FinCEN issues guidance regarding due diligence requirements

Q: Has there been clarification on BSA requirements for hemp-related businesses?

A: Yes. FinCEN recently issued guidance regarding due diligence requirements for hemp-related business customers.

On June 29, 2020 the Financial Crimes Enforcement Network (FinCEN) issued guidance on the requirements under the Bank Secrecy Act for hemp-related business customers. The guidance provides that, in addition to conducting customer due diligence (CDD) on hemp-related businesses at time of application, financial institutions must establish risk-based procedures for conducting ongoing CDD. Specifically, 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.

Financial institutions might also consider seeking additional information based upon their assessment of potential risk posed by each customer. FinCEN suggests that 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. It is important for financial institutions to know the nature of their customer's business to best determine the risk profile. 

The guidance also clarifies that because hemp is no longer a Schedule I controlled substance, financial institutions are not required to file a Suspicious Activity Report on customers solely because they are engaged in the growth or cultivation of hemp in accordance with applicable laws and regulations.

Lastly, the guidance confirms that financial institutions must report currency transactions in connection with hemp-related businesses in the same manner they would for any other customers.

FinCEN Guidance

Birrenkott is WBA assistant director - legal. For legal questions, please email wbalegal@wisbank.com.

Note: The above information is not intended to provide legal advice; rather, it is intended to provide general information about banking issues. Consult your institution's attorney for special legal advice or assistance.