On June 29, 2020, the Financial Crimes Enforcement Network (FinCEN) launched guidance (the “Guidance”) on the Bank Secrecy Act (BSA) and anti-money laundering (AML) obligations and issues surrounding hemp-related prospects. These prospects embrace hemp growers, and processors and producers that buy hemp from such growers. The Guidance dietary supplements a December 2019 interagency statement, summarized in our prior Client Alert, and descriptions how monetary establishments can adjust to their BSA/AML necessities when offering providers to hemp-related shoppers.
Generally, hemp-related companies are topic to the identical necessities as some other buyer. However, the Guidance emphasizes that with a purpose to adequately assess threat, monetary establishments might have to totally perceive the regulatory context through which these prospects function.
The Agriculture Improvement Act of 2018 (the “2018 Farm Bill”) eliminated hemp from the definition of marijuana within the Controlled Substances Act, thereby declassifying hemp as a Schedule I narcotic. The 2018 Farm Bill additionally legalized hemp manufacturing underneath sure circumstances and instructed the United States Department of Agriculture (USDA) to ascertain the required regulatory framework. In October 2019, the USDA issued an interim final rule, pursuant to which state and tribal governments could: (1) submit plans to the USDA for regulating hemp inside their jurisdictions; (2) depend on the USDA’s federal licensing plan; or (3) prohibit hemp completely inside their jurisdictions.
BSA/AML Program Expectations
As with any buyer, monetary establishments should apply preliminary and ongoing buyer due diligence procedures (buyer identification and verification (CIP), useful possession data for authorized entity prospects, and risk-based buyer due diligence/enhanced due diligence (CDD/EDD)) to hemp-related companies. Suspicious Activity Reports and Currency Transaction Reports have to be filed upon discovering suspicious exercise and forex transactions above $10,000 in mixture on a single enterprise day, respectively. In addition, FinCEN’s guidance on marijuana-related businesses stays legitimate, and it could be implicated by transactions that mingle hemp and marijuana funds.
For hemp growers, compliance with state, tribal authorities, or USDA licensing necessities could also be verified by acquiring both: (1) a replica of the license, or (2) a written attestation from the grower of legitimate licensure. As for added due diligence, FinCEN encourages a risk-based method. Financial establishments could contemplate requesting crop inspections, testing stories, license renewal data, and copies of correspondence with regulatory companies.
The Guidance in meant to enhance entry to monetary providers for hemp-related companies, however FinCEN stresses that monetary establishments should perceive the character and objective of a buyer relationship to acknowledge, monitor, and mitigate the associated dangers. Hemp regulation within the United States is advanced, and varies between states, and between the state, tribal authorities, and federal ranges. License necessities could hinge on phrases corresponding to “cultivate” and “process,” which can be outlined in another way between jurisdictions. Hemp-related actions inside one state could also be regulated by completely different companies. Moreover, because the hemp business expands within the United States, guidelines and steering are topic to vary steadily. Financial establishments in search of to service hemp-related prospects ought to totally perceive the hemp regulatory regime, in addition to their hemp prospects’ enterprise actions.[View source.]