We just completed July Monthly Connection. Kevin Edwards shared the latest when it comes FinCEN Guidance on Hemp-Related Businesses. Check out our Monthly Connection Here – https://store.bankerscompliance.com/link/MConnection
Get in the weeds for the Hemp Customer Due Diligence Update on 7/23
Well, because it keeps changing. Just for everybody, the next item there, there’s a link in your material that takes you to the brand new FinCEN guidance on hemp-related businesses. We had some guidance back in December that this is updating and kind of a partner with. But just to get you up to speed, they were providing a little more detail on what the customer due diligence requirements are for hemp-related businesses. This has been a murky area for quite some time. Back in 2014, we got the guidance on marijuana-related businesses.
Then over the years, they’ve kind of been messing with things. We’ve had a number of law changes that really carved out hemp from the definition of marijuana. Now, there are some definitions that are in there that are a little tricky. But really in October, this was streamlined, where states were given the authority to basically license hemp producers. So they’re in charge of making sure that they’re following all the rules, and they’ll issue a license, and they’re monitoring. There’s also a federal program now. So if your state hasn’t created a licensing program, they can actually go to the feds. You’re going to see more and more hemp producers coming into your institutions and wanting to talk about financing and things along those lines.
The good news is, this new guidance that came out, gave us a little more detail on what exactly they’re expecting to see on the bank side. Because even though a hemp-related business is less risky than a marijuana-related business, it’s still a higher risk customer, and you’re still going to have to have some special customer due diligence in place.
The nice thing as you read through it, it gives the banks a little bit of leeway to determine what the risk with that individual producer is. So if you have a customer coming in, I would say this has some good guidance. Things like how do you determine that the hemp producer is validly licensed? Well, the guidance says you can go through and obtain a written attestation from the hemp producer that they have a valid license. That would be one option. Or you could get a copy of that license on a rolling basis. These were things that we were guessing previously, if you remember. If you attended our webinar a couple of months back, it was when we were kind of in a gray area, taking wild guesses on what exactly a bank should do to protect themselves. Fortunately, this actually provides us something we can point to and say, “These are steps that are adequate.”
We’re actually working on a flash webinar. It’s going to be a half hour, where we’re going to go through and get into the weeds on this a little bit more. Depending on the risk assessment of the producer, you can have a lower level of monitoring for some hemp producers, and you may have a higher level of monitoring for some that you’re not as comfortable with. It’s kind of laid out in that guidance.
I didn’t want to spend a whole lot of time on it because we could sit and talk about hemp producers and the varying risk all day long. But one interesting thing they did point out is that if you have a hemp-related business, you should be monitoring them to see whether or not they may be mixing things with a marijuana-related business. There are some red flags that they suggest that you look for. So take a look at it. We’re getting a little more guidance. So I would say, it’s good news
Published
2020/07/10