IBA Compliance Connection

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An individual with a hemp grower’s license in their name would like to open an account in the name of a separate business entity. The Illinois Department of Agriculture (IDOA)’s rules state that no “person” (defined to include “an individual, partnership, firm, corporation”) may grow hemp without a license. If we open an account for a business that deposits hemp proceeds, would we be accepting funds from a “person” without a hemp license?

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Yes, we agree that under the IDOA’s rules, you would be accepting hemp proceeds from an unlicensed person by opening an account under a name that differs from the name provided on the grower’s hemp license. We do not recommend opening an account for a business entity that will deposit hemp proceeds obtained with a hemp cultivation license that is not in the business entity’s name.

You are correct that IDOA’s Industrial Hemp Act Rules define “person” to include an individual or a business entity and require a hemp cultivation license for cultivating industrial hemp. The IDFPR’s guidance on banking hemp customers provides that “financial institutions should, at a minimum, verify that the business is operating with the required state license and following the state’s industrial hemp program rules.” Similarly, FinCEN’s guidance on due diligence requirements for hemp-related business customers provides that for customers who are hemp growers, financial institutions should confirm their compliance with state, tribal, or USDA licensing requirements, as applicable, by obtaining a copy of the license or a written attestation by the hemp grower that they are validly licensed.

Consequently, we do not recommend opening an account for a business entity that would be depositing hemp cultivation proceeds if the business entity is not named on the relevant hemp cultivation license.

For resources related to our guidance, please see:

  • IDOA Industrial Hemp Act Rules, 8 Ill. Adm. Code 1200.10 (“‘Person’ means any individual, partnership, firm, corporation, company, society, association, the State or any department, agency, or subdivision thereof, or any other entity, or the agent thereof.”)
  • IDOA Industrial Hemp Act Rules, 8 Ill. Adm. Code 1200.20(a) (“No person shall cultivate industrial hemp in the State without first receiving an Industrial Hemp Cultivation License from the Department.”)
  • IDFPR, Memorandum on Industrial Hemp (July 25, 2019) (“Regarding industrial hemp customers, financial institutions should, at a minimum, verify that the business is operating with the required state license and following the state’s industrial hemp program rules. Banks should also perform continuing due diligence, including but not limited to obtaining available reports on crop testing and checking for any enforcement actions taken against the customer.”)
  • FIN-2020-G001 — FinCEN Guidance Regarding Due Diligence Requirements under the Bank Secrecy Act for Hemp-Related Business Customers (June 29, 2020) (“For customers who are hemp growers, financial institutions may confirm the hemp grower’s compliance with state, tribal government, or the USDA licensing requirements, as applicable, by either obtaining (1) a written attestation by the hemp grower that they are validly licensed, or (2) a copy of such license.”)
  • IDOA Industrial Hemp Act Rules, 8 Ill. Adm. Code 1200.30(a) (“Each applicant for an industrial hemp cultivation license shall submit a signed, complete, accurate and legible application form provided by the Department. The applicant shall provide the following:

1)    The name and address of the person or entity applying for the cultivation license;

2)   The type of business or organization, such as corporation, LLC, partnership, sole           proprietor, etc.;

3)   Business name and address, if different than the ones submitted in response to subsection (a)(1) . . .”)