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#2246566 - 12/15/20 10:21 PM SARs on CBD Clients
BSAN3rd Offline
Junior Member
Joined: Sep 2016
Posts: 35
Hello all!

My question is regarding the filing of SARs on clients who sell CBD interstate; more specifically those who may be located in one state but sell CBD to a customer (and ship it) in another state wherein the sale of CBD is only allowed at specific retailers or is not allowed at all.

The laws are somewhat confusing to follow. I have been presented a legal opinion which states: "The U.S. Drug Enforcement Administration ("DEA") no longer has any possible claim to interfere with interstate commerce involving hemp or hemp products. The 2018 Farm Bill explicitly protects interstate commerce involving hemp and hemp-derived products and prohibits states and Native American tribes from interfering with the interstate transportation or shipment of hemp or hemp-derived products even those states that impose more stringer restrictions on hemp production.".

So... if we have a customer that is selling CBD across state lines to states wherein CBD is illegal or highly restricted, are they even breaking the law? Would SARs need to be filed?

Up to now, we have been filing these SARs, however internal discussions have begun to loop in legal and I am wondering if (besides them being completely worthless) they are mandatory filings for activity which is technically illegal in the state in question but apparently there's no jurisdictional authority to enforce...

Thanks for your opinions and expertise.

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#2246577 - 12/16/20 12:10 AM Re: SARs on CBD Clients BSAN3rd
ColoradoAML Offline
Gold Star
Joined: Mar 2018
Posts: 337
SAR regulation requires you to file a SAR if you suspect money laundering or a "Federal criminal violation." Since you're already working with your legal team, I think their opinion on the applicability of this could deserve some attention. The fact that you've been filing and would stop leaves you open to some criticism, so potentially talking to your regulators or FinCEN* about your planned decision not to file, it that's what you choose, could keep you ahead of it.

*Not that I think FinCEN or any other regulator would give you concrete guidance saying one thing or another, but sometimes documenting that you called them and they didn't object goes a long way.

My opinion is that I don't think I'd file, but I think it's a good question and you need to be clear when you document your decision.

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#2246864 - 12/23/20 02:53 PM Re: SARs on CBD Clients BSAN3rd
StacyLitkeGCV Offline
New Poster
Joined: Nov 2020
Posts: 14
CBD is under the supervision of the FDA, Hemp is under the supervision of the USDA. CBD can be derived from hemp or marijuana.

FDA states that the ingestion of CBD for any purpose is illegal, however it can be used topically. However, they don't seem to have the interest or manpower to track down all of the offenders.

What do you know about the customer's business? Do you know the source of the CBD? I would think it makes a difference if they're buying from a licensed hemp provider vs. growing what they hope to be hemp in their back yard. If you do your due diligence and find they "playing by the rules" you could put them on a monitoring list and only file when things look sketchy, like they suddenly have an extra $20,000 in their account that it unexplained and could possibly be from illicit sales.

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