Federal regulators gave banks the go-ahead to serve industrial hemp customers without any enhanced anti-money laundering reporting requirements.
The Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Financial Crimes Enforcement Network said in Dec. 3 guidance that banks would no longer have to file suspicious activity reports just because they conduct transactions or other services for hemp-related businesses.
Banks had been slow to serve industrial hemp-related businesses despite the cousin to marijuana being removed from federal controlled substance scheduling in the 2018 farm law. There was uncertainty over whether hemp would be subject to the same types of robust reporting requirements as marijuana.
The Dec. 3 guidance affirmed that hemp producers would be subject to the same standard suspicious activity reporting that banks carry out on all customers. Banks don’t have to file reports on hemp-related customers solely because they are engaged in the growth or production of the plant.
While hemp and marijuana are related, hemp contains only trace amounts of THC, the psychoactive compound in marijuana. Hemp was considered a Schedule 1 controlled substance until the 2018 law, which allowed for widescale industrial production of the plant.
The U.S. Department of Agriculture issued interim final rules for hemp production in October. The plant is used to make products including rope, building materials, cloth, and fuel.
Even with those legal changes, banks were hesitant to open accounts and conduct transactions for hemp farmers and companies that serve the industry, for fear of violating anti-money laundering requirements and the Bank Secrecy Act.
The Conference of State Bank Supervisors also signed on to the joint guidance along with its federal counterparts.