In a joint statement, four federal agencies in consultation with state bank regulators clarified that as a result of the Agriculture Improvement Act of 2018 (“2018 Farm Bill”), banks no longer are required to file a Suspicious Activity Report (“SAR”) on customers “solely because they are engaged in the growth or cultivation of hemp.”
The 2018 Farm Bill removed hemp as a Schedule I controlled substance under the Controlled Substance Act and directed the United States Department of Agriculture to regulate its production. This fall, the USDA released an interim final rule establishing a regulatory program that will facilitate the domestic cultivation of hemp. Under the interim final rule: (1) hemp may be grown only with a valid USDA-issued license, or under a USDA-approved state or tribal plan; (2) a state or tribal government may prohibit the production of hemp despite its legal status under federal law; and (3) marijuana remains a controlled substance under federal law.
Since hemp no longer is classified as a controlled substance, banks are now expected to follow standard SAR procedures for hemp-related customers. Accordingly, banks should file a SAR “if indicia of suspicious activity warrants,” but not solely because a customer engages in the growth or cultivation of hemp.
The joint statement goes on to note that customers engaged in hemp-related businesses are responsible for compliance with the interim rule, and banks must have a compliance program “commensurate with the level of complexity and risks involved.” Specifically, banks must ensure compliance 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.
In the context of marijuana-related businesses, banks are to continue following the Financial Crimes Enforcement Network’s guidance FIN-2014-G001 – BSA Expectations Regarding Marijuana-Related Businesses. FinCEN will issue additional guidance after further review and evaluation of the USDA’s interim final rule.