CBD RETAIL & ECOM
CBD brands and businesses often find it difficult to obtain compliant, sustainable, and stable banking services. Interestingly, it’s often more challenging to find a CBD-friendly bank than a THC-licensee-friendly one since banks feel that at least are established guidelines for banking cannabis whereas there are few to none for CBD. However, the false impression remains that it’s easy for CBD businesses to access these accounts.
What are some of the pressing banking issues faced by the CBD industry?
Many folks both in and out of the industry believed that with the passage of the 2018 Farm Bill by the U.S. Congress in December 2018 that banking and payment processing for CBD enterprises would quickly become a non-issue. However, though it’s been some time since the Farm Bill passed, Empirical Solutions receives a continuous stream of inquiries from hemp and CBD companies seeking simple, transparent, compliant business checking accounts after being turned away from all the banks they’ve contacted.
There’s a popular misconception that the 2018 Farm Bill made CBD “legal,” and therefore the still-prevailing banking restrictions seem contradictory. The actual effect of the legislation was to remove hemp and hemp-derived products, including CBD, from the U.S. Drug Enforcement Agency (DEA)’s narcotic drug schedule, transferring oversight to the U.S. Department of Agriculture (USDA) as a regulated agricultural crop and the U.S. Food & Drug Administration (FDA) for products intended for human or animal consumption. However, the legal confusion arises from the fact that hemp and its derivative products are now considered a regulated agricultural crop, without a regulatory framework yet in place.
The USDA has mandated that individual states develop their own hemp regulatory programs and submit those programs for their approval. This process is well underway. Meanwhile, the FDA has made it more clear than any products containing CBD intended for human or animal consumption must be approved. To date, they have officially only approved one clinically tested pharmaceutical containing CBD: Epidiolex. They have clearly-published guidance that until approved, the sale and interstate commerce of CBD products for human or animal consumption are prohibited, as is product packaging or advertisements making any claim of health benefits or medical efficacy. However, they have also informally stated that they lacked both the resources and inclination to prosecute CBD commerce so long as the medical and health prohibition is observed.
Unofficially, they are considering CBD topicals to be a “cosmetic” and therefore not unapproved for retail sale and manufacturing. Although specific guidelines are still in the works, especially in regards to labeling, disclosure and testing, both major retailers are openly selling and many banks now accept these business customers while still barring CBD in ingestibles, foods and smokeables. Note that many states and municipalities mirror the same guidelines. Add to this the fact that many states have varying standards of what is legal and permissible in their state, the regulatory framework is patchy at best.
Do CBD companies face similar issues obtaining payment processing?
Companies seeking payment processing solutions experience similar frustration. We were all relieved and elated when US Bank merchant services subsidiary Elavon began onboarding CBD merchants in late 2018 with reasonable pricing and next-day settlement, but when it began apparent that they had jumped in before carefully studying and resolving serious legal and compliance issues, they were obliged to exit the sector in April 2019. This left thousands of merchants without viable alternatives. And of course their exit had a chilling effect on worthy competitors now obliged to reconsider their plans to enter the market.
Contrary to popular understanding, bankers -- including banks essential to supporting merchant processing -- are not restrained from serving our industry due to the tension between conflicting state and federal laws. Their ‘mainstream conservative’ boards generally still consider marijuana and related products and services to be a disreputable trade that they do not wish to be associated with. While it’s true that the needle of acceptance has moved glacially toward more tolerance and acceptability over the past couple of years, especially in hemp and medical cannabis, banking and merchant processing remains elusive to this day.
How Empirical Solutions educates financial institutions on CBD banking
A great deal of Empirical Solutions resources are devoted to educating financial institutions on the risks and opportunities of banking the CBD industry. When a particular bank is willing to further consider dipping their toes in the water in sub-sectors such as CBD and marijuana ancillaries, Empirical Solutions provides access to the necessary resources to build and implement a proven compliance and marketing program. These banks then become part of our Cannabis Banking Financial Network™ and we can introduce MRB licensees, ancillaries, hemp and CBD companies, investment funds and payment solutions to them according to their current criteria and appetite.
Since Elavon exited the market, Empirical Solutions has been working directly with numerous U.S. banks to support this sector with transparent, traditional merchant processing. Commencing in August 2019, we re-opened access for CBD merchants with a reputable bank in California. Since then, we’ve developed programs with several other banks around the country. This is vital since each has its own criteria and requirements, and no one individual bank will accept all industry businesses.
Between these and the many other financial institutions in our exclusive Cannabis Banking Financial Network™, we can now confidently provide U.S.-based merchant processing service to all reputable businesses in the CBD space. We offer multiple options for compliant, transparent, sustainable full-service banking providers, including:
How long does it take to obtain a compliant CBD banking account with Empirical Solutions?
Be prepared when applying for banking or merchant services that until FDA and other Federal guidelines are promulgated and published, and also afterwards reputable service providers will require substantial due diligence, proof of compliance, product integrity and background checks. Review the Tier A compliance check requirements before opening accounts. Empirical Solutions provides its clients expert guidance and advisory in navigating this process to a speedy and successful conclusion.
Under these circumstances, it’s best to allow 1 to 4 weeks for account onboarding and activation.