On December 3, 2019, a group of key federal banking regulators — the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Financial Crimes Enforcement Network (FinCEN), and the Office of the Comptroller of the Currency in consultation with the Conference of State Bank Supervisors — issued their first formal statement on the industry’s ability to work with hemp companies.
The statement was issued “to provide clarity regarding the legal status of commercial growth and production of hemp and relevant requirements for banks under the Bank Secrecy Act,” which requires financial institutions to submit Suspicious Activity Reports to FinCEN within 30 days of identifying facts which indicate illegal activity such as money laundering or wire fraud. Many banks have hesitated or refused to work with hemp companies due to uncertainty about the interplay between the legality of hemp and the illegality of marijuana under federal law.
This statement therefore represents an important and encouraging step for banks looking to work with hemp companies, advising that:
“Because hemp is no longer a Schedule I controlled substance under the Controlled Substances Act, banks are not required to file a Suspicious Activity Report (SAR) on customers solely because they are engaged in the growth or cultivation of hemp in accordance with applicable laws and regulations. For hemp-related customers, banks are expected to follow standard SAR procedures, and file a SAR if indicia of suspicious activity warrants.”
Equally note-worthy, FinCEN indicates that it will issue additional guidance after further review of the recently-issued USDA Interim Rule on the Domestic Hemp Program.
Because marijuana is still a Schedule I controlled substance, however, banks working with marijuana companies still should adhere to FinCEN guidance FIN-2014-G001 – BSA Expectations Regarding Marijuana-Related Businesses.
How Should Banks Adapt?
Banks must have strong Bank Secrecy Act/Anti-Money Laundering compliance programs. Banks working with or looking to expand their customer base into the hemp industry should evaluate their new account opening policies and requirements to ensure they understand their state’s law on hemp and are complying with all state and federal hemp regulations. Additionally, banks should update policies to clarify the distinction between hemp and marijuana businesses, and set a risk profile for hemp customers. Banks may also want to develop or expand their Know Your Customer policies and due diligence requirements relating to hemp businesses.
For more information or should you have any questions, please contact any member of our Cannabis Law group.