FinCEN CTR Update and Joint Agency Statement on Hemp
Two recently released statements/updates impacting BSA and BSA reporting requirements have been released. The first was issued by FinCEN on October 1, 2019, and is specific to multiple roles when conducting a reportable transaction, as referenced in Question #16 in FinCEN’s CTR FAQ.
The second was issued on December 3, 2019, by Federal and State regulating agencies clarifying the requirements for providing financial services to hemp-related businesses.
Previous to the change, FinCEN’s instructions for filing a CTR on a conductor who played multiple roles in a reportable transaction (i.e., deposited into own account and on behalf of another), required filers to complete one Part I on the conductor and indicate that the transaction was conducted on behalf.
However, this has led to rejected CTR filings and reviewers not being able to fully understand the true nature of the transaction.
On October 1, 2019, FinCEN issued revised instructions on how to complete a CTR for these types of transactions. The revisions now result in the requirement to complete two Part I's on the conductor, as well as on the party on whose behalf the transaction was conducted, indicating the applicable amounts and accounts for each role involved in the transaction.
Due to the likelihood that these changes would require updates to software programs that are utilized to create batch files, as well as ensuring that appropriate training is provided to essential staff, FinCEN delayed its proposed mandatory effective date from February 1, 2020, to September 1, 2020.
FinCEN has subsequently updated its CTR XML User Guide and issued revised FAQs. Both of which can be accessed on FinCEN’s website.
Joint Agency Guidance on Hemp-Related Businesses
On December 20, 2018, the Agriculture Improvement Act of 2018 (2018 Farm Bill) was signed into law and, as such, removed hemp as a Schedule 1 controlled substance under the Controlled Substances Act.
Subsequently, on October 1, 2019, the USDA issued an interim final rule implementing the statute and setting forth regulatory guidance for hemp producers, and most recently; the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, FinCEN and the Conference of State Bank Supervisors issued a joint statement clarifying the requirements for providing financial services to hemp-related businesses.
The joint statement issued on December 3, 2019, provided several key points, one of which was the clarification that banks are no longer required to file suspicious activity reports solely based on the fact that the customer is engaged in the legal growth or cultivation of hemp.
The statement also made it clear that although a bank is free to offer financial services to hemp-related business, it must only do so by having a BSA/AML compliance program that is commensurate with the level of complexity and risks involved.
In addition, a Bank must ensure compliance with all applicable regulatory requirements for customer identification, suspicious activity reporting, currency transaction reporting, and risk-based customer due diligence (including the collection of beneficial ownership information for legal entity customers).
Lastly, the statement also indicated that FinCEN will issue additional guidance after further review and evaluation of the USDA’s interim final rule.
Pursuant to the CTR revisions noted above, banks should review the newly updated instructions, provide the applicable training, and ensure that software programs are updated to adequately comply with the new filing instructions.
Based on the clarifications provided by the joint agencies and depending on whether your financial institution is banking hemp-related businesses, policies and procedures may need to be revised to reflect any changes to your SAR filing procedures.
For those financial institutions that are not yet offering services to hemp-related businesses, the reduction in the requirement to file suspicious activity reports may be enough to entice your financial institution to begin offering financial services to hemp-related entities. However, we remind you of the additional key points provided within the joint statement, which require a robust BSA/AML compliance program and ensuring compliance with all applicable regulatory requirements.
FBLG is a professional partner for financial institutions. Let us help you with all your regulatory needs in providing financial services to hemp or marijuana-related businesses. For advice or additional questions, please feel free to contact the author of this article or click on the Contact button to reach a Compliance Specialist.