In an effort to broaden the supply of economic providers for hemp-related companies[1], the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) issued steerage on June 29, 2020, clarifying the kind of data and documentation that monetary establishments ought to gather from hemp-related enterprise prospects to comply with the Bank Secrecy Act (“BSA”). The steerage reiterates that the 2018 Farm Bill eliminated “hemp” from the definition of marijuana within the Controlled Substances Act (“CSA”) and recommends that monetary establishments conduct risk-based buyer due diligence on any hemp-related enterprise, as they need to for all prospects. The steerage relates particularly to companies or people that develop hemp, and processors or producers who buy hemp immediately from such growers, and doesn’t substitute or supersede FinCEN’s earlier steerage concerning marijuana-related companies working in violation of the CSA.

In an effort to broaden the supply of economic providers for hemp-related companies[1], the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) issued steerage on June 29, 2020, clarifying the kind of data and documentation that monetary establishments ought to gather from hemp-related enterprise prospects to comply with the Bank Secrecy Act (“BSA”). The steerage reiterates that the 2018 Farm Bill eliminated “hemp” from the definition of marijuana within the Controlled Substances Act (“CSA”) and recommends that monetary establishments conduct risk-based buyer due diligence on any hemp-related enterprise, as they need to for all prospects. The steerage relates particularly to companies or people that develop hemp, and processors or producers who buy hemp immediately from such growers, and doesn’t substitute or supersede FinCEN’s earlier steerage concerning marijuana-related companies working in violation of the CSA.

In conducting buyer due diligence, banks and credit score unions might, per the steerage, affirm a hemp grower’s compliance with relevant licensing necessities by acquiring both (1) a written attestation from the hemp grower that they’re validly licensed, or (2) a replica of such license. Depending on the extent of threat posed by the enterprise, the establishment can also search further data, together with crop inspection or testing experiences, license renewals, up to date attestations from the enterprise, or correspondence with relevant regulators.

With the 2018 removing of hemp from the listing of managed substances below the CSA, monetary establishments are not required to file a Suspicious Activity Report (“SAR”) on prospects who interact within the progress or cultivation of hemp in accordance with relevant legal guidelines and rules. Financial establishments are nonetheless anticipated to comply with normal SAR procedures, nonetheless, and file a SAR if the establishment turns into conscious of suspicious exercise within the regular course of enterprise. FinCEN’s steerage gives the next examples of probably suspicious exercise:

  • A buyer seems to be engaged in hemp manufacturing in a jurisdiction the place hemp manufacturing stays unlawful (e.g., Idaho, South Dakota, and Mississippi);
  • A buyer seems to be utilizing a state-licensed hemp enterprise as a pretext to launder cash derived from different prison exercise, together with marijuana-related exercise;
  • A buyer engaged in hemp manufacturing seeks to conceal or disguise involvement in marijuana-related enterprise exercise; and
  • A buyer is unable or unwilling to certify or present adequate data to reveal that it’s duly licensed and working constant with relevant legislation.

In the occasion the monetary transactions of a hemp-related enterprise are comingled with marijuana-related actions, a monetary establishment is required to file a SAR in accordance with earlier steerage issued by FinCEN. Where the proceeds from the marijuana-related actions are saved separate, nonetheless, a SAR submitting is barely required for the marijuana-related a part of the enterprise.

FinCEN’s full steerage could also be discovered here.

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