The Financial Crimes Enforcement Network (FinCEN) has released guidance for financial institutions concerning customers engaged in hemp-related businesses. The guidance seeks to address questions regarding the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) regulatory requirements for hemp-related business customers.
It identifies the kind of information that financial institutions may require of hemp-related businesses to ensure compliance with the BSA regulatory requirements. Financial institutions are expected to conduct customer due diligence (CDD), collect basic identifying information on hemp-related businesses and confirm compliance of such businesses with state, tribal government, or the USDA licensing requirements.
While they are also expected to report financial transactions of hemp-related business like they do for other businesses, they may not report such businesses as suspicious since hemp is no longer a strictly controlled substance.
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BSA/AML program expectations
To ensure compliance with the BSA/AML program expectations, basic identifying information of hemp-related businesses are to be collected through the application of the financial institutions’ customer identification programs and risk-based CDD processes as is applicable to all its customers.
This includes beneficial ownership collection and verification as it applies to all customers. They must also ensure that hemp growers are in full compliance with state, tribal government, or the USDA licensing requirements.
This can be done by obtaining evidence confirming that the hemp grower is validly licensed by the host authorities and a copy of the license. The concerned financial institution may however request additional information at its own discretion depending on the outcome of its risk assessment of the business involved.
Such additional information may include crop inspection or testing reports, license renewals, updated attestations from the business, or correspondence with the state, tribal government, or USDA.
The guidance also stipulates that financial institutions may only file Suspicious Activity Report (SAR) on hemp-related customers when:
• A customer appears to be engaged in hemp production in a state or jurisdiction in which hemp production remains illegal.
• A customer appears to be using a state-licensed hemp business as a front or pretext to launder money derived from other criminal activity or derived from a marijuana-related activity that may not be permitted under applicable law.
• A customer engaged in hemp production seeks to conceal or disguise involvement in marijuana-related business activity.
• The customer is unable or unwilling to certify or provide sufficient information to demonstrate that it is duly licensed and operating consistent with applicable law, or the financial institution becomes aware that the customer continues to operate (i) after license revocation, or (ii) inconsistently with applicable law.
While financial transactions of hemp-related businesses are expected to be monitored like any other business, a financial institution should apply FinCEN’s 2014 Marijuana Guidance if it finds that a legitimate hemp-related income is mixed up with that of a marijuana-related business.
Reporting hemp-related currency transactions
Like is applicable for all customers, financial institutions are expected to report all currency transactions of hemp-related businesses exceeding $10,000 in aggregate for any single business day. Businesses or persons who carry out non-financial trade or business must also report on FinCEN Form 8300.
This guidance is not meant to replace or supersede FinCEN’s previous guidance on the BSA expectations regarding marijuana-related businesses (2014 Marijuana Guidance).
It is rather it is intended to supplement the December 3, 2019, interagency statement on providing financial services to customers engaged in hemp-related businesses, also known as the December Hemp Statement.
Financial institutions may seek more information on hemp-related business regulation from the relevant authorities as stated in the announcement.