Pub. 11 2020 Issue 1

www.wvbankers.org 22 West Virginia Banker Key Considerations for Banking Hemp Producers in West Virginia By Mark Mangano, Jackson Kelly S erving customers engaged in growing, culti- vating, handling or processing industrial hemp presents significant opportunities. As a banker considering the pursuit of these opportunities, you should consider legal authority, the Bank Secrecy Act (BSA), and credit risks associated with a new and rapidly expanding industry. Cultivation, processing and sale of industrial hemp and its byproducts has grown rapidly since 2017. According to the West Virginia Department of Agriculture, the acres of hemp grown in the state increased from 155 acres in 2018 to 641 acres in 2019. Applications for licenses to grow hemp in 2020 have more than quadrupled from 2019. Fortunately, the rules for legally growing and bank- ing hemp have become much clearer in 2019. The USDA published an interim final regulation govern- ing growth and production of hemp and the banking regulators issued a statement reducing the Suspi- cious Activity Report (SAR) filing requirements. Serving hemp growers and producers continues to present heightened risks that require special considerations. Safely banking hemp growers and producers requires understanding and document- ing the legal authority to grow hemp, ensuring BSA procedures are appropriately adjusted, and eval- uating the unique credit risks of a new and rapidly expanding industry. Legal authorization Federal For decades, production of hemp in the United States was illegal because Schedule 1 of the Con- trolled Substances Act included Marihuana (now more commonly spelled marijuana). Marijuana is a name used to describe the plant Cannabis sativa L. The psychoactive chemical in Marijuana is tetrahy- drocannabinol (THC). However, it is possible to breed Cannabis sativa L. plants that have very low levels of THC. The Agricultural Improvement Act of 2018 (2018 Farm Bill) removed hemp from Schedule 1 of the