Is it legal for our bank to open accounts for a cannabidiol (CBD) retail business? Are there any applicable federal or state restrictions on banking a CBD business? Are there any additional reporting requirements for these customers?

See CQ 2022-153 for our most recent guidance on banking a CBD or hemp-related business

The most cautious answer to your question is that it likely is not legal to bank a CBD retail business unless you are able to verify that the CBD was derived from a federally-legal source. Moreover, if your bank does choose to accept deposits or provide services to CBD retail businesses, it will take on heightened monitoring and BSA/AML responsibilities with respect to these customers, including increased suspicious activity report (SAR) filing responsibilities.

With the passage of the Agriculture Improvement Act of 2018 (the 2018 Farm Bill), hemp and hemp-derived CBD are no longer illegal controlled substances under the federal Controlled Substances Act. Similarly, Illinois enacted legislation in 2018 (the Industrial Hemp Act) that removed industrial hemp from the state’s general prohibition against manufacturing, delivering or possessing “cannabis.” Under both federal and Illinois law, “hemp” and “industrial hemp” mean “the plant Cannabis sativa L. and any part of that plant . . . with a delta-9 tetrahydrocannabinol [THC] concentration of not more than 0.3 percent on a dry weight basis.”

However, the 2018 Farm Bill also provides that “it shall be unlawful to produce hemp” without a license issued by the United States Department of Agriculture (USDA) or by a state that has been approved by the USDA to issue licenses for the production of hemp. The USDA’s website states that it will not review or approve any state hemp programs until it finalizes its own regulations later in 2019 or 2020. Accordingly, the USDA’s position is that during the 2019 planting season, hemp growers may obtain licenses only under a 2014 Farm Bill program, such as Illinois’ Industrial Hemp Pilot Program — which permits only institutions of higher learning or state agricultural departments to grow hemp — and such hemp must be grown exclusively for research purposes.

Consequently, we believe the sale of CBD derived from commercially-produced hemp without a USDA-approved license technically is illegal. Further, without federally-approved guidelines for commercial hemp cultivation, it may be impractical for your bank to determine whether a customer’s CBD (which can be derived from either hemp or marijuana plants) is an illegal controlled substance without testing for the 0.3% THC concentration threshold.

For resources related to our guidance, please see:

FinCEN SAR Rules, 31 CFR 1020.320(a)(2) (“A transaction requires reporting under the terms of this section if it is conducted or attempted by, at, or through the bank, it involves or aggregates at least $5,000 in funds or other assets, and the bank knows, suspects, or has reason to suspect that (i) The transaction involves funds derived from illegal activities . . . as part of a plan to violate or evade any Federal law or regulation or to avoid any transaction reporting requirement under Federal law or regulation; . . . ”)

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 550/3 (“‘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 89/5 (“‘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.”)

Agriculture Marketing Act of 1946, 7 USC 1639q(c)(1) (“In the case of a State or Indian tribe for which a State or Tribal plan is not approved under section 1639p of this title, it shall be unlawful to produce hemp in that State or the territory of that Indian tribe without a license issued by the Secretary under subsection (b).”)

Agriculture Marketing Act of 1946, 7 USC 1639q(a)(1) (“In the case of a State or Indian tribe for which a State or Tribal plan is not approved under section 1639p of this title, the production of hemp in that State or the territory of that Indian tribe shall be subject to a plan established by the Secretary to monitor and regulate that production in accordance with paragraph (2).”)

Agricultural Marketing Act of 1946, 7 USC 1639p(a)(1) (“A State or Indian tribe desiring to have primary regulatory authority over the production of hemp in the State or territory of the Indian tribe shall submit to the Secretary, through the State department of agriculture (in consultation with the Governor and chief law enforcement officer of the State) or the Tribal government, as applicable, a plan under which the State or Indian tribe monitors and regulates that production as described in paragraph (2).”)

USDA website, Hemp Production Program (“For the 2019 planting season, the 2018 Farm Bill provides that States, Tribes, and institutions of higher education can continue operating under authorities of the 2014 Farm Bill. USDA provided additional guidance to these programs in the August 2016 multi-agency Statement of Principles on Industrial Hemp (FR 53395). The 2018 Farm Bill extension of the 2014 authority expires 12 months after USDA has established the plan and regulations required under the 2018 Farm Bill.”)

Industrial Hemp Pilot Program, 720 ILCS 550/15.2(a)(1) (“Pursuant to Section 7606 of the federal Agricultural Act of 2014, an institution of higher education or the Department of Agriculture may grow or cultivate industrial hemp if . . . the industrial hemp is grown or cultivated for purposes of research conducted under an agricultural pilot program or other agricultural or academic research.”)

Final Order, Placement in Schedule V of Certain FDA-Approved Drugs Containing Cannabidiol, 83 Fed. Reg. 48950, 48952 (September 28, 2019) (“As further indicated, any material, compound, mixture, or preparation other than Epidiolex that falls within the CSA definition of marijuana set forth in 21 U.S.C. 802(16), including any non-FDA-approved CBD extract that falls within such definition, remains a schedule I controlled substance under the CSA. Thus, persons who handle such items will continue to be subject to the requirements of the CSA and DEA regulations relating to schedule I controlled substances.”)