On December 3, 2019, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation ("FDIC"), the Financial Crimes Enforcement Network, the Office of the Comptroller of the Currency, and the Conference of State Bank Supervisors released a joint statement on “Providing Financial Services to Customers Engaged in Hemp-Related Businesses.” The statement clarifies the legal status of hemp and hemp production, and certain requirements under the Bank Secrecy Act (“BSA”) and its implementing regulations for banks providing financial services to hemp-related businesses.
The 2018 Farm Bill, and the interim final rules establishing the domestic hemp program released by the United States Department of Agriculture (“USDA”) on October 31, 2019, among other things, deregulated hemp as a Schedule I controlled substance under the Controlled Substances Act (“CSA”) by removing hemp from the definition of marijuana. As a result of this enactment, as clarified by this guidance, banks may provide financial services to lawful hemp businesses. It is the obligation of the bank customer operating a hemp business or engaged with a hemp-related business to comply with the applicable 2018 Farm Bill, interim final rules, and other applicable state or tribal laws.
Generally, it is in the banks’ discretion to determine the financial services offered to any business. However, banks desiring to offer services to hemp-related businesses “must have a BSA/AML compliance program commensurate with the level of complexity and risk involved.” “When deciding to serve hemp-related businesses, banks must comply with applicable regulatory requirements for customer identification, suspicious activity reporting, currency transaction reporting, and risk-based customer due diligence, including the collection of beneficial ownership information for legal entity customers.” However, banks are no longer required to file a Suspicious Activity Report (“SAR”) for a customer operating a hemp-related business solely on such basis of its engagement in the hemp industry, but are still required to follow SAR standards if any activity indicates suspicion.
Notwithstanding the foregoing, this guidance does not relieve banks of their obligations and requirements with respect to marijuana-related businesses. In such cases, “banks should continue following FinCEN guidance FIN-2014-G001 – BSA Expectations Regarding Marijuana-Related Businesses.” Further, the 2018 Farm Bill expressly preserved the authority of the United States Food and Drug Administration (“FDA”) to regulate hemp products.
The federal agencies issuing this joint statement anticipate releasing additional guidance after further review of the interim final rules. For information and questions regarding the regulation and authority of the cultivation and production of hemp in the United States, banks should contact the USDA and applicable state departments of agriculture and tribal governments. For information and questions regarding the legality, regulation, and authority of the hemp-derived food, drug, and cosmetic products under the Food, Drug, and Cosmetic Act, banks should contact the FDA.
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