Global Legal Law Firm

CBD Merchant Processing

Doing Your Due Diligence

Underwriting recommendations and due diligence considerations regarding the provision of electronic payment processing services to merchants engaged in the legal hemp (CBD) industry.

Beneficial Ownership Verification

  • Verify all owners with 25% ownership or more;

  • Verify all managers;

  • Review agreements, certifications, etc. for any signers not indicated as a Beneficial Owner.


Product Verification

Imported Hemp

  • it cannot originate from the United States;

    • it must be lawfully imported into the United States (e.g., under the Tariff Code 1515.90.8010 (Harmonized Tariff Schedule of the United States, Section III [“Animal or vegetable fats and oils and their cleavage products prepared edible fats; animal or vegetable waxes”], Chapter 15); and

  • it must be derived from material excluded from the Controlled Substances Act (CSA), meaning it must contain less than 0.3% THC.

    • Supplier must show that the CBD oil is derived from the “mature stalks and seeds” or “oil and cake made from seeds” of non-psychoactive industrial hemp plants.

    • Must show the CBD oil does not contain the “synthetic” “substances or derivatives” that are covered by the definition of THC, and non-psychoactive industrial hemp is explicitly excluded from Schedule I of the CSA.

Domestic Hemp

  • Must show successful application and approval to the National Institute of Food and Agriculture (NIFA) under the US Farm Bill

    • Certification for Authorized Representative (AR): The AR must certify that they are authorized to provide that information.

    • AGI Certification. In order to qualify for these programs, the persons need to prove that their adjusted gross income (AGI) does not exceed specified limitations, $900,000 AGI. The persons can prove compliance with the limitations by furnishing the last three years of federal income tax returns or by providing a certification letter from a CPA or attorney as an alternative to providing the actual tax returns.

    • Drug-Free Workplace: AR must complete the Drug-Free Workplace Act Form AD-1049

    • Debarment and Suspension: AR must complete Form AD-1047 to show that they are not precluded from participation. Must show that the applicant(s)

      • Are not presently debarred, suspended, or proposed for debarment, declared ineligible, or voluntarily excluded from covered transactions by any Federal department or agency;

      • Have not within a three-year period preceding this proposal been convicted of or had a civil judgment rendered against them for commission of fraud or a criminal offense in connection with obtaining, attempting to obtain, or performing a public (Federal, State or local) transaction or contract under a public transaction; violation of Federal or State antitrust statutes or commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, or receiving stolen property;

      • Are not presently indicted for or otherwise criminally or civilly charged by a governmental entity (Federal, State or local) with commission of any of the offenses enumerated in paragraph (A.2.) of this certification; and

      • Have not within a three-year period preceding this application/proposal had one or more public transactions (Federal, State or local) terminated for cause or default.

    • If the project will involve a subcontractor or consultant, the subcontractor/consultant should submit a Form AD-1048, to the grantee organization for retention in their records.

  • Certification Regarding Lobbying: When an application exceeds $100,000, the AR is required to complete a certification regarding lobbying restrictions. The Certification for Lobbying can be viewed via PDF.

  • Certification Regarding Civil Rights Compliance: The AR is required to complete a certification regarding civil rights compliance. When signing an application, the AR is providing the certification that it will offer its programs to all eligible persons without regard to race, color, national origin, sex, disability, age, political beliefs, religion, marital status, or familial status and that people will not be excluded from participation in, be denied the benefits of, or be otherwise subjected to discrimination under any program or activity for which the Applicant receives Federal financial assistance from the Department of Agriculture; and hereby gives assurance that it will immediately take any measures necessary to effectuate this agreement.

  • Certification Regarding Unpaid Federal Tax Liability: If the proposer is a corporation, the AR (or equivalent) is required to complete a certification that the corporation has no unpaid Federal tax liability that has been assessed, for which all judicial and administrative remedies have been exhausted or lapsed, and that is not being paid in a timely manner pursuant to an agreement with the authority responsible for collecting the tax liability. NIFA provides a suggested template.

  • Certification Regarding Criminal Convictions: If the proposer is a corporation, the AR (or equivalent) is required to complete a certification that the corporation has not been convicted of a felony criminal violation under any Federal or State law within the 24 months preceding the date on which the certification is signed. NIFA provides a suggested template.

  • Representation Regarding Prohibition on Certain Internal Confidentiality Agreements: When signing an application, the AR is providing the representation that the applicant does not require any of its employees, contractors, or subrecipients seeking to report fraud, waste, or abuse to sign or comply with internal confidentiality agreements or statements prohibiting or otherwise restricting those employees, contractors, or subrecipients from lawfully reporting that waste, fraud, or abuse to a designated investigative or law enforcement representative of a Federal department or agency authorized to receive such information.

