On December 3, 2019, the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Financial Crimes Enforcement Network (FinCEN), and the Office of the Comptroller of the Currency (OCC) in consultation with the Conference of State Bank Supervisors (CSBS), issued a statement, “Providing Financial Services to Customers Engaged in Hemp-Related Businesses” (the “HRB Statement”), to provide clarity regarding the legal status of commercial growth and production of hemp and relevant requirements for banks under the Bank Secrecy Act (BSA) and its implementing regulations.

Also noted in the HRB Statement was FinCEN will issue additional guidance after further review and evaluation of the U.S. Department of Agriculture (USDA) interim final rule. The USDA’s interim rule (the “USDA Interim Rule”) was issued on October 31, 2019 and established the domestic hemp production regulatory program to facilitate the legal production of hemp, as provided for in the 2018 Farm Bill. Under the 2018 Farm Bill, hemp was removed as a Schedule I controlled substance under the Controlled Substances Act (“CSA”).

To accommodate the 2020 planting season, the USDA Interim Rule sets forth the requirements for maintaining information on the land where hemp is produced, testing hemp for tetrahydrocannabinol (THC) levels, disposing of plants with more than 0.3 percent THC, and licensing for hemp producers.

Where hemp is no longer under the CSA, financial institutions are no longer required to file Suspicious Activity Reports (SARs) on customers solely based on the fact that they are engaged in the cultivation or growth of hemp. Financial institutions are expected to follow standard SAR procedures if a hemp-related customer demonstrates suspicious activity. Hemp-related businesses (HRBs) are subject to the requirements of the 2018 Farm Bill and applicable regulations. It is the responsibility of an institution to have a BSA/AML program commensurate with the complexity and risk involved in banking HRBs, including customer identification, SARs, currency transaction reporting and risk-based customer due diligence. In addition, financial institutions must collect applicable beneficial ownership information on HRBs it elects to bank.

With respect to Marijuana-Related Businesses (MRBs), the HRB Statement noted that financial institutions should continue to follow FinCEN’s guidance FIN- 2014-G001 BSA Expectations Regarding Marijuana-Related Businesses.

 

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