In a joint statement, four federal agencies in consultation with state bank regulators clarified that, as a result of the Agriculture Improvement Act of 2018 (2018 Farm Bill), banks are no longer required to file a Suspicious Activity Report (SAR) on customers “solely because they are engaged in the growth or cultivation of hemp.” The guidance was issued by the Board of Governors of the Federal Reserve Board, 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 2018 Farm Bill removed hemp as a Schedule I controlled substance under the Controlled Substance Act and directed the U.S. Department of Agriculture (USDA) to regulate its production. This fall, the USDA released an interim final rule establishing a regulatory program that will facilitate the domestic cultivation of hemp. Under the interim final rule: (1) hemp may be grown only with a valid USDA issued license or under a USDA-approved state or tribal plan; (2) a state or tribal government may prohibit the production of hemp despite its legal status under federal law, and (3) marijuana remains a controlled substance under federal law.
Because hemp is no longer a controlled substance under the Controlled Substance Act, banks are now expected to follow standard SAR procedures for hemp-related customers. Accordingly, banks should file a SAR “if indicia of suspicious activity warrants,” but not solely because a customer is engaged in the growth or cultivation of hemp.
The joint statement goes on to note that customers engaged in hemp-related businesses are responsible for compliance with the interim rule, and banks must have a compliance program “commensurate with the level of complexity and risks involved.” Specifically, banks must ensure compliance 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.
In the context of marijuana related businesses, banks should continue to follow FinCEN guidance FIN-2014-G001 – BSA Expectations Regarding Marijuana-Related Businesses. FinCEN will issue additional guidance after further reviewing and evaluating the USDA’s interim final rule.