  • Certification Regarding Industrial Hemp: When signing the application (electronic submission through Grants.gov), the Authorized Organizational Representative is providing certification that if they grow, cultivate, or market industrial hemp under the proposed project, the organization will comply with all terms and conditions set by the applicant's State agency regarding industrial hemp growth, cultivation, and marketing. For this purpose, the term "industrial hemp" includes the plant Cannabis sativa L. and any part or derivative of such plant, including seeds of such plant, whether growing or not, that is used exclusively for industrial purposes (fiber and seed) with a tetrahydrocannabinols concentration of not more than 0.3 percent on a dry weight basis. The term "tetrahydrocannabinols" includes all isomers, acids, salts, and salts of isomers of tetrahydrocannabinols. For further information see www.nifa.usda.gov/industrial-hemp.


Biomass Supplier State Regulations

Require merchant's supplier to show all necessary documents and registrations to confirm biomass is produced under a state-approved program. The below list provides an overview for preliminary review purposes.

Laboratory Compliance

Laboratory must be certified and accredited under the ISO/IEC 17025 General requirements for the competence of testing and calibration laboratories.

Valid US accreditation includes:

  • The ANSI-ASQ National Accreditation Board and their recent acquisitions of L-A-B and ASCLD-LAB which are now both ANAB

  • The American Association for Laboratory Accreditation (A2LA)

  • Perry Johnson Laboratory Accreditation (PJLA)

  • American Industrial Hygiene Association

  • International Accreditation Service, Inc. (IAS)

 

Valid International accreditation includes:

In Canada:

  • Standards Council of Canada

  • The Canadian Association for Laboratory Accreditation

  • National Accreditation Board for Testing and Calibration Laboratories (NABL)

In Indonesia:

  • Komite Akreditasi Nasional (KAN)

In Ireland:

  • Irish National Accreditation Board (INAB)

In New Zealand (Aotearoa):

  • International Accreditation New Zealand (IANZ)

In The Netherlands:

  • Dutch Accreditation Council (DAC)

In Vietnam,:

  • Bureau of Accreditation (BoA)

In Korea:

  • Korea Laboratory Accreditation Scheme (KOLAS)

In Germany:

  • The German National Accreditation Body DAkkS


See attachment re medical testing requirements (the most stringent and developed laboratory requirements) done on a case-by-case basis.

Confirm State Laboratory Compliance

Merchant must show a certification analysis from a state approved laboratory to include the following:

  • CBD. The main chemical compound that you want to look for in the third part lab report is CBD (which is sometimes listed by its scientific name cannabidiol).

  • Other cannabinoids. CBD itself is a cannabinoid, but other cannabinoids to identify in third part lab reports are CBC, THC, THCA, CBG, CBDA, and CBN. (THC should be 0 or no more than .3). Many reports will not list the full cannabinoid profile. Absence of CBC, THCA, CBG, CBDA, or CBN listed on the report, indicates that the other cannabinoids didn’t show up on the chromatograph.

  • Pesticides, herbicides, growth hormones, and fertilizers. Test should not include a positive test for any pesticides, herbicides, growth hormones, or fertilizers in the third-party lab report. The best CBD oils will be 100% free of any of these potentially harmful byproducts.

  • Microbes. There are millions of different species of microbial organisms. In general, though, there should be no living organisms present in the CBD oil.

  • Chemical solvents. Any form of glycols – especially polyethylene glycol (PEG) or propylene glycol (PG), can be harmful. These are chemical solvents that can break down into carcinogenic (cancer-causing) aldehydes such as formaldehyde and acetaldehyde.

  • Verified ingredients: The base ingredients tested to be present in the sample tincture – can include flavorings and other content.

  • Active cannabinoid profile: This determines the actual presence/potency of CBD and other cannaboids and typically sets an allowable variation of +/- 10%);

  • Heavy metal content. No, we are not talking about bands like Metallica or Slipknot here. ‘Heavy metal’ content refers to the presence of certain metal elements that are known to be toxic or cause hazards to human health. The 100 mg Elixinol sample tested for:

    • Arsenic (As) (*acceptable limit 1.5 ppm)

    • Cadmium (Cd) (*acceptable limit 25 ppm)

    • Mercury (Hg) (*acceptable limit 15 ppm)

    • Lead (Pb) 0.06 (*acceptable limit 5 ppm)

      *under the Environmental Protection Agency’s federally-mandated limits

Confirm Laboratory Certification Analysis


  • Test cultivator’s water supply for contamination.

  • Test cultivator’s soil for contamination.

  • Perform unannounced testing of the product as well as soil and plant samples.

Additional Grower Facility (Cultivator) Recommendations


The legal advice and opinions set forth herein are an expression of our professional judgment and not a guaranty of a result.