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 (the Agencies) have released a joint statement titled Providing Financial Services to Customers Engaged in Hemp-Related Businesses.
The Agencies note the following:
- Hemp may be grown in compliance with one of the following: 1) Valid USDA-issued license; 2) Under a USDA-approved state or tribal plan; or 3) Research and development initiatives authorized under the Agricultural Act of 2014 (in effect until one year after the effective date of the USDA interim final rule).
- State or tribal laws regarding the production of hemp that are more stringent than federal law are not preempted by the 2018 Farm Bill; therefore even though hemp production may be legal under federal law, state or tribal governments may prohibit the production of hemp at the state or tribal level of government.
- The 2018 Farm Bill excluded hemp from as a Schedule I controlled substance under the Controlled Substances Act meaning it is not illegal under federal law. However, marijuana remains a controlled substance under the Controlled Substances Act and is illegal under federal law.
The Agencies also give guidance on how financial institutions should evaluate risk and manage BSA/AML requirements related to serving hemp related business customers. Financial institutions may generally determine the types of services to offer.
- In deciding whether to serve hemp related businesses financial institutions should consider: 1) Hemp-related business customers are responsible for complying with 2018 Farm Bill in order to operate legally; 2) The financial institution must have a BSA/AML compliance program commensurate with the level of risk and complexity involved; 3) The financial institution must ensure compliance with BSA/AML requirements including, but not limited to, customer identification program requirements, risk-based customer due diligence requirements (including collection of beneficial ownership information for legal entity customers), as well as suspicious activity and currency transaction reporting requirements.
- Financial institutions are expected to follow standard suspicious activity reporting requirements for hemp related customers operating in accordance with applicable laws and regulations (i.e. file a SAR if suspicious activity warrants not because the business is engaged in hemp production).
- FinCEN guidance FIN-2014-G001 – BSA Expectations Regarding Marijuana-Related Businesses applies when serving marijuana related businesses.
- The U.S. Food and Drug Administration (FDA) has the authority to regulate hemp products under the Federal Food, Drug, and Cosmetic Act and section 351 of the Public Health Service Act. Financial institutions may consider contacting the FDA with specific questions (e.g. when serving hemp related businesses producing hemp related food, drug, or cosmetic products).
The Agencies’ joint statement is available here.
Compliance Resource recently offered a two-hour webinar presented by Mary Beth Guard titled Banking Update on CBD, Hemp, and Marijuana. The recording is available for purchase here.