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How to Get a Credit Union Account for Your Hemp Business

hemp cbd bank credit union

Commercial marijuana activity remains a federal crime, and the Bank Secrecy Act (“BSA”) generally prohibits financial institutions from accepting marijuana-generated dollars. Financial institutions that work with marijuana businesses must conduct due diligence to ensure that marijuana businesses are complying with state law. That includes regularly submitting Suspicious Activity Reports (“SARs”) to the Financial Crimes Enforcement Network (“FinCEN”). Regulated commercial hemp activity is not a federal crime, but hemp's close proximity to marijuana makes it a generally high-risk endeavor for financial institutions who generally don't have a high risk tolerance to begin with. That has made it very difficult for many hemp and hemp-derived CBD (“Hemp-CBD”) businesses to access bank accounts. That is changing.

On August 19, the National Credit Union Administration (“NCUA”) released Interim Guidance on Serving Hemp Businesses. The Guidance lays out what credit unions need to incorporate into their Bank Secrecy Act (“BSA”) and Anti-Money Laundering (“AML”) compliance programs in order to work with hemp businesses.

First, credit unions need to maintain appropriate due diligence procedures for hemp-related accounts and comply with BSA and AML requirements to file Suspicious Activity Reports (SARs) for any activity that appears to involve potential money laundering or illegal or suspicious activity. It is the NCUA's understanding that SARs are not required to be filed for the activity of hemp-related businesses operating lawfully, provided the activity is not unusual for that business. Credit unions need to remain alert to any indication an account owner is involved in illicit activity or engaging in activity that is unusual for the business.

Second, if a credit union serves hemp-related businesses lawfully operating under the 2014 Farm Bill pilot provisions, it is essential the credit union knows the state's laws, regulations, and agreements under which each member that is a hemp-related business operates. For example, a credit union needs to know how to verify the member is part of the pilot program. Credit unions also need to know how to adapt their ongoing due diligence and reporting approaches to any risks specific to participants in the pilot program.

Third, when deciding whether to serve hemp-related businesses that may already be able to operate lawfully–those not dependent on the forthcoming USDA regulations and guidelines for hemp production–the credit union needs to first be familiar with any other federal and state laws and regulations that prohibit, restrict, or otherwise govern these businesses and their activity. For example, a credit union needs to know if the business and the product(s) is lawful under federal and state law, and any relevant restrictions or requirements under which the business must operate. For example, certain hemp-derived products may now or in the future be regulated by state health departments and/or the U.S. Food and Drug Administration.

NCUA's guidance is written for credit unions but these guidelines are important for hemp businesses because it gives insight into what credit unions are going to need from hemp businesses. Below are some questions any hemp business should be prepared to answer when seeking an account with a credit union.

Where was the hemp grown? For cultivators, this question should be easy as they are the ones growing hemp and can easily provide a credit union a copy of the license or permit provided by a state department of agriculture that authorizes the production of hemp under the 2014 Farm Bill, which currently governs domestic hemp cultivation, or the 2018 Farm Bill which will govern cultivation after the USDA starts approving state hemp plans. Companies that are manufacturing products that contain hemp or selling finished Hemp-CBD products, this may present more of a challenge if they haven't been closely tracking the source of their hemp. Manufacturers and distributors should have copies on file of every hemp cultivator who grew hemp that is contained in their products and should be prepared to explain to a credit union how they keep track of this information.

Who is buying hemp? According to the Guidance, the NCUA does not believe that credit unions are required to submit SARs when working with hemp businesses, but they are still mandated to submit SARs for suspicious activity. That means the credit union is going to watch a hemp business' account activity closely. If a hemp business is receiving payments from a suspicious account, that will raise red flags. Also, most states that allow for hemp cultivation do not allow the direct sale of raw hemp to unlicensed individuals. Some states issue processing, manufacturing, or wholesaling licenses. Hemp cultivators should be prepared to explain who is buying their hemp and should provide a credit union copies of the license or permits of their buyers, if applicable. Cultivators should also be prepared to explain how they transport hemp to buyers, especially if raw hemp is moving across state lines as many states have specific regulations on the topic. If a state doesn't require a license to process or manufacture hemp, hemp cultivators should be prepared to explain that as well.

