We have been approached by an investment company that would like to open an account related to its investment in an out-of-state hemp farm. Our current policy is not to open accounts for businesses dealing with hemp or marijuana, but we have not reconsidered our policy since the passage of the federal farm bill legislation regarding hemp. Can you give us a sense of the potential pitfalls of opening an account for the investment company?

Under the new federal law, as well as Illinois law, it now is legal to sell hemp — provided that it meets the statutory definitions of “hemp” and “industrial hemp.”

With the passage of the federal Agriculture Improvement Act of 2018, hemp is no longer a Schedule I controlled substance under the federal Controlled Substances Act and is legal to sell in the United States — provided that it meets the federal definition of “hemp.” Under the federal law, “hemp” means “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.”

Likewise, Illinois passed the Industrial Hemp Act in 2018, which removed industrial hemp from the general prohibition on manufacturing, delivering or possessing “cannabis” with the intent to deliver under the Illinois Cannabis Control Act. Under the Illinois law, “industrial hemp” means “the plant Cannabis sativa L. and any part of that plant, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis that has been cultivated under a license issued under this Act or is otherwise lawfully present in this State, and includes any intermediate or finished product made or derived from industrial hemp.”

While your bank would not be directly providing services to the hemp farm, you would be accepting deposits from the investment company, and those deposits likely would be sourced from the hemp farm’s proceeds. Consequently, we recommend applying the same careful analysis as you would when accepting deposits directly from the hemp farm. Additionally, your bank may need to be aware of the law and THC threshold imposed by the state in which the hemp farm is located, since it is located outside of Illinois.

For resources related to our guidance, please see:

Controlled Substances Act, 21 USC 802(6) (A controlled substance is “a drug or other substance, or immediate precursor, included in schedule I . . . .”)

Controlled Substances Act, 21 USC 812(c)(c)(10) (Schedule I drugs include marihuana.)

Controlled Substances Act, 21 USC 841(a)(1) (“Unlawful acts. Except as authorized by this subchapter, it shall be unlawful for any person knowingly or intentionally — (1) to manufacture, distribute, or dispense, or possess with intent to manufacture, distribute, or dispense, a controlled substance; . . . .”); 21 USC 802(6) (A controlled substance is “a drug or other substance, or immediate precursor, included in schedule I, II, . . .”); 21 USC 812(c)(c)(10)(Schedule I drugs include marijuana.); 18 USC 2(a) (“Whoever commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal.”)

U.S. Criminal Code, 18 USC 1956(a)(1)(A)(i) (“Whoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction . . . shall be sentenced to a fine of not more than $500,000 or twice the value of the property involved in the transaction, whichever is greater, or imprisonment for not more than twenty years, or both.”)

Controlled Substances Act, 21 USC 853(c) (“All right, title, and interest in property described in subsection (a) [manufacturing, distributing or dispensing a controlled substance] vests in the United States upon the commission of the act giving rise to forfeiture under this section. Any such property that is subsequently transferred to a person other than the defendant may be the subject of a special verdict of forfeiture and thereafter shall be ordered forfeited to the United States . . . .”)

Controlled Substances Act, 21 USC 802(16) (“(A) Subject to subparagraph (B), the term ‘marihuana’ means all parts of the plant Cannabis sativa L. . . . (B) The term ‘marihuana’ does not include

(i) hemp, as defined in section 1639o of Title 7; or

(ii) the mature stalks of such plant, fiber produced from such stalks, oil or cake made from the seeds of such plant, any other compound, manufacture, salt, derivative, mixture, or preparation of such mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of such plant which is incapable of germination.”)

Agriculture Marketing Act of 1946, 7 USC 1639o(1) (“The term ‘hemp’ means the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.”)

Illinois Cannabis Control Act, 720 ILCS 550/5 (“It is unlawful for any person knowingly to manufacture, deliver, or possess with intent to deliver, or manufacture, cannabis . . . .”)

Illinois Cannabis Control Act, 720 ILCS 550/3 (“‘Cannabis’ includes marihuana, hashish and other substances which are identified as including any parts of the plant Cannabis Sativa . . . ‘Cannabis’ does not include industrial hemp as defined and authorized under the Industrial Hemp Act.”)

Illinois Industrial Hemp Act, 505 ILCS 89/15(d) (“The Department shall adopt rules for the testing of the industrial hemp THC levels and the disposal of plant matter exceeding lawful THC levels, including an option for a cultivator to retest for a minor violation, with the retest threshold determined by the Department and set in rule. Those rules may provide for the use of seed certified to meet the THC levels mandated by this Act as an alternative to testing.”)

Illinois Industrial Hemp Act, 505 ILCS 89/5 (“‘Industrial hemp’ means the plant Cannabis sativa L. and any part of that plant, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis that has been cultivated under a license issued under this Act or is otherwise lawfully present in this State, and includes any intermediate or finished product made or derived from industrial hemp.”)