At the end of 2018, the federal government legalized the production of hemp for agricultural purposes. On December 3, 2019, the Financial Crimes Enforcement Network (“FinCEN”) and all federal banking regulators issued a joint statement about Bank Secrecy Act obligations and hemp. The federal regulators’ statement indicates that banks are no longer required to file suspicious activity reports (“SARS”) relating to hemp-related businesses engaged in lawful activity under federal law. FinCEN and the federal banking regulators emphasized that SARS should be filed if a bank detects that a hemp-related business is otherwise engaged in suspicious activity. The statement emphasized that:
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hemp-related businesses must be licensed by the USDA, a state or a tribe;
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state and tribal governments can prohibit hemp although legal under federal law;
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federal law does not preempt state or tribal law with regard to hemp and states and tribes may have more stringent laws on hemp production;
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cannabis is still illegal under federal law.
Based on FinCEN’s and the banking regulators’ statement, banks can immediately stop filing SARs on hemp-related businesses who are operating lawfully. Banks and financial institutions should of course be mindful that SARS must be filed relating to hemp-related business customers who are otherwise engaged in suspicious activity. Banks do need to continue to file SARS on all other types of cannabis-related businesses irrespective of whether their activities are legal under state law. Banks who traditionally have refused to accept cannabis-related business customers may now consider doing so. However, caution should be exercised because hemp remains illegal under the laws of certain states.