What products are you selling, where are you selling them, and how are they marketed? Lets cut to the chase: much of the interest in hemp is due to Hemp-CBD and the legality of Hemp-CBD varies widely from state-to-state and that the Food and Drug Administration's (“FDA”) position is that Hemp-CBD cannot be added to food, dietary supplements, or unapproved drugs. NCUA indicated that credit unions must be aware of restrictions and regulations under other state and federal law. This question is going to be a major focus for distributors of Hemp-CBD products, but hemp manufacturers or cultivators should be prepared to answer this as well if they are selling directly to consumers or know that they are in the production chain of Hemp-CBD products. Credit unions are going to look out for Hemp-CBD in foods and dietary supplements, as the FDA has clearly stated that Hemp-CBD may not be legally added to these products. The credit union will also want to see marketing materials to watch out for medical claims as such claims will cause the FDA to categorize a product as an unapproved drug. The FDA's position on Hemp-CBD in cosmetics and smokable hemp is not as hostile but some states have enacted laws or regulations prohibiting smokable hemp. States also differ widely on how they treat Hemp-CBD, generally including: what types of products are prohibited, standards for THC testing, requirements for labeling and packaging, manufacturing standards, and whether products must be registered in a given state, just to name a few examples. Hemp businesses should be prepared to explain how they are complying with regulations in each state where they do business.

How are you monitoring regulatory changes? With the ever-changing laws and regulations, hemp businesses should expect to discuss the efforts they make to stay up-to-date on law and policy regarding hemp. A credit union is going to want to know that its hemp clients are well informed and carefully tracking the industry with procedures in place to comply with new regulations.

The above questions are not a comprehensive checklist, but if you are prepared to answer each in detail, you'll be in a good position when it comes time to meet with your local credit union. If not, contact our Hemp-CBD attorneys to help get your business on track.

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How to Get a Credit Union Account for Your Hemp Business

hemp cbd bank credit union

Commercial marijuana activity remains a federal crime, and the Bank Secrecy Act (“BSA”) generally prohibits financial institutions from accepting marijuana-generated dollars. Financial institutions that work with marijuana businesses must conduct due diligence to ensure that marijuana businesses are complying with state law. That includes regularly submitting Suspicious Activity Reports (“SARs”) to the Financial Crimes Enforcement Network (“FinCEN”). Regulated commercial hemp activity is not a federal crime, but hemp’s close proximity to marijuana makes it a generally high-risk endeavor for financial institutions who generally don’t have a high risk tolerance to begin with. That has made it very difficult for many hemp and hemp-derived CBD (“Hemp-CBD”) businesses to access bank accounts. That is changing.

On August 19, the National Credit Union Administration (“NCUA”) released Interim Guidance on Serving Hemp Businesses. The Guidance lays out what credit unions need to incorporate into their Bank Secrecy Act (“BSA”) and Anti-Money Laundering (“AML”) compliance programs in order to work with hemp businesses.

First, credit unions need to maintain appropriate due diligence procedures for hemp-related accounts and comply with BSA and AML requirements to file Suspicious Activity Reports (SARs) for any activity that appears to involve potential money laundering or illegal or suspicious activity. It is the NCUA’s understanding that SARs are not required to be filed for the activity of hemp-related businesses operating lawfully, provided the activity is not unusual for that business. Credit unions need to remain alert to any indication an account owner is involved in illicit activity or engaging in activity that is unusual for the business.

Second, if a credit union serves hemp-related businesses lawfully operating under the 2014 Farm Bill pilot provisions, it is essential the credit union knows the state’s laws, regulations, and agreements under which each member that is a hemp-related business operates. For example, a credit union needs to know how to verify the member is part of the pilot program. Credit unions also need to know how to adapt their ongoing due diligence and reporting approaches to any risks specific to participants in the pilot program.

Third, when deciding whether to serve hemp-related businesses that may already be able to operate lawfully–those not dependent on the forthcoming USDA regulations and guidelines for hemp production–the credit union needs to first be familiar with any other federal and state laws and regulations that prohibit, restrict, or otherwise govern these businesses and their activity. For example, a credit union needs to know if the business and the product(s) is lawful under federal and state law, and any relevant restrictions or requirements under which the business must operate. For example, certain hemp-derived products may now or in the future be regulated by state health departments and/or the U.S. Food and Drug Administration.

NCUA’s guidance is written for credit unions but these guidelines are important for hemp businesses because it gives insight into what credit unions are going to need from hemp businesses. Below are some questions any hemp business should be prepared to answer when seeking an account with a credit union.

