Guidance for Credit Unions Serving Hemp-Related Businesses
It’s critical that credit unions that choose to serve hemp-related businesses in their field of membership understand the complexities and risks involved.
With the recent passage of H. 126 and signing by Governor Little, Idaho became the last state in the U.S. to legalize industrial hemp.
The 2018 Farm Bill removed hemp from Schedule I of the Controlled Substances Act and directed the U.S. Department of Agriculture to establish a national regulatory framework for hemp production in the United States. In response, the USDA established the U.S. Domestic Hemp Production Program through an interim final rule which outlines provisions for the USDA to approve plans submitted by states and Native American tribes for the domestic production of hemp, and outlines minimum requirements that all hemp producers must meet, including:
- Licensing requirements;
- Maintaining information on the land on which hemp is produced;
- Procedures for testing delta-9 tetrahydrocannabinol (THC) concentration levels;
- Procedures for disposing of non-compliant plants;
- Compliance provisions, and
- Procedures for how to handle violations of the production requirements.
For credit unions considering serving hemp-related businesses, the NCUA provides the following advice:
Credit unions must be aware of the Federal, State, and Indian Tribe laws and regulations that apply to any hemp-related businesses they serve. It’s important that credit unions that choose to serve hemp-related businesses in their field of membership understand the complexities and risks involved.
While it is generally a credit union’s business decision as to the types of permissible services and accounts to offer, credit unions must have a Bank Secrecy Act and Anti-Money Laundering compliance program commensurate with the level of complexity and risks involved. In particular, credit unions need to incorporate the following into their BSA/AML policies, procedures, and systems:
- Credit unions need to maintain appropriate due diligence procedures for hemp-related accounts and comply with BSA and AML requirements to file Suspicious Activity Reports (SARs) for any activity that appears to involve potential money laundering or illegal or suspicious activity. It is the NCUA’s understanding that SARs are not required to be filed for the activity of hemp-related businesses operating lawfully, provided the activity is not unusual for that business. Credit unions need to remain alert to any indication an account owner is involved in illicit activity or engaging in activity that is unusual for the business.
- If a credit union serves hemp-related businesses lawfully operating under the 2014 Farm Bill pilot provisions, it is essential the credit union knows the state’s laws, regulations, and agreements under which each member that is a hemp-related business operates. For example, a credit union needs to know how to verify the member is part of the pilot program. Credit unions also need to know how to adapt their ongoing due diligence and reporting approaches to any risks specific to participants in the pilot program.
- When deciding whether to serve hemp-related businesses that may already be able to operate lawfully — those not dependent on the forthcoming USDA regulations and guidelines for hemp production —the credit union needs to first be familiar with any other federal and state laws and regulations that prohibit, restrict, or otherwise govern these businesses and their activity. For example, a credit union needs to know if the business and the product(s) is lawful under federal and state law, and any relevant restrictions or requirements under which the business must operate.12
Lending to a lawfully operating hemp-related business is permissible. Any such lending credit unions engage in must be done in accordance with NCUA’s regulations for lending, in particular Part 723 Member Business Loans; Commercial Lending. Credit unions also need to ensure such lending is conducted safely and soundly, consistent with sound commercial lending practices. This includes appropriate underwriting standards that consider the borrower’s management ability and experience with this line of business, the financial condition of the borrower, and the borrower’s ability to meet all obligations and service the debt.
Question of the Week
Q. Are we supposed to give a member a copy of the Currency Transaction Report we are filing just because he wants one?
A. There is no rule by FinCEN that mandates a credit union give a copy of the CTR to the affected member. The credit union has several options in handling requests:
- Give the member a copy of the CTR
- Give the member a blank CTR
- Show the member the completed CTR, but do not provide a copy
- Develop a policy of not giving out copies of CTRs
- Develop a policy of giving out copies of CTRs
- Direct the member to the FinCEN website for additional information
The filing of a CTR can be disclosed to a member. FinCEN has created a pamphlet that credit unions may hand out to members that have questions about CTRs.
It is important to remember that a SAR cannot be disclosed to the member and a copy should never be provided to the member.
Consumer Financial Protection Bureau
CFPB Delays Mandatory Compliance Date for General QM Final Rule: The CFPB delayed the mandatory compliance date of the General Qualified Mortgage (QM) final rule from July 1 to Oct. 1, 2022. While this provides more time to use the GSE Patch, the availability of the GSE Patch after July 1 may be limited by recent revisions to the Preferred Stock Purchase Agreements entered into by the Department of Treasury.
CFPB Consumer Complaint Bulletin Examines County-Level Demographic Dara: The CFPB issued a bulletin which analyzes complaints submitted by consumers in counties nationwide. In 2019 and 2020, the CFPB received more complaints on a per-capita basis from consumers living in predominantly minority counties than from consumers in predominantly white, non-Hispanic counties. Consumers in counties with the highest percentage of minority population submitted complaints at over four times the rate compared to counties with the lowest percentage of minority population.
Office of Foreign Assets Control
OFAC has updated the SDN list as of April 30. The last update prior to this was April 26.
Questions? Contact the Compliance Hotline: 1.800.546.4465; [email protected].