Banking Services for Hemp Growers – FinCEN Makes a Statement
On December 3, 2019, FinCEN, along with the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, in consultation with the Conference of State Bank Supervisors, issued a statement to provide clarity “regarding the legal status of commercial growth and production of hemp and relevant requirements for banks under the Bank Secrecy Act and its implementing resolutions.”
The statement provides that following the issuance of interim final rules for domestic hemp production by the USDA in conjunction with the 2018 Farm Bill, which removed hemp as a Schedule I controlled substance under the Controlled Substances Act, banks do not need to file suspicious activity reports (“SARs”) on customers “solely because they are engaged in the growth or cultivation of hemp in accordance with applicable laws and regulations.”
This statement has received a great deal of attention in part because the headline uses the term “Hemp-Related Businesses.” Why a statement was needed in the first place is curious as the 2018 Farm Bill removed CBD from hemp from the Controlled Substances Act and as a result there is no reason for banks to file SARs related to hemp-related businesses. Despite that, banks and other financial services companies have been reluctant to provide services to hemp-related businesses absent additional guidance from the federal government.
However, this statement is limited to hemp growers and not to other businesses related to hemp or CBD from hemp. More specifically, the statement is limited to hemp growers that hold a USDA-issued license or are operating under a USDA-approved state or tribal plan. The USDA has not yet approved a state or tribal plan nor has it yet issued licenses to hemp growers.
Further, the wording of the statement is also very narrow. The operative statement provides that banks are not required to file SARs for customers “solely” because they are engaged in the growth or cultivation of hemp. Does that mean that banks should file SARs if they have any other reason for concern or the customer is not just a hemp grower? Again, even though CBD from hemp has been removed from the Controlled Substances Act.
For banks that are providing services to farmers who are getting into hemp cultivation, but have not otherwise provided banking services to hemp or cannabis-related businesses, this statement should give banks comfort in continuing to provide banking services to long-time customers since they don’t have to file SARs. For banks that are already providing bank services to hemp businesses, this statement is unlikely to change their existing practices related to filing SARs. For banks that are reluctant to provide banking services to hemp businesses, this statement is unlikely to provide sufficient comfort to enter the market.
Additionally banks may be reluctant to provide service to some hemp-related businesses because the FDA has taken the position that many products sold for human or animal consumption containing CBD from hemp are being marketed in violation of the Food Drug and Cosmetic Act. The notice does not address these concerns.
Finally, FinCEN stated that it would issue additional guidance following further review of the USDA interim final rule, perhaps after issuance of final rules from the USDA. Banks may delay making any changes to their banking services until issuance of such additional guidance.