Where was the hemp grown? For cultivators, this question should be easy as they are the ones growing hemp and can easily provide a credit union a copy of the license or permit provided by a state department of agriculture that authorizes the production of hemp under the 2014 Farm Bill, which currently governs domestic hemp cultivation, or the 2018 Farm Bill which will govern cultivation after the USDA starts approving state hemp plans. Companies that are manufacturing products that contain hemp or selling finished Hemp-CBD products, this may present more of a challenge if they haven’t been closely tracking the source of their hemp. Manufacturers and distributors should have copies on file of every hemp cultivator who grew hemp that is contained in their products and should be prepared to explain to a credit union how they keep track of this information.

Who is buying hemp? According to the Guidance, the NCUA does not believe that credit unions are required to submit SARs when working with hemp businesses, but they are still mandated to submit SARs for suspicious activity. That means the credit union is going to watch a hemp business’ account activity closely. If a hemp business is receiving payments from a suspicious account, that will raise red flags. Also, most states that allow for hemp cultivation do not allow the direct sale of raw hemp to unlicensed individuals. Some states issue processing, manufacturing, or wholesaling licenses. Hemp cultivators should be prepared to explain who is buying their hemp and should provide a credit union copies of the license or permits of their buyers, if applicable. Cultivators should also be prepared to explain how they transport hemp to buyers, especially if raw hemp is moving across state lines as many states have specific regulations on the topic. If a state doesn’t require a license to process or manufacture hemp, hemp cultivators should be prepared to explain that as well.

What products are you selling, where are you selling them, and how are they marketed? Lets cut to the chase: much of the interest in hemp is due to Hemp-CBD and the legality of Hemp-CBD varies widely from state-to-state and that the Food and Drug Administration’s (“FDA”) position is that Hemp-CBD cannot be added to food, dietary supplements, or unapproved drugs. NCUA indicated that credit unions must be aware of restrictions and regulations under other state and federal law. This question is going to be a major focus for distributors of Hemp-CBD products, but hemp manufacturers or cultivators should be prepared to answer this as well if they are selling directly to consumers or know that they are in the production chain of Hemp-CBD products. Credit unions are going to look out for Hemp-CBD in foods and dietary supplements, as the FDA has clearly stated that Hemp-CBD may not be legally added to these products. The credit union will also want to see marketing materials to watch out for medical claims as such claims will cause the FDA to categorize a product as an unapproved drug. The FDA’s position on Hemp-CBD in cosmetics and smokable hemp is not as hostile but some states have enacted laws or regulations prohibiting smokable hemp. States also differ widely on how they treat Hemp-CBD, generally including: what types of products are prohibited, standards for THC testing, requirements for labeling and packaging, manufacturing standards, and whether products must be registered in a given state, just to name a few examples. Hemp businesses should be prepared to explain how they are complying with regulations in each state where they do business.

How are you monitoring regulatory changes? With the ever-changing laws and regulations, hemp businesses should expect to discuss the efforts they make to stay up-to-date on law and policy regarding hemp. A credit union is going to want to know that its hemp clients are well informed and carefully tracking the industry with procedures in place to comply with new regulations.

The above questions are not a comprehensive checklist, but if you are prepared to answer each in detail, you’ll be in a good position when it comes time to meet with your local credit union. If not, contact our Hemp-CBD attorneys to help get your business on track.

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Utah MLM Essential Oils: doTERRA’s Copaiba Oil Challenges Young Living’s CBD Oil

doterra young living cannabis cbd mlm

Recently I wrote about the two dominant global MLM essential oil companies based in Utah: Young Living and doTERRA. Last month Young Living announced it is entering the CBD oil market, but doTERRA publicly stated on its website that it will not (yet) follow suit, even though everyone and their dog are clamoring for CBD oil and CBD oil-derived products. doTERRA only hints that it may produce CBD oil if it can be produced according to doTERRA’s rigorous standards for its products, but “Right now, it is not possible to deliver a CBD oil that meets [doTERRA’s] CPTG® standards.”

Instead, doTERRA has gone to great lengths to educate its distributors (wellness consultants) both about the medical and legal issues surrounding CBD oil. On its website in a post modestly titled Everything You Need to Know About CBD, doTERRA provides a part-medical part-legal treatise, complete with embedded video, a PowerPoint presentation, and 24 footnotes to medical journals and federal laws. Its thoroughness means that it is a beast to digest if you did not double major in pre-med and pre-law, but doTERRA makes some compelling points about the current unsettled state of CBD.

