FinCEN Issues BSA/AML Due Diligence Guidance for Hemp-Related Businesses

On June 29th, the Financial Crimes Enforcement Network (FinCEN) issued new guidance in an effort to expand the financial services available to hemp-related businesses and increase reporting transparency. The guidance clarifies the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) regulatory requirements surrounding customer due diligence (CDD) for hemp-related businesses, and it explains Suspicious Activity Reporting (SAR) and FinCen Form 8300 reporting requirements. 

BSA/AML Requirements 

According to the new FinCEN guidance, CDD procedures are performed for hemp-related businesses, just as they are for all other members. Financial institutions are advised to obtain basic identifying information by using their customer identification programs and risk-based CDD processes, which include beneficial ownership collection and verification. Your institution should establish the appropriate risk-based procedures for conducting ongoing CDD procedures. The level of risk needs to be assessed on a case-by-case basis, and your program should be tailored to each member’s risk profile. For hemp growers, you may confirm the business’s state/tribal government/USDA licensing requirements have been met by obtaining either the member’s written attestation or a copy of the license.

SAR Requirements

The 2018 Farm Bill redefined hemp, outside the scope of marijuana, which removed hemp from the Schedule I controlled substance classification of marijuana under the Controlled Substances Act. The 2019 USDA IFR, an Interim Final Rule published by the United States Department of Agriculture, established a domestic hemp production regulatory program. This new guidance builds on these pieces of previous legislation, and the FinCEN explicitly notes the new guidance should be used in tandem with the interagency-released December Hemp Statement from 2019. 

FinCEN’s new guidance strictly applies to hemp-related businesses, leaving all regulations for marijuana-related businesses under the FinCEN’s 2014 Marijuana Guidance. As such, SAR requirements are separated in businesses with both hemp and marijuana-related activities, with the SAR reporting requirements from the 2014 guidance applying only to the marijuana-related activities and the new guidance applying to any hemp-related activities.

Since the December Hemp Statement’s issuance, financial institutions have not been required to file a SAR simply because a business grows or cultivates hemp. SAR requirements for hemp-related businesses are similar to those for other general business types.

Under the new guidance, financial institutions should file a SAR when they have reason to believe a member is engaged in hemp production in a state or jurisdiction where hemp production remains illegal; using a state-licensed hemp business as a front or pretext for laundering money derived from criminal or marijuana-related activities not permitted under applicable law; or seeking to conceal or disguise involvement in marijuana-related business activity. A SAR should also be filed when a member is unable or unwilling to certify or provide sufficient information to demonstrate proper licensure and operations, or if you become aware of continued operations following a license revocation or that are inconsistent with applicable law.

FinCEN Form 8300 Reporting Requirements

The new guidance also clarifies the reporting requirements associated with hemp-related businesses for FinCEN Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business. The requirements are the same across the board, regardless of the individual’s or business’s activities. Financial institutions must report transactions over $10,000 in aggregate in a single business day. 

Contact ARB

ARB’s Credit Union Services Group is dedicated to your industry. We are available to assist with understanding new guidance and standards, staying alert to accounting updates, and creating a plan for implementation and compliance. Contact us for more information or for your other accounting and business advisory needs.

by Samantha Pedersen, CPA