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Hemp Related Business

Updated: Feb 8, 2019

We have received questions related to Hemp Related Business (growers). We outlined a few requirements to help you understand the recent changes as conferred through the 2018 Farm Bill, legalizing Hemp.

First Steps if your approached to open an account:

1) Determine if you want to be engaged in this type of deposit service. We do not have set FINCEN or regulatory guidance on the federal or state requirements. If you decide to open an account, your workload and responsibilities could change rapidly.

Update your risk assessments to accommodate this new type of service

Itemize and detail the possible risks:

Producer mixes in illegal plants with legal hemp plants

THC levels rise above tolerance < (.3%)

Producer shifts to other Marijuana Related Businesses

Product is sold to unauthorized parties

Brainstorm Possible Risks for each account

2) Contact your Examiner for the Federal Reserve, OCC, or FDIC

Ask them if this will be treated as an MRB (marijuana related business). If so, you may decide not to Bank them due to the workload

Guidance has not been released

Understand if you do not treat as an MRB and if they are deemed MRB you may have to close the account or comply.

Minimum Steps if deciding to proceed if accepting account after speaking with your examiner

3) All entities will be required to license by the state. Bank will need to obtain the license and have a method to verify it with NM Department of Agricultural or State.

Need a method to track if license is revoked

Obtain a copy of License

4) Develop a program to perform the following:

Site Visits to review for illegal activity

Obtain Copy of Testing Results to ensure crop remains under the threshold

Review monthly cash in and out

Review all wire activity/ACH

File SAR’s until instructed not to

Verify License

Monitor for regulatory changes

Increase the account fee to accommodate the extra work

Flag customer and all relations to ensure relationship is risk assessed

Monitor state and federal laws for compliance changes.

Possible monitoring if financial, crop yields, etc.

File CTRs if needed

Establish an understanding of the customer’s normal and expected activity

Perform a transaction volume and dollar comparison to identify any significant variances in business activity

Document executive and board acknowledgement of the risk associated with banking Hemp account.

Update the AML/BSA training program to incorporate coverage to address the bank’s procedures and due diligence.

Consider Hemp accounts as part of the high-risk customer review.

Clearly define the mitigating controls and provide a detailed explanation of the residual risk.

5) If examiners instruct Bank to treat as an MRB, add in all additional steps.

Helpful Facts:

License required for all producers

No agency has been charged with evaluating CBD production or certifying quality (risk of health issues if improperly managed)

Required destruction of plants if test results fail

Harvest License will be issued only to those meeting the State Guidelines

Two types of license: “Continually Production and Annual Production”. The difference is annual will only be allowed to produce one crop and cannot maintain viable plants throughout the year.

Licenses will dictate type and number of crops allowed

Obtain copies of background checks

The work and steps required may be substantially reduced depending on the Examiner and Once we get full guidance. As long as the crop is HEMP it is legal, but the plan can morph into an illegal crop and would be an MRB.

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