Skip to content
BOL Conferences
Thread Options
#2202834 - 01/14/19 02:16 PM Farm Bill - Banking HEMP
praBSA Offline
Gold Star
Joined: Aug 2018
Posts: 348
Now that the Farm Bill has passed, being a rural community bank, members of upper management want me to explore banking industrial hemp.

Has anyone developed a policy around banking industrial hemp yet? If so, would you care to share?
- I would automatically throw them into a high risk customer category
- Would you monitor more often than yearly with this type of customer for now? We have an entirely manual process for transaction monitoring at this point in time


With the Fed shutdown right now, I have been unsuccessful in reaching out to my contacts at federal agencies.

Return to Top
BSA/AML/CIP/OFAC Forum
#2202840 - 01/14/19 02:56 PM Re: Farm Bill - Banking HEMP praBSA
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,225
Galveston, TX
Why would be any different than farming potatoes?
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2202869 - 01/14/19 04:47 PM Re: Farm Bill - Banking HEMP praBSA
praBSA Offline
Gold Star
Joined: Aug 2018
Posts: 348
First there is a discussion on how this will be done, who will oversee testing (the US Department of Agriculture, state departments or both), and how these results of THC levels will be verified and recorded. Until this is further clarified, banks that might want to move forward with industrial hemp customers should look for a careful and deliberative process in measuring THC to ensure they are not inadvertently facilitating the production of a Schedule I drug?

Should we rely on states and their testing and approvals? Will the fed think that is enough oversight?

Manufacturing a plant where the % of THC in the plant is how the plant is classified makes it 1000% different than potatoes.

Return to Top
#2203113 - 01/16/19 03:48 PM Re: Farm Bill - Banking HEMP praBSA
ColoradoAML Offline
Gold Star
Joined: Mar 2018
Posts: 338
I suspect that the waiting for the rulemaking period to be completed will help with some of these questions. The Farm Bill's definition of hemp gives me some concern about what type of due diligence would be expected of us to validate that we're not banking marijuana. I would think we could rely on state testing, either in good faith or by public documentation, but I'd like to see how the rules and framework are designed before making that decision.

Also, not necessarily an AML risk, but there's no risk of the government destroying your potato crop if they test it at a particular time in it's growth cycle and after an particularly favorable (or unfavorable) climate. If you decide to bring these customers in, I'd potentially be more granular about what products you'd allow. Lending, to my view, seems to carry some additional risks.

Return to Top
#2206397 - 02/15/19 08:05 PM Re: Farm Bill - Banking HEMP praBSA
GottaLuvIt Offline
Junior Member
Joined: May 2009
Posts: 48
Saw this topic already started so pardon me for jumping in.

We too are a small community bank, in TN. Hemp is an extremely hot topic as we are in a farming area. Growing and processing hemp is being considered as an alternative to replace tobacco. The TN Dept. of Agriculture issues licenses for hemp producers. As a matter of fact, today is the final day to apply. I've read great day lately but still don't feel I have a clear understanding since the passing of the 2018 Farm Bill as far as the bank's BSA requirements when banking hemp customers.
Federally, hemp is now legal. However FinCEN has not issued any new guidance. So do we continue to treat hemp customers as MRBs and file the SARs?

Return to Top
#2206408 - 02/15/19 08:34 PM Re: Farm Bill - Banking HEMP praBSA
Big Dog Offline
Power Poster
Big Dog
Joined: Mar 2005
Posts: 2,659
Kennel
You would not need to treat them as a MRB. Hemp is on par with corn, tobacco or any other typical crop for BSA purposes. You could smoke a bail of the stuff and have no effects. Hemp is not the same as Cannabis, which has high levels of THC.

Using a Hemp crop as collateral is a credit issue since a crop that is found to have excessive level of THC could be destroyed. Again, credit collateral issue.
_________________________
CAMS, AMLP, AKC, K-9






Return to Top
#2206417 - 02/15/19 09:15 PM Re: Farm Bill - Banking HEMP Big Dog
GottaLuvIt Offline
Junior Member
Joined: May 2009
Posts: 48
Thanks for your feedback!

Return to Top
#2206991 - 02/25/19 04:15 PM Re: Farm Bill - Banking HEMP praBSA
CountryBanker Offline
Gold Star
Joined: Mar 2013
Posts: 266
Northern IL
For the sake of discussion, is it possible FinCEN will remain silent on industrial hemp? I'm starting to think so, based on recent history. If we add the point about industrial hemp farming now being on par with farming corn or potatoes together with the fact Wisconsin had a State-regulated industrial hemp program last year and FinCEN remained silent, why would we expect them to provide guidance at all now? It looks to me like it's going to be the responsibility of each state to regulate, test, and keep tabs on industrial hemp grown in their respective states.

I've got the added perspective that some subsidiaries in counties bordering Wisconsin have customers wanting to partner & invest in Wisconsin's program. It looks like WI allows the practice for out-of-state entities to produce industrial hemp in WI, meaning simply that WI laws apply to industrial hemp grown in WI. So besides trying to get a handle on what the new IL regulation requires in its first year, we have to consider due diligence based on WI's requirements for hemp regulation. They are similar, but not exactly so.

