Authored By: Rod Kight
The marijuana industry’s lack of meaningful access to banking services is a phenomenon that continues to bleed into and affect the legal hemp sector. A number of my clients had their bank accounts closed without notice this year. In most cases, the banks issued them certified checks for the balances in their accounts.They were left with all of their funds tied up in a negotiable instrument that they couldn’t deposit until they found a bank that was willing to work with them – a difficult, stressful, and time consuming task. These were bad days for my clients that were usually the result of banks conflating federally illegal marijuana with lawful hemp.
To highlight the absurdity of the banking situation, I am going to discuss the recent experience of Rawganique, a company that specializes in selling “seed to sewn” organic hemp clothing and home products, including hempseed oil, hempseed butter, hemp protein powder, and rope. (Note: Rawganique is not my client. I learned of its story through my independent research.) Founded in 1997 on Denman Island in Canada, Rawganique is now located on Birch Bay, just south of the Canadian border. Importantly for this story, Rawganique’s operations are unqualifiedly legal and noncontroversial. It sources its products from non-psychoactive hemp cultivated in Europe. Hemp Indus. Ass’n v. DEA, 357 F.3d 1012 (9th Cir. Cal. 2004)
In October Rawganique received letters from its bank, Umpqua Bank, stating that it was closing its accounts. Umpqua’s letter stated that the termination was due to the fact that Rawganique operated “a business line that is an excluded business.” It later confirmed that it was closing the accounts due to Rawganique’s hemp business, which it contended was unlawful. When pressed, an Umpqua bank official stated, “We are federally insured, so we are bound legally to comply with federal law. We are prevented from banking with companies that grow cannabis. Hemp is the result of growing cannabis.” I spoke with Qeanu Wallner, one of Rawganique’s founders, earlier this week. He said, “Rawganique started banking with Umpqua in 2015 and never hid the fact that it did business in hemp products.”
While scrambling to find a new banking option, Rawganique’s owners scheduled meetings with bank management and also informed its customers about its predicament through social media. Eventually, the bank relented and reversed its decision. Wallner told me that he believes the reversal was mostly due to pressure from bank customers, many of whom closed their accounts in protest. Although happy with the outcome, Wallner said that he lives with constant uncertainty. There is nothing currently preventing the bank from unilaterally deciding the close its accounts again.
Rawganique’s story is only unusual in that the bank was willing to meet with its owners, take time to learn the law, and ultimately reverse its decision. The bank is also small enough that customer flight played a significant role. On the other hand, PayPal, a global juggernaut, routinely closes my client’s accounts with little to no notice or feedback. The same is true of larger, conventional banks. This is a problem that Congress should fix. Until then, hemp companies are left in much the same predicament as their cousins in the marijuana sector.
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