New guidance published this week states banks are no longer required to file suspicious activity reports (SARs) in relation to customers involved in the legal cultivation of hemp.
The guidance is based on the fact hemp is no longer a Schedule I controlled substance under the Controlled Substances Act, thanks to the effect of the 2018 Farm Bill. However, banks are still expected to file a SAR if suspicious activity warrants it.
The joint statement was issued by the following federal agencies state bank regulators.
- Federal Reserve Board
- Federal Deposit Insurance Corporation
- Office of the Comptroller of the Currency
- Conference of State Bank Supervisors
The statement notes in order for hemp production to be legal, it must occur under a USDA-issued license or USDA-approved state or tribal plan. But it also states hemp production activities authorized under the 2014 Farm Bill can continue until one year after the effective date of the recently published USDA interim final rule.
The Financial Crimes Enforcement Network (FinCEN) will publish additional guidance after further study of the USDA’s interim final rule. The full statement can be viewed here.
The hemp and wider cannabis industry have been travelling a long and bumpy road towards gaining full access to banking services that most other businesses take for granted. This has led to many cannabusinesses dealing in cash only, which is not only inconvenient and impacts on sales, but also presents significant security risks. However, the situation has been slowly changing.
Back in August, the National Credit Union Administration issued guidance indicating federally insured credit unions can provide financial services to hemp businesses operating legally.
Eagerly awaited is the passing and signing into law of the SAFE Banking Act, which is proposed legislation regarding the handling of funds gained through the USA’s cannabis industry. It also has a specific section dealing with hemp businesses that should remove any remaining banking barriers. The House of Representatives passed the Secure and Fair Enforcement Banking Act in September, but it remains to be seen if the Republican-controlled Senate will also endorse it.