Meanwhile, the FDA has made it clear that any products containing CBD intended for human or animal consumption be so approved, and to date, they have officially only approved one clinically tested pharmaceutical containing CBD: Epidiolex. They have published clear guidance that until approved, the sale and interstate commerce of CBD products for human or animal consumption are prohibited, as is product packaging or advertisements making any claim of health benefits or medical efficacy. However, they have also informally stated that they lacked both the resources and inclination to prosecute CBD commerce so long as the medical and health prohibition is observed.
Add to this the fact that many states have varying standards of what is legal and permissible in their state, from requirements of less than the maximum 0.3% THC standard, physician prescription requirements or outright prevailing bans, creating a regulatory and legal thicket that was primarily responsible for Elavon’s untimely exit from the industry.
The good news is that Fincann has been preparing to counter these obstacles on our industry’s behalf for over a year and offers redundant federally-insured real banking options for compliant, transparent business checking accounts, as well as a full suite of commercial banking services covering all 50 states and all hemp and CBD sub-sectors.
FINCANN also partners with the best merchant processing solutions available and is actively developing new and better ones.