The Financial Crimes Enforcement Network (FinCEN) issued FIN-2020-G001, FinCEN Guidance Regarding Due Diligence Requirements under the Bank Secrecy Act for Hemp-Related Business Customers (the “Guidance”), to address questions related to the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) regulatory requirements for hemp- related business customers. The Guidance explains how financial institutions can conduct due diligence for hemp-related businesses as well as identifies the type of information and documentation financial institutions can collect from hemp-related businesses to comply with BSA/ AML regulatory requirements. The intent of the Guidance is to enhance the availability of financial services for, and the financial transparency of, hemp-related businesses in compliance with federal law. Additionally, the new Guidance is in addition to and not in lieu of the interagency statement on providing financial services to customers engaged in hemp-related businesses issued in December 2019.
FinCEN’s Guidance provides financial institutions with BSA/ AML risk considerations only for hemp-related businesses (i.e., businesses or individuals that grow hemp, and processors and manufacturers who purchase hemp directly from such grow- ers). It does not replace or supersede FinCEN’s previous 2014 guidance on the BSA expectations regarding Marijuana-Related Businesses (MRB Guidance).
Financial institutions must conduct appropriate customer due diligence (CDD) for all customers, including hemp-related businesses. CDD includes obtaining basic identifying information through the institution’s customer information program (CIP), as well as its risk-based CDD procedures, which includes obtaining beneficial ownership information as applicable. In particular, FinCEN noted that for customers who are hemp growers, institutions may confirm the hemp grower’s compliance with state, tribal government, or the USDA licensing requirements, as applicable, by either obtaining: (1) a written attestation by the hemp grower that they are validly licensed, or (2) a copy of such license. Beyond that, each institution must evaluate the risk posed by the customer, which may trigger requiring additional information such as crop inspection or testing reports and license renewals or such other information the institution may desire for assurances.
FinCEN also addressed Suspicious Activity Reporting (SAR). Whereas hemp is no longer a Schedule I controlled substance under the Controlled Substances Act (CSA), SAR reporting is not required solely because the customer is a hemp-related business (HRB). However, FinCEN also noted that in the event that such customer’s activity does become suspicious, e.g., the HRB is engaged in hemp production in a state or jurisdiction where hemp production is illegal, such event is a SAR reportable event and must be reported accordingly. Other examples include where the HRB’s business appears to be using a state-issued hemp license as a front to launder money derived from other criminal activity or marijuana-related activity; the HRB seeks to conceal or disguise involvement in marijuana-related activity; or the HRB customer is unable or unwilling to provide or certify sufficient information to demonstrate it is duly licensed as an HRB. If the hemp-related activity is co-mingled with marijuana- related activity, institutions must apply FinCEN’s MRB Guidance.
Lastly, the Guidance also reminded institutions of their BSA obligations for filing Currency Transaction Reports (CTRs) the same as the institution would for any other customer.
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