FinCEN Issues Due Diligence Guidance for Business Clients Tied to Hemp
30 Jun 2020

The U.S. Treasury Department’s financial intelligence unit issued new guidance on Monday for banks and other covered entities providing services to corporate clients tied to the hemp sector.

The publication by the Financial Crimes Enforcement Network (FinCEN) follows an interagency statement issued in December outlining the legal status of the commercial growth and production of hemp as well as how banks should view related compliance duties under the U.S. Bank Secrecy Act. Legislation passed in 2018 removed hemp from the definition of “marijuana” under the Controlled Substances Act.

In contrast to its guidance on cannabis-related businesses, FinCEN said on Monday that financial institutions are not required to file suspicious activity reports (SARs) on clients solely because they are engaged in growing or cultivating hemp.

“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,” FinCEN said in the guidance.

The bureau, however, warned that banks must still report clients that appear to be engaged in the production of hemp in a state or jurisdiction where doing so remains illegal, or if they believe such businesses are attempting to conceal their involvement in the cannabis sector.

Under U.S. federal law, the production and distribution of cannabis remains illegal, though states 47 states have relaxed prohibitions on the use or sale of the drug. Eleven states currently permit the recreational use of marijuana despite the federal ban.

The guidance separately recommends that financial institutions confirm a hemp-growing client’s compliance with state, tribal government and USDA licensing obligations, either by obtaining written attestations or a copy of the license.

Read the full guidance here

Photo: D-Kuru [CC BY-SA 3.0 at], via Wikimedia Commons

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