Federal Bank Regulators Issue Guidance on Serving Hemp-Related Businesses
On Dec. 3, 2019, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), the Financial Crimes Enforcement Network (FinCEN) and the Office of the Comptroller of Currency (OCC) in conjunction with the Conference of State Bank Supervisors (CSBS) issued a joint statement entitled “Providing Financial Services to Customers Engaged in Hemp-Related Businesses.” Aside from summarizing the United States Department of Agriculture’s (USDA) recently published interim final rules for domestic hemp production, the statement attempts to clarify the legal status of hemp growth and production in light of the Bank Secrecy Act (BSA) and corresponding regulations. The following are key takeaways from the statement.
USDA Interim Final Rules for Domestic Hemp Production
Under the USDA’s interim final rules, authorized by and echoing the 2018 Farm Bill, hemp is no longer a controlled substance. Therefore, customers who engage in the growth and production of hemp under state hemp plans, and who will be growing or producing under the federal plan, will not trigger mandatory reporting by banks of suspicious activity. However, the statement encourages banks to issue Suspicious Activity Reports (SARs) for hemp-related customers who demonstrate suspicious activity independent of their involvement in an otherwise legal industry.
See additional guidance on the USDA’s interim final rules for domestic hemp production here.
According to the publication, banks should maintain BSA and anti-money laundering compliance programs that are sufficiently adequate to evaluate a complex industry with anticipated risks. In doing so, they should continue exercising discretion when determining permissible services and accounts to offer customers involved in the hemp industry and otherwise. Specifically, banks should consider the following:
Applicable regulatory requirements for customer identification
Suspicious activity reporting
Currency transaction reporting
Risk-based customer due diligence (i.e. – collection of beneficial ownership information for legal entity customers)
Banks should also anticipate further guidance from FinCEN related to serving hemp-related businesses.
Distinguishing Treatment of Marijuana-Related Businesses
Finally, the statement distinguishes the authors’ recommendations pertaining to customers affiliated with hemp-related businesses and the recommended treatment of customers involved in marijuana growth, production and related businesses. Considering marijuana remains a controlled substance under the 2018 Farm Bill, banks should continue following 2014 FinCEN guidance outlining more stringent BSA expectations for banks engaging with marijuana-related businesses.