On December 3, 2019, the FRB, FDIC, FinCEN and the OCC, in consultation with the Conference of State Bank Supervisors, issued the Bank Secrecy Act: Interagency Statement on Providing Banking Services to Customers Engaged in Hemp Production to provide clarity regarding the legal status of commercial growth and production of hemp and relevant requirements for financial institutions under the Bank Secrecy Act and its implementing regulations.
The guidance highlights the following:
- Hemp is no longer a Schedule I controlled substance under the Controlled Substances Act.
- It emphasizes that banks are not required to file SARs on customers solely because they are engaged in the growth or cultivation of hemp in accordance with applicable laws and regulations.
- It explains that when deciding to provide financial services to hemp-related businesses, banks must comply with applicable BSA regulatory requirements.
- The guidance notes that marijuana is still a controlled substance under federal law and that in the context of marijuana-related businesses (MRBs), banks should continue following FinCEN guidance FIN-2014-G001, BSA Expectations Regarding Marijuana-Related Businesses, as it relates to their MRB customers.
In addition, the joint statement indicated that FinCEN intends to issue additional guidance after further reviewing the USDA October 31, 2019, interim rule and references the following key points of the interim rule:
- Hemp may be grown only with a valid USDA-issued license or under a USDA-approved state or tribal plan. Research and development initiatives authorized under the Agricultural Act of 2014 (aka the 2014 Farm Bill) remain in effect until one year after the effective date of the USDA interim final rule.
- A state or tribal government may prohibit the production of hemp, even though it is legal under federal law. The 2018 Farm Bill provisions related to USDA-approved state or tribal plans did not preempt state or tribal laws regarding the production of hemp that are more stringent than federal law.
- Marijuana is still a controlled substance under federal law. The 2018 Farm Bill amended the definition of marijuana only to exclude hemp from the Controlled Substances Act.
While this joint statement provides a bit more clarity to banks who already have or may be contemplating banking hemp or MRB customers, a prudent customer due diligence program should be in place to ensure compliance. Wipfli can assist your institution in understanding the risks of banking hemp and marijuana-related businesses and in the implementation of a risk-based program to mitigate those risks.
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