While marijuana remains federally illegal, the 2018 Farm Bill amended the federal definition of marijuana to exclude hemp from the Controlled Substances Act.
On Tuesday, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Financial Crimes Enforcement Network, and the Office of the Comptroller of the Currency in consultation with the Conference of State Bank Supervisors issued new guidance to provide clarity regarding the legal status of commercial production of hemp and relevant requirements for banks under the Bank Secrecy Act (BSA).
According to the new guidance, banks are no longer required to file Suspicious Activity Reports (SAR) for customers who are engaged in hemp growth or cultivation and follow regulations.
“Because hemp is no longer a Schedule I controlled substance under the Controlled Substances Act, 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 in accordance with applicable laws and regulations,” states the guidance. “For hemp-related customers, banks are expected to follow standard SAR procedures, and file a SAR if indicia of suspicious activity warrants.”
While bank customers who engage in hemp-related business must comply with policies laid out by the 2018 Farm Bill, it is up to the bank to assess potential risks, decide which types of services to offer, and determine who to offer them to.
When making the decision, banks must comply with regulations requiring customer identification, suspicious activity reporting, currency transaction reporting, and risk-based customer due diligence.
The regulatory program to facilitate legal hemp production in the United States was initiated on October 31, 2019, when the United States Department of Agriculture (USDA) issued an interim final rule.
The interim final rule creates a federal licensing plan to regulate state and tribal hemp producers who do not have USDA-approved plans.
Without a state or tribal regulatory plan, hemp producers are subject to direct USDA regulation unless hemp production is prohibited in their state or tribal territory.
The guidance states that the Financial Crimes Enforcement Network will be issuing additional guidance after reviewing and evaluating the USDA interim final rule.
Banks with further questions concerning the 2018 Farm Bill and the implementation of its regulations may contact the USDA, state departments of agriculture, and tribal governments.