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FinCEN issues regulatory requirements for hemp-related business customers

FinCEN Guidance Regarding Due Diligence Requirements

In what appears to be a breakthrough for the hemp business sector, the Financial Crimes Enforcement Network (FinCEN) has published guidance for financial institutions regarding customers engaged in hemp-related enterprises. The guidance aims to clarify the regulatory requirements for hemp-related businesses, according to the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) policies.

Regulatory requirements

The guidance describes the type of information that financial institutions may need from hemp-related businesses in line with the BSA regulatory policies.

“This guidance explains how financial institutions can conduct due diligence for hemp-related businesses and identifies the type of information and documentation financial institutions can collect from hemp-related businesses to comply with BSA regulatory requirements. This clarification is intended to enhance the availability of financial services for, and the financial transparency of, hemp-related businesses in compliance with federal law,” part of the statement reads.

According to the guidance, financial institutions will conduct customer due diligence (CDD) by collecting basic identification data on customers involved hemp-related businesses. The institutions will confirm that the businesses remain compliant with the state, tribal government, or the USDA licensing conditions. The guidance also allows the institutions to report financial transactions of hemp-related businesses the same way they do for other businesses. 

BSA/AML Due Diligence Requirements 

To ensure that hemp-related enterprises comply with the BSA/AML requirements, the businesses must present their basic identifying information through the customer identification mechanisms of the financial institutions. They will also go through the risk-based CDD processes just as all customers do.

This means financial institutions will have to obtain proof of licensing from hemp-related businesses to show they’re validly mandated to carry out the business. It’s also at the discretion of the concerned institution to request additional information based on the result of its risk assessment of the business in question.

Additional information may include, but not limited to license renewals, crop inspection or testing reports, business correspondence with state, tribal government, or the USDA.

When it comes to reporting financial transactions of hemp-related businesses, the same rule applies to all customers will apply. The institutions will report all currency transactions of hemp-based enterprises “exceeding $10,000 in aggregate for any single business day.” Persons or businesses involved in non-financial trade or business are also expected to report on FinCEN Form 8300. 

“This guidance supplements the December 3, 2019, interagency statement on providing financial services to customers engaged in hemp-related businesses,” part of the announcement reads.

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