Federal agencies made a formal announcement indicating that banks are no longer required to file suspicious activity reports on hemp farming.
Financial institutions providing services to hemp-related businesses in the United States need not file suspicious activity reports any longer. The updated policy statement was released by four federal agencies in conjunction with state bank regulators earlier this month.
@federalreserve @fdicgov @usocc @CSBSnews and FinCEN clarify requirements for providing financial services to hemp-related businesses: https://t.co/XFFAl0qeOq
— Federal Reserve (@federalreserve) December 3, 2019
“Because hemp is no longer a Schedule I controlled substance under the Controlled Substances Act, banks are not 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,” a Dec. 3 Federal Reserve press release stated.
Prior to the 2018 Farm Bill, financial institutions were required to file a SAR on activity involving a marijuana-related business (including those duly licensed under state law), according to the Financial Crimes Enforcement Network (FinCEN).
The Federal Reserve issued the statement to help clarify the “legal status of hemp growth and production and the relevant requirements under the Bank Secrecy Act (BSA) for banks providing services to hemp-related businesses.”
While banks have the option to serve hemp-related businesses or not, the statement makes it clear they are responsible for following regulations from the 2018 Farm Bill and the BSA.
“When deciding to serve hemp-related businesses, banks must comply 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,” reads the memo.
Senate Majority Leader Mitch McConnell, who helped drive the push for hemp legalization, suggested he was partly responsible for the updated guidance.
“I’m proud federal banking regulators agreed to my request to issue new guidance that affirms hemp’s legality,” McConnell said in a press release.
Other agencies involved with the statement were the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Conference of State Bank Supervisors. The news release also indicated that additional guidance will come from FinCEN after further review of the United States Department of Agriculture (USDA) interim final rule on hemp.
The USDA released its initial guidelines on hemp rules and regulations in October. The hemp regulations published by USDA establish growing standards, testing rules for THC, and proper disposal of crops they do not meet the proposed industry standard.
With the release of the interim hemp regulations came an open invitation for public comment from the USDA. The agency will keep public comment open until Dec. 30. Those interested in submitting feedback can do so, here.
More on Hemp
Hemp, a member of the Cannabis sativa plant species, has played a crucial role in American history. However, it was banned in 1970 with other substances identified as dangerous by the federal government in the beginning stages of the War on Drugs. To be considered hemp, the cannabis plant must contain no more than 0.3% THC — which is 33 times less concentrated than the least intoxicating marijuana plant.
Hemp was removed from the list of prohibited substances under the Controlled Substances Act after the 2018 Farm Bill went into effect. The bill opened the gates for the commercial cultivation, manufacturing, and distribution of hemp and hemp products throughout the U.S. and clarified the legality of purchasing and using cannabidiol (CBD) products made from hemp.
States across the country joined in administering hemp farming pilot programs after the passage of the 2014 Farm Bill opened up hemp cultivation to universities and state departments of agriculture for research and pilot purposes.
More than 30 states have jumped at the opportunity to cultivate the newly legalized crop, and many have formally drafted the programs into long term plans since the recent legalization of commercial production.
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