According to new guidance released on December 3, 2019, banks are not required to file suspicious activity reports (SARs) on customers solely because they are engaged in the legal growth or cultivation of hemp (“Guidance”). The Guidance was issued by the federal banking agencies[1] and the Financial Crimes Enforcement Network (“FinCEN”) in consultation with the Conference of State Bank Supervisors.
The Agriculture Improvement Act of 2018 (“2018 Farm Bill”) amended the definition of marijuana for purposes of the Controlled Substances Act, effectively removing hemp[2] from classification as a Schedule I controlled substance. Pursuant to the 2018 Farm Bill, on October 31, 2019, the U.S. Department of Agriculture (USDA) issued an interim final rule establishing a regulatory regime for the legal production of hemp.[3] The new regulatory regime, which is designed to accommodate the 2020 planting season, permits state and tribal governments to (i) establish their own USDA-approved plans for monitoring and regulating the production of hemp within their jurisdictions; (ii) rely on a federal licensing program administered by the USDA; or (iii) prohibit the production of hemp altogether.
Under the Guidance, banks are not required to file SARs on customers based solely on the fact that they are engaged in the legal growth or cultivation of hemp. For such customers, banks should follow their standard procedures applicable to other customers, including with respect to customer identification, SAR reporting, currency transaction reporting, customer due diligence, and the collection of beneficial ownership information for legal entity customers. It is a bank’s own business decision whether to provide banking services to customers engaged in the growth or cultivation of hemp, as long as the bank has an appropriate Bank Secrecy Act/Anti-money Laundering program in place that is commensurate with the level and complexity of the risks involved.
The 2018 Farm Bill did not remove marijuana from classification as a Schedule I controlled substance and the Guidance does not address SAR filing requirements with respect to organizations engaged in marijuana-related businesses. For such organizations, the Guidance states that banks should continue to follow guidance set forth in FinCEN’s 2014 guidance, “BSA Expectations Regarding Marijuana-Related Businesses.”
The Guidance also announced that FinCEN will issue additional guidance with respect to hemp-related businesses after reviewing and evaluating the interim final rule issued by the USDA.
[1] The federal banking agencies are the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation.
[2] Hemp is defined as the plant species Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.
[3] See Establishment of a Domestic Hemp Production Program, 84 Fed. Reg. 58522 (Oct. 31, 2019) (to be codified at 7 CFR 990), available at: https://www.federalregister.gov/documents/2019/10/31/2019-23749/establishment-of-a-domestic-hemp-production-program.
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