Federal financial regulatory agencies are clarifying that banks no longer have to take extra steps to track accounts for hemp-related businesses.
Before hemp and its derivatives were federally legalized under the 2018 Farm Bill, financial institutions were required to file suspicious activity reports (SARs) for accounts associated with the crop because it was a Schedule I controlled substance treated the same as marijuana..
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But the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Financial Crimes Enforcement Network (FinCEN) and the Office of the Comptroller of the Currency, as well as the Conference of State Bank Supervisors, issued a statement on Tuesday updating banks on the legal status of hemp..
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“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,” the memo states. “For hemp-related customers, banks are expected to follow standard SAR procedures, and file a SAR if indicia of suspicious activity warrants.” In essence, the financial agencies said that while banks don’t have to accept hemp accounts, if they do, those clients shouldn’t be treated any differently than customers from any other legal industry..
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“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,” they wrote.
Federal guidance on dealing with marijuana businesses, which was outlined in a 2014 Treasury Department memo, remains in place, the letter added. Banks must still file SARs for those firms, regardless of the legal status of cannabis under state law..
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Senate Majority Leader Mitch McConnell (R-KY), a chief proponent of hemp legalization, took credit for the release of updated guidance.
