FinCEN Issues Guidance on BSA Due Diligence Requirements for Hemp-Related Businesses

The guidance identifies types of information financial institutions can collect from those businesses to comply with regulatory requirements.

7/7/2020Rules and Regulations Stamps

The Financial Crimes Enforcement Network recently issued guidance to help address Bank Secrecy Act requirements for hemp-related business customers. The guidance explains how financial institutions can conduct due diligence for hemp-related businesses and identifies the type of information and documentation financial institutions can collect from hemp-related businesses to comply with BSA regulatory requirements.

The Agriculture Improvement Act of 2018 (the 2018 Farm Bill) removed hemp from the definition of marijuana in the Controlled Substances Act and directed the establishment of a regulatory framework for the legal production of hemp.

BSA/AML Program Expectations

Financial institutions must conduct customer due diligence (CDD) for all customers, including hemp-related businesses. Financial institutions should obtain basic identifying information about hemp-related businesses through the application of the financial institutions’ customer identification programs and risk-based CDD processes, including beneficial ownership collection and verification, as they would for all customers. Financial institutions must also establish appropriate risk-based procedures for conducting ongoing CDD.

For customers who are hemp growers, financial institutions may confirm the hemp grower’s compliance with state, tribal government, or the USDA licensing requirements, as applicable, by either obtaining (1) a written attestation by the hemp grower that they are validly licensed, or (2) a copy of such license. The extent to which a financial institution will seek additional information beyond the steps outlined above will depend on the financial institution’s assessment of the level of risk posed by each customer. Additional information might include crop inspection or testing reports, license renewals, updated attestations from the business, or correspondence with the state, tribal government, or USDA. In order to identify the risks posed, financial institutions must understand the nature and purpose of customer relationships for the purpose of developing a customer risk profile and conduct ongoing monitoring to identify and report suspicious transactions, including, on a risk basis, to maintain and update customer information. As with any customer, FinCEN expects financial institutions to tailor their BSA/AML programs to reflect the risks associated with the customer’s particular risk profile and file reports required under the BSA.

SAR Reporting

Suspicious Activity Report (SAR) on customers solely because they are engaged in the growth or cultivation of hemp in accordance with applicable laws and regulations. For hemp-related business customers, financial institutions are expected to follow standard SAR procedures and file a SAR if the financial institution becomes aware, in the normal course of business, of suspicious activity.

CTR Reporting

Financial institutions must report currency transactions in connection with hemp-related businesses in the same manner they would for any other customers (i.e. report all currency transactions above $10,000 in aggregate on a single business day).

Question of the Week

Q. Is the credit union required to identify the BSA Officer by name in the credit union’s BSA policy?

A. According to the NCUA, the specific name (i.e., Jane Smith) is not required to be included in the policy itself, a title is enough. However, the board minutes should reflect the current person, by name, that has been designated as the BSA compliance officer. In addition to the designation in the policy and board minutes, examiners will also look to ensure that the BSA Officer has sufficient authority and expertise to administer an effective BSA program.

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Consumer Financial Protection Bureau

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Fannie Mae and Freddie Mac

On June 30 and July 1, Fannie Mae and Freddie Mac updated their COVID-19 selling FAQs and servicing FAQs, which can be accessed here: Fannie Mae selling FAQs and servicing FAQs; Freddie Mac selling FAQs and servicing FAQs.

Financial Crimes Enforcement Network

Guidance Regarding Due Diligence Requirements under the Bank Secrecy Act for Hemp-Related Business Customers
FinCEN issued FinCEN Guidance FIN-2020-G001 to explain how financial institutions can conduct due diligence for hemp-related businesses, and to identify the type of information and documentation financial institutions can collect from hemp-related businesses to comply with BSA regulatory requirements.

Office of Foreign Assets Control

OFAC has updated the SDN list as of July 2. The last update prior to this was June 25.

Questions? Contact the Compliance Hotline: 1.800.546.4465; [email protected].