Fiona Ma, California’s state treasurer, testified recently at a House hearing on financial services to the commercial cannabis businesses.
Photo courtesy of California State Treasurer

Financial services for the budding cannabis industry was the topic of a hearing in the U.S. House of Representatives last week.
The House Committee on Financial Services, which California’s Maxine Waters (D 43) chairs, organized the session. Its Subcommittee on Consumer Protection and Financial Institutions held the hearing, which was entitled “Challenges and Solutions: Access to Banking Services for Cannabis-Related Businesses.”
The subcommittee has six witnesses testifying and answering questions about the financial problems and issues facing cannabis businesses. One of the witnesses was Fiona Ma, California’s state treasurer.
“The clash between federal law and state law in the cannabis industry presents an especially difficult problem for states such as California where cannabis use is now legal,” she said during her testimony.
Since all but three states have approved some form of legal cannabis, either medical or recreational or both, the subcommittee wanted to explore the issues financial institutions have raised about servicing “state authorized cannabis-related businesses.”
“Many financial institutions are refraining from offering banking services to these businesses based on several legal and compliance risks,” the staff report noted. However, there is some bipartisan support to examine what banking laws the federal government might create or modify.
However, several Republican committee members stressed, “Under federal law, the cultivation, possession and distribution of marijuana are illegal.” Therefore, enabling financial practices before changing this situation was premature.
Ma pointed out that the lack of access to banking is not only a problem for the cannabis entrepreneurs, but a significant issue for employees, who are paid in cash.
“Social Security, state and federal income taxes can’t be accurately collected on cash payments’ wage statements done manually to employees. This doesn’t allow employees to pay into or receive Social Security benefits,” she noted.
And another personal issue potentially affecting the employee and eventually their family is, she said, “The lack of a paper trail for all-cash businesses can pose as a challenge in meeting financial obligations such as paying alimony and child support if an employee chooses to not report their cash income.”
The draft bill, which the subcommittee was reviewing, contained several provisions that would enable banking institutions to serve the cannabis industry.
With respect to providing banking services to cannabis-related businesses that are operating in accordance to state law, this legislation would harmonize federal and state law by prohibiting federal banking regulators from engaging in certain actions against financial institutions, such as discouraging, prohibiting or penalizing depository institutions that serve cannabis-related legitimate businesses.
Also, any depository institution or employee of the institution would be exempt from federal prosecution or investigation solely for providing banking services to a state-authorized, cannabis-related business. This safe harbor is intended to provide certainty for financial institutions to offer their products and services to well-regulated cannabis-related businesses.
In her testimony, Ma was an advocate for safe harbor legislation, for those federally regulated or federally insured banks and credit unions wishing to accommodate cannabis businesses in this state. In her opinion, this would “improve the efficiency of collecting the taxes and fees we use to regulate the industry, and does not allow the banks and credit unions to totally abdicate their responsibilities to know their customers and avoid illicit money laundering.”
Currently, federally regulated banks and financial institutions risk severe penalties if they inadvertently aid and abet — no matter how remotely — activities that the federal government deems illegal.