We are aware of our obligation to file a suspicious activity report (SAR) for a customer that purchases hemp seed without a USDA-approved license in a transaction of $5,000 or more — but what about a transaction under $5,000? Is a SAR not required, even though the transaction constitutes “illegal activity?” Do we have a continuing obligation to file SARs as long as our customer continues to cultivate hemp? Also, we have a customer who owns a smoke shop and sells cannabidiol (CBD) oil. Do we need to file a SAR for this customer as well?

See CQ 2019-283 for our most recent guidance regarding SAR-filing responsibilities for hemp/CBD customers.

No, your bank is not required to file a SAR in relation to hemp seed in a transaction that does not involve an aggregate amount of less than $5,000 (although you may choose to do so).

As recognized in your question, producing hemp without a license approved by the U.S. Department of Agriculture (USDA) technically remains “unlawful” under federal law and constitutes an illegal activity that could trigger a SAR filing if it meets the $5,000 threshold for SAR filings. While the 2018 Farm Bill decriminalized the cultivation and sale of “industrial hemp” (containing less than 0.3% THC), the USDA has not yet promulgated regulations — nor has it begun approving state licensing plans — for regulating the lawful cultivation and sale of industrial hemp pursuant to the 2018 Farm Bill.

Under FinCEN’s thresholds, a SAR filing is required only when a transaction involves or aggregates at least $5,000 and the bank knows, suspects, or has reason to suspect that the transaction involves funds derived from illegal activities (among other reasons). For transactions under $5,000, a bank may but is not required to file a SAR when the bank reasonably believes the transaction may be relevant to the possible violation of any law or regulation. Consequently, we do not believe that SAR filings are required for hemp transactions under $5,000, even though these transactions constitute “illegal activities.”

We do recommend filing continuing SARs related to your customer’s hemp cultivation activities if they continue to involve or aggregate more than $5,000, until your customers obtain a USDA-approved license for the commercial cultivation of hemp, or they are purchasing CBD oil from a USDA-approved hemp cultivator (notably CBD oil can be derived from either hemp or marijuana plants). The general rule is that a new SAR should be filed for any suspicious activity involving or aggregating $5,000 or more. However, FinCEN has issued guidance providing that when the nature of the suspicious activity remains consistent, organizations may instead report continuing suspicious activities occurring during 90-day intervals with a continuing SAR. For example, if your bank discovers additional transactions on your customer’s account related to the commercial cultivation of hemp, and those transactions exceed the $5,000 SAR filing threshold, your institution should file a continuing SAR covering each successive 90-day review period.

For resources related to our guidance, please see:

FinCEN SAR Rules, 31 CFR 1020.320(a)(2) (“A transaction requires reporting under the terms of this section if it is conducted or attempted by, at, or through the bank, it involves or aggregates at least $5,000 in funds or other assets, and the bank knows, suspects, or has reason to suspect that (i) The transaction involves funds derived from illegal activities . . . as part of a plan to violate or evade any Federal law or regulation or to avoid any transaction reporting requirement under Federal law or regulation; . . . ”)

Controlled Substances Act, 21 USC 802(16) (“(A) Subject to subparagraph (B), the term ‘marihuana’ means all parts of the plant Cannabis sativa L. . . . (B) The term ‘marihuana’ does not include

(i) hemp, as defined in section 1639o of Title 7; or

(ii) the mature stalks of such plant, fiber produced from such stalks, oil or cake made from the seeds of such plant, any other compound, manufacture, salt, derivative, mixture, or preparation of such mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of such plant which is incapable of germination.”)

Agriculture Marketing Act of 1946, 7 USC 1639o(1) (“The term ‘hemp’ means the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.”)

Agriculture Marketing Act of 1946, 7 USC 1639q(c)(1) (“In the case of a State or Indian tribe for which a State or Tribal plan is not approved under section 1639p of this title, it shall be unlawful to produce hemp in that State or the territory of that Indian tribe without a license issued by the Secretary under subsection (b).”)

USDA website, Hemp Production Program Questions and Answers (“May state or Tribal Nations submit plans now to the USDA for review and approval? It is USDA’s intention to issue regulations in the Fall of 2019 to accommodate the 2020 planting season. Should a state or Tribal nation submit a plan before that time, USDA will not review or approve such plan until regulations have been implemented.”)

FFIEC BSA/AML Manual, Suspicious Activity Reporting (“FinCEN’s guidelines have suggested that banks should report continuing suspicious activity by filing a report at least every 90 calendar days. Subsequent guidance permits banks with SAR requirements to file SARs for continuing activity after a 90 day review with the filing deadline being 120 calendar days after the date of the previously related SAR filing. Banks may also file SARs on continuing activity earlier than the 120 day deadline if the bank believes the activity warrants earlier review by law enforcement.”)

The SAR Activity Review Trends Tips & Issues, Suspicious Activity Report Form Completion Tips, pg. 32 (April 2005) (“When filing a ‘90-day update,’ financial institutions should not check box 1, since an update does not actually correct a prior report. Instead, the financial institution should complete most of the Suspicious Activity Report as if it were the first report filed on the suspect’s activity. The date range and dollar amounts should be cumulative, encompassing the entire period of suspicious activity (not just the last 90 days). The narrative does not need to detail the entire episode; rather, the narrative needs to only reference the previously filed Suspicious Activity Report(s), summarize the information previously reported, and then detail any activity that has occurred since the last report was filed (the previous 90 days of activity).”

Final Order, Placement in Schedule V of Certain FDA-Approved Drugs Containing Cannabidiol, 83 Fed. Reg. 48950, 48951 (September 28, 2019) (“The cannabis plant contains more than 100 cannabinoids. Among these are tetrahydrocannabinols (THC) and CBD. Material that contains THC and CBD extracted from the cannabis plant falls within the listing of extracts and tinctures of cannabis for purposes of the Single Convention. Thus, such material, which includes, among other things, a drug product containing CBD extracted from the cannabis plant, is a Schedule I drug under the Single Convention.”)

Final Order, Placement in Schedule V of Certain FDA-Approved Drugs Containing Cannabidiol, 83 Fed. Reg. 48950, 48952 (September 28, 2019) (“As further indicated, any material, compound, mixture, or preparation other than Epidiolex that falls within the CSA definition of marijuana set forth in 21 U.S.C. 802(16), including any non-FDA-approved CBD extract that falls within such definition, remains a schedule I controlled substance under the CSA. Thus, persons who handle such items will continue to be subject to the requirements of the CSA and DEA regulations relating to schedule I controlled substances.”)