The Financial Crimes Enforcement Network (FinCEN) published guidance (Guidance) on customer due diligence requirements under the Bank Secrecy Act (BSA) for hemp-related customers on June 29. The Guidance, which recognizes hemp as defined under the Agriculture Improvement Act of 2018 (the 2018 Farm Bill), advises financial institutions on their BSA customer due diligence requirements for hemp customers. This Guidance supplements—but does not replace—the December 3, 2019 interagency statement on providing financial services to customers engaged in hemp-related businesses.

Notably, the Guidance allows financial institutions to confirm a hemp grower’s compliance with applicable legal requirements by obtaining an attestation from the grower that it is validly licensed, or by obtaining a copy of that license. Further due diligence above and beyond these core requirements may be needed, however, depending on the financial institution’s assessment of the level of risk posed by a particular hemp customer. Thus, financial institutions are expected to apply their risk-based customer due diligence policies and procedures to determine whether additional information about a particular hemp customer is required, and to obtain additional information as may be necessary, consistent with the risk profile of the customer.

US Attorney General Jeff Sessions has just issued a memorandum (AG Memo) rescinding prior US Department of Justice (DOJ) guidance on the federal prosecution of marijuana offenses, including the 2013 “Cole Memorandum” (Cole Memo) and subsequent guidance regarding marijuana-related financial crimes (Financial Crimes Memo). The Cole Memo, among other things, expressly acknowledged the legalization of marijuana in several states for medical and recreational purposes and directed federal prosecutors to focus their enforcement priorities and resources on activities that align with current DOJ enforcement priorities. In turn, these priorities emphasized the prevention of marijuana-related activities posing the most significant threats to public safety and welfare (such as preventing the sale of marijuana to minors, or preventing marijuana sales from benefiting criminal enterprises). The Cole Memo in substance encouraged federal prosecutors to take a “hands-off” approach on the prosecution of “low level” marijuana-related offenses in those states that have legalized in some form the possession or use of marijuana for medical or recreational purposes. The subsequent Financial Crimes Memo carried forward the Cole Memo principles to the prosecution of banks and other financial institutions participating in marijuana-related banking and financial activities.