Federal monetary regulatory agencies are clarifying that banks no longer have to take additional actions to track accounts for hemp-associated corporations.
Prior to hemp and its derivatives had been federally legalized below the 2018 Farm Bill, monetary institutions had been essential to file suspicious activity reports (SARs) for accounts connected with the crop simply because it was a Schedule I controlled substance treated the exact same as marijuana.
But the Board of Governors of the Federal Reserve Technique, the Federal Deposit Insurance coverage Corporation, the Economic Crimes Enforcement Network (FinCEN) and the Workplace of the Comptroller of the Currency, as nicely as the Conference of State Bank Supervisors, issued a statement on Tuesday updating banks on the legal status of hemp.
— Federal Reserve (@federalreserve) December 3, 2019
“Because hemp is no longer a Schedule I controlled substance below the Controlled Substances Act, banks are not essential to file a Suspicious Activity Report (SAR) on clients solely simply because they are engaged in the development or cultivation of hemp in accordance with applicable laws and regulations,” the memo states. “For hemp-associated clients, banks are anticipated to adhere to common SAR procedures, and file a SAR if indicia of suspicious activity warrants.”
In essence, the monetary agencies mentioned that whilst banks do not have to accept hemp accounts, if they do, these consumers shouldn’t be treated any differently than clients from any other legal business.
FDIC, @FederalReserve, @USOCC, and the Economic Crimes Enforcement Network, along with @CSBSNews, have clarified reporting needs for banks with clients involved in hemp-associated corporations. https://t.co/C6OuTvByAG
— FDIC Gov (@FDICgov) December 3, 2019
“When deciding to serve hemp-associated corporations, banks need to comply with applicable regulatory needs for consumer identification, suspicious activity reporting, currency transaction reporting, and threat-primarily based consumer due diligence, like the collection of valuable ownership details for legal entity clients,” they wrote.
Federal guidance on dealing with marijuana corporations, which was outlined in a 2014 Treasury Division memo, remains in location, the letter added. Banks need to nonetheless file SARs for these firms, regardless of the legal status of cannabis below state law.
Senate Majority Leader Mitch McConnell (R-KY), a chief proponent of hemp legalization, took credit for the release of updated guidance. In April, he and Sen. Ron Wyden (D-OR) sent a series of letters to federal monetary regulators requesting clarification on the legality of servicing hemp corporations.
At @senatemajldr Mitch McConnell’s request, federal banking regulatory agencies concern joint guidance to help legal #hemp business: https://t.co/KB43C4cq2X @FDICgov @USOCC @federalreserve @CSBSNews + Economic Crimes Enforcement Network (FinCEN)
— Senator McConnell Press (@McConnellPress) December 3, 2019
“Today’s multi-agency announcement represents continued progress as we perform to make sure hemp is treated just like any other legal agricultural commodity,” McConnell mentioned in a press release on Tuesday. “Even just after President Trump signed my initiative in final year’s farm bill to completely legalize hemp and eliminate it from the list of federally controlled substances, I heard from hemp producers about Kentucky about their ongoing challenges, like the lack of access to the monetary technique.”
“I’m proud federal banking regulators agreed to my request to concern new guidance that affirms hemp’s legality,” he mentioned. “I appear forward to far more Kentucky producers getting the potential to develop their hemp corporations with the assist of the Commonwealth’s monetary institutions.”
Wyden also cheered the improvement.
“Hemp was legalized just about a year ago, but Oregon farmers and producers have been forced to ride the roller coaster of uncertainty,” he mentioned in a press release. “Slowly but certainly federal regulators are beginning to catch up, and these new banking suggestions are an crucial step toward providing hemp corporations the certainty they have to have. The perform does not cease right here, on the other hand, and far more need to be performed to make certain hemp corporations are treated relatively and permitted to completely comprehend this legal crop’s financial possible in our state and nationwide.”
The current legalization of hemp presents large possibilities for smaller corporations. Making sure they have access to banking is an crucial step in developing a enterprise. https://t.co/OJuACz8fIe
— Property Committee on Modest Enterprise (@HouseSmallBiz) December 3, 2019
The American Bankers Association (ABA) mentioned that the regulators’ hemp move has been “long sought” by the monetary solutions business.
“We are pleased that the guidance also notes that bank clients are accountable for complying with regulatory needs surrounding hemp, not the banks who serve these clients,” ABA President Rob Nichols mentioned. “We appreciate the actions regulators have taken now to clarify regulatory expectations for banks, and we appear forward to functioning with them as they create further guidance.”
New ABA statement from @BankersPrez applauds regulatory guidance issued now on hemp banking, which “provides higher clarity on banks’ obligations associated to hemp producers.” Study it right here: https://t.co/oLpv9RQRCv pic.twitter.com/tyHg36xsi3
— American Bankers Association (@ABABankers) December 3, 2019
Although monetary institutions are nonetheless essential to file SARs for marijuana corporations, the price of these reports becoming submitted seemed to level off in the final quarter.
It is doable that is connected to business expectations about the possible passage of a bipartisan bill that would shield banks servicing marijuana firms from becoming penalized by federal regulators.
When the Property overwhelmingly authorized the legislation in September, that was months later than some had anticipated, and it is doable banks had been holding off on accepting new cannabis consumers and had been discouraged that lawmakers hadn’t acted prior to the summer time recess, as was anticipated.
It is not clear regardless of whether the bill has adequate help to clear the Senate, but the chair of that chamber’s Banking Committee has mentioned he’s interested in holding a vote on it in his panel just before the year’s end—and that he’d also like to see specific modifications produced.
Should really the cannabis banking bill in the end be enacted, it is most likely that monetary solutions providers would at some point see a comparable update on SAR reporting guidance for marijuana providers.
Study the federal hemp banking memo beneath:
Federal Watchdog Agency Weighs In On USDA Speeding Up Hemp Regulations
This story was updated to include things like comment from Wyden and ABA.
Photo courtesy of Brendan Cleak.