On the legal side, doTERRA takes a conservative approach:

  • doTERRA advises its distributors to “remain cautious” against products that may not follow the Federal Food, Drug, and Cosmetics Act (the “FD&C Act”) that may put health and safety at risk. This point is well taken, as we mentioned in a prior blog post entitled Four Important Considerations for Any Hemp CBD Company.
  • Relatively little medical and scientific research has been completed regarding CBD and its “perceived health benefits” (see FDA Says It Is Speeding Up The CBD Regulation Process). This point is also well taken with respect to U.S. regulators. Neither the FDA nor the USDA have issued implementing regulations yet regarding hemp-derived CBD.

Young Living is aware of these potential legal issues with the current state of CBD, and it has taken proactive steps to mitigate potential negative effects. In its acquisition of Colorado-based Nature’s Ultra that produces 0.0% CBD oil (no THC content), Young Living has opted to keep Nature’s Ultra as a separate operating company rather than integrating its operations within Young Living. Nature’s Ultra’s CBD oils can be purchased with Young Living’s essential oils blended into its products rather than the other way around.

On the medical side, doTERRA provides extensive information regarding cannabinoids:

  • The human body has cannabinoid receptors that are broken down into two categories:
    • CB1 receptors – affect the brain and central nervous system (pleasure and reward) (more widely distributed throughout the body).
    • CB2 receptors – immune system (inflammatory system) (less widely distributed than CB1 receptors).
  • THC works directly on both CB1 and CB2 receptors.
  • CBD works indirectly on both CB1 and CB2 receptors by slowing down the work of an enzyme called fatty acid amide hydrolase (“FAAH”), which breaks down anandamide (your body’s naturally-produced cannabinoid as a response to strenuous exercise (runner’s high), stress (fight or flight), and other related stimuli (stepping on a pile of your kid’s Legos in the dark)), which is why anandamide is called an endocannabinoid).
    • A slower breakdown in anandamide means it is present in the body longer and continues to interact with the body’s CB1 and CB2 receptors.

Finally, in good competitive market fashion, doTERRA educates its distributors that it already has a superior product to CBD oil called Copaiba oil:

  • Copaiba oil contains beta-caryophyllene (“BCP”), which is a cannabinoid and a sesquiterpene (delivers oxygen molecules to cells) found in hundreds of different plant species.
  • Copaiba oil comes from distilling the oleoresin of varieties of copaiba trees, which are found in Brazil. The resin is harvested similar to the method used to extract maple sap from maple trees.
  • BCP interacts directly with the body’s CB2 receptors (“no risk of psychoactive effects”), “soothing tissues and helping to manage healthy inflammatory responses.”
  • doTERRA’s copaiba essential oil contains 55% BCP content, which is the “highest BCP content of any known oil.”
  • Its efficacy means only “a drop or two” is needed for its BCP to start affecting the human body, so its price point is significantly lower than CBD oil per application (They can’t call it a “dose” because “These statements have not been evaluated by the Food and Drug Administration” and “This product is not intended to diagnose, treat, cure, or prevent any disease.”)
  • Copaiba oil has been produced under doTERRA’s rigorous proprietary CPTG® standards.

But at the end of the day, copaiba oil is not CBD oil. BCP is not CBD, even though it contains two of the same three letters and may be confusingly similar enough for doTERRA’s wellness advocates to have an opening in the conversation to educate the market about BCP’s benefits. doTERRA is hoeing a hard row right now, but there is a segment of the doTERRA and Young Living essential oil market that is hesitant to use products that have not been approved by the FDA or that have any trace of THC content, as I explained my prior blog post. If copaiba oil is as effective as and can be purchased at a fraction of the price of CBD oil, it may get some takers, but because it does not interact with the CB1 receptors, it may be a hard sell. And copaiba oil is not as cool or edgy as CBD oil. Will doTERRA eventually produce CBD oil? Almost certainly. Will doTERRA’s consultants be able to educate the market about copaiba and BCP and keep pace with Young Living’s sales of its CBD oil through Nature’s Ultra? Probably not. The developments over the next several months will be interesting as these two competitors continue to fight for market dominance.

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How to Make a CBD Topical for Healthy Skin

Bottles of CBD oil surrounded by cannabis flowers

The desire to anoint our skin with potions is as old as humanity itself. But is slathering an oily substance onto the skin really useful? And if so, what kind of skin elixir should one use, and why? Let’s look at how the skin protects and maintains itself, and what, if anything, can help it along.

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Hemp Testing

Altitude Consulting is not only a hemp testing laboratory, but an organization trusted to consult within the industry. Home growers and commercial farms around the world recognize that EPA based methodologies assure the most accurate and consistent data. Give us a call or bring us a hemp potency, residual solvent or terpene profile sample and see the difference.

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