The nation’s marijuana regulator has told financial institutions to treat the $500 million hemp businesses the same way they would any other businesses.
In updated rules from the Financial Crimes Enforcement Network (FinCEN), the U.S. Treasury Department’s financial crime division, the agency said the new guidance is in response to questions related to Bank Secrecy Act/Anti-Money Laundering regulatory requirements for hemp-related business customers.
The reminder is intended for banks with clients that include marijuana retailers or individuals that grow, process, or manufacture pot. It’s intended to “enhance the availability of financial services and the financial transparency of hemp-related businesses in compliance with federal law,” the notice said.
Hemp, a strain of cannabis with lower concentrations of THC, the substance that makes users high, was legalized in 2018. But a federal ban on marijuana remains, and some states don’t allow possession of any kind of cannabis, including hemp.
Among the rules: Banks must obtain identifying information, including a copy of licenses, as they would for any customer. Suspicious activity must be reported, for example, if a customer appears to be engaged in hemp production in a place where hemp production remains illegal.
The updated rules also call on banks to keep a watchful eye on any customer who appears to be using a state-licensed hemp business as a front to launder money derived from criminal activity.
In addition, FinCEN expects financial institutions to monitor the transactions of hemp-related businesses for signs of suspicious or unlawful activity, such as transactions above $10,000 in a day.
A Nevada-based, publicly-traded company that owns processing centers and a 5,000-square-foot retail store in Arizona, praised FinCEN’s update.
“These guidelines help clarify how hemp should be treated and operate in the banking space,” said the CEO. “A lot of the hurdles that the hemp industry faces come from stigma and misinformation…the power and promise of hemp is coming to light in the mainstream…”
Last year, four federal agencies, in conjunction with state bank regulators, clarified the legal status of hemp-related businesses and the applicable edicts under the Bank Secrecy Act for financial institutions offering services to those businesses, the Office of the Comptroller of the Currency.
Also in 2019, PYMNTS reported cannabidiol (CBD), a chemical derived from cannabis plants, has become popular for a variety of wellness related applications. Its use has become trendy in pet products, skincare items on supermarket shelves and high-end department stores.