H.C.R. NO.














Requesting the commissioner of financial institutions to study the feasibility of a state-operated financial institution to service marijuana-RELATED BUSINESSES in Hawaii.




     WHEREAS, the legalization of medical marijuana in 23 states, the District of Columbia, and more recently the legalization of marijuana for recreational use in four states and the District of Columbia have posed complex issues for the banking industry; and


     WHEREAS, any state action does nothing to change that and it does not appear that Congress has any desire or willingness to legalize marijuana at a federal level; and


     WHEREAS, as long as it is considered an illegal substance by federal law, financial institutions across the country have serious risks and challenges if they desire to provide banking services to any businesses involved with marijuana in any form; and


     WHEREAS, that includes obviously businesses growing or selling marijuana, but also landlords or vendors assisting or serving these businesses; and


     WHEREAS, there are several federal statutes, dating back to 1970, that affect a financial institution’s ability to serve clients involved with marijuana, including the Controlled Substances Act, the Bank Secrecy Act, the Patriot Act, and the Comprehensive Drug Abuse Prevention and Control Act; and


     WHEREAS, as more states legalize marijuana use in some form, there have been some attempts to reconcile federal and state marijuana laws; and


     WHEREAS, the Department of Justice, as well as the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) have issued guidance for banks interested in serving marijuana businesses; and


     WHEREAS, however, as well intended as these guidances may have been, they have been inadequate in providing assurances to banks that they will not face civil or criminal penalties, and even the possibility of losing their charters should they provide financial services to marijuana-related businesses; and


     WHEREAS, in addition to the legal and regulatory risks, banks also face many other significant risks when considering relationships with marijuana businesses; and


     WHEREAS, