34 JULY / AUGUST 2019 FEATURE The Farm Bill Made CBD Legal So we can bank it … can’t we? Lori Jean Partner Krieg DeVault LLP ljean@kdlegal.com Krieg DeVault LLP is a Diamond Associate Member of the Indiana Bankers Association. The year 2018 was big for CBD. Indiana legalized the distribution and sale of “low THC hemp extract” (but not the cultivation of hemp or the production of hemp products);1 and the federal Agriculture Improvement Act of 2018 (2018 Farm Bill)2 removed hemp (including any part of the cannabis plant containing 0.3% delta-9 THC or less), its extracts, derivatives and cannabinoids,3 including CBD, from Schedule I of the Controlled Substances Act.4 It did so by explicitly exempting hemp from the definition of marijuana.5 In May 2019, Gov. Eric J. Holcomb signed into law Senate Enrolled Act 516, Regulation of Hemp,6 which creates the framework for Indiana to submit its plan to monitor and regulate the cultivation, production and sale of hemp for U.S. Department of Agriculture approval under the federal-state regulatory structure of the 2018 Farm Bill. Given these legal developments, can financial institutions now provide services to customers growing, processing, and selling hemp and hemp products like CBD? If financial institutions bank these customers, do they still have to comply with the due diligence and SAR requirements in the Financial Crimes Enforcement Network’s “BSA Expectations Regarding Marijuana-Related Businesses” (FinCen Guidance),7 since “marijuana” does not include hemp? The answers are not simply yes or no. Despite these changes, hemp cultivation, production and sale are not a free-for-all, but will be subject to strict federal and state/tribal regulatory oversight. In order to grow or process hemp and hemp-derived products legally, an appropriate license will be necessary. These licenses will be issued under as-yet-to-be-written federal and/or state regulations. Specifically, the 2018 Farm Bill places hemp under the dual authority of the USDA in coordination with state departments of agriculture or tribal governments.8 States/tribes may, but need not, adopt their own regulatory plans, which must meet minimum federal standards, including the procedures regarding land to be used for planting, testing, effective disposal of plants and products, compliance with law enforcement, annual inspections, and submission of information to the USDA. These state/tribal plans must be approved by the USDA. It is important to note that state/tribal plans may be more restrictive than USDA regulations.9 This means that despite the federal law making hemp “legal” nationwide, those growing, producing and selling hemp will not only have to comply with federal law and regulations, but will also have to contend with state laws and regulations that will vary state-to-state. If a state does not adopt its own plan, USDA regulations will apply. USDA regulations are expected by late 2019 in time to accommodate the 2020 growing 1 Indiana P.L. 153-2018 (SEA 52). 2 Agriculture Improvement Act of 2018 (H.R. 2), Pub. L. No. 115-334, 132 Stat. 4490 (2018). 3 Agriculture Improvement Act of 2018 (H.R. 2), Pub. L. No. 115-334, §12619, 132 Stat. 4490, 5018 (2018). 4 See 21 USC §§ 802(6), 812 (Schedule I(c)(10)(2012). 5 See Agriculture Improvement Act of 2018 (H.R. 2), Pub. L. No. 115334, §12619, 132 Stat. 4490, 5018 (2018). 6 See Regulation of Hemp, Pub. L. No. 190-2019 (1st Reg. Sess. of the 121st Ind. Gen. Assembly, 2019). 7 www.fincen.gov/resources/statutes-regulations/guidance/bsa-expectations-regarding-marijuana-related-businesses 8 Agriculture Improvement Act of 2018 (H.R. 2), Pub. L. 115-334, §10113, 132 Stat. 4490, 4908-4914 (2018). 9 See 7 USC § 1639p (2018).
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