I'm adding BigDog's point that using a hemp crop as collateral creates a credit issue to my list of questions for decision makers, since any part of a crop that is found to have excessive levels of THC could be destroyed. We've heard that some producers in WI lost an entire harvest last year due to an unexpected mold issue. Not sure whether that crop was intended for biomass, CBD oil, or future seed.
_________________________
Opinions or attitudes are mine, not those of my employer.

Return to Top
#2208035 - 03/06/19 10:56 PM Re: Farm Bill - Banking HEMP praBSA
MollyM Offline
100 Club
Joined: Jul 2005
Posts: 127
Mississippi
To answer why not treat as any other crop by the first reply above - because they are NOT like any other farm crop.

Serious consideration would need to be given to the THC level restrictions, crop destruction for over 3% THC, what is required by state or federal statute (and therefore what would be expectation for Banks as part of ensuring they are complying (required by regulators).

I am not allowing until I am completely comfortable with all concerns listed above.
_________________________
“The strongest of all warriors are these two—Time and Patience.”
—
Leo Tolstoy
Russian Author

Return to Top
#2208039 - 03/06/19 11:09 PM Re: Farm Bill - Banking HEMP MollyM
RockChucker, CAMS Offline
Diamond Poster
Joined: Jul 2013
Posts: 1,700
The Country
Originally Posted By MollyM
To answer why not treat as any other crop by the first reply above - because they are NOT like any other farm crop.

Serious consideration would need to be given to the THC level restrictions, crop destruction for over 3% THC, what is required by state or federal statute (and therefore what would be expectation for Banks as part of ensuring they are complying (required by regulators).

I am not allowing until I am completely comfortable with all concerns listed above.


You mean .3% right?
_________________________
A successful man is one who can lay a firm foundation with the bricks others have thrown at him.
-David Brinkley

Return to Top
#2209086 - 03/20/19 03:01 PM Re: Farm Bill - Banking HEMP rlcarey
WillyWonka Offline
Junior Member
Joined: Jun 2014
Posts: 35
Midwest USA
I am interested in this thread! I have the same feeling as Randy as "same as potatoes". We recently had a long time ag customer (corn & soybeans) who wants to get into the hemp grain production - has the state approval all ready to go - looking for an operating line. He wants to turn one of his corn fields into hemp, where it will be sold to a market (ie: customer isn't refining or selling to consumers). Plenty of collateral and security for an operating line, knowing the risks of growing this product.

I'd like to think it's the same as corn & beans - boss feels it's the same as Colorado marijuana... what do we do?

Return to Top
#2209104 - 03/20/19 04:16 PM Re: Farm Bill - Banking HEMP praBSA
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,225
Galveston, TX
Hemp is legal and Colorado marijuana is not. Where is the comparison?
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2209107 - 03/20/19 04:33 PM Re: Farm Bill - Banking HEMP praBSA
RockChucker, CAMS Offline
Diamond Poster
Joined: Jul 2013
Posts: 1,700
The Country
I would recommend making yourself familiar with your state's laws regarding growing hemp. If you and management can get comfortable with them and the process to verify that the hemp does not contain more than .3% THC I can't see why your boss wouldn't be ok with it.
_________________________
A successful man is one who can lay a firm foundation with the bricks others have thrown at him.
-David Brinkley

Return to Top
#2209337 - 03/22/19 09:35 PM Re: Farm Bill - Banking HEMP praBSA
TryingtoComply Offline
Diamond Poster
Joined: Apr 2013
Posts: 2,199
The West
Call your State's Department of Agriculture or visit their website to learn about laws affecting your customer and then set up a program to make sure you verify that they are in compliance. Also consider local laws.

In our state if the hemp is tested and the THC is over .03% the crop has to be destroyed. If the crop will be your collateral, then this is something to consider.

As a side note, if you are banking MRBs, you should have a program around it. There was a bank recently put under a consent order and the order mentioned the lack of an EDD program for MRBs. Bank name is Southwest Capital Bank, Albuquerque, New Mexico. FDIC regulated.

4. Within 90 days from the effective date of this ORDER, the Bank shall develop, adopt,
and implement a written Customer Due Diligence ("CDD") Program as part of the system for
internal controls. At minimum, the CDD Program shall also specifically provide for:
a) A risk focused assessment of the Bank's customer base to determine the
appropriate level of ongoing monitoring required to assure that the Bank can reasonably detect
suspicious activity and determine which customers require Enhanced Due Diligence ("EDD")
necessary for those categories of customers the Bank has reason to believe pose a heightened risk
of suspicious activity including, but not limited to, High-risk Accounts. Such activity includes
marijuana-related businesses, nonbank financial institutions, non-governmental organizations,
and privately-owned ATMs;
_________________________
TryingToComply
CRCM

Return to Top

Moderator:  Andy_Z