No one will argue that there has been a lot of confusion, fear, and apprehension surrounding providing banking services to the hemp and hemp-related industries. Thankfully, there is some new guidance that will help provide some clarity.
New Regulatory Guidance on Providing Banking Services to Hemp-Related Businesses
Seeing through the smoke
Banking regulators, state regulators, and FinCEN release joint statement
In a joint statement issued on December 3, 2019, the federal banking regulators, along with state regulators and FinCEN issued regulatory guidance clarifying the expectations for banks regarding the BSA requirements for providing banking services to hemp-related businesses.
The much-needed guidance comes almost a year after The Agriculture Improvement Act of 2018 (2018 Farm Bill) was signed into law. The 2018 Farm Bill removed hemp as a Schedule I narcotic under the Controlled Substances Act and directs the United States Department of Agriculture (USDA) to regulate legal hemp cultivation and production. The USDA has issued an interim final rule establishing a domestic hemp production plan as required under the 2018 Farm Bill and anticipates the approved plan to be in effect by the 2020 planting season.
Banks now have the following regulatory guidance on providing services to hemp-related businesses:
- Banks are no longer required to file SARs on customers solely because they are engaged in the hemp industry. Banks should follow standard SAR requirements for any unlicensed operations or other suspicious activity.
- Bank clients engaged in hemp-related activity are responsible for complying with the 2018 Farm Bill and other applicable regulations, not the banks that serve them. It is the bank’s decision as to the types of clients they accept. When providing services to these higher-risk clients, a bank must have a strong risk-based BSA/AML compliance program that includes:
- Initial customer identification, including obtaining beneficial ownership information
- Ongoing monitoring, including enhanced due diligence
- Currency transaction reporting
- Suspicious activity monitoring and reporting
The guidance does not cover marijuana-related businesses
This new guidance for hemp does not address marijuana-related businesses, and banks should continue to follow FinCEN guidance FIN-2014-G001. The primary difference in the two subspecies of cannabis is the level of tetrahydrocannabinol (THC), the psychoactive component that gets the user high. Hemp contains a THC level of 0.3% or less, and marijuana generally contains THC of 10% or more.
Although this is a drop in the bucket of regulatory guidance needed for banks to feel comfortable providing traditional services to cannabis-related businesses, including hemp, this is a start to clarifying this gray area. FinCEN has indicated that they will issue further guidance after a full review and evaluation of the USDA interim final rule on the production of hemp.
Do you need help clearing the smoke around banking CRBs/MRBs in 2020? Check out our free webinar on the state of current cannabis laws and the things you need to consider whether you're looking to bank or avoid CRBs: Starting 2020 on a High Note: Cannabis-Related Banking Explained.
Terri Luttrell, CAMS-Audit
Terri Luttrell is a seasoned AML professional and former director and AML/OFAC officer with over 20 years in the banking industry, working both in medium and large community and commercial banks ranging from $2 billion to $330 billion in asset size. She has successfully worked with institutions in developing BSA/OFAC programs, optimizing various automated solutions, and streamlining processes while ensuring all regulatory requirements are met. As the Compliance and Engagement Director at Abrigo, Terri provides insights that contribute and support long-term banking strategies based on analysis of market and industry trends, competitor developments, and financial and regulatory technology changes. She is an audit-certified anti-money laundering specialist and a board member of the Central Texas chapter of the Association of Certified Anti-Money Laundering Specialists (ACAMS). Terri earned her bachelor’s degree in business administration, specializing in business and finance, from the University of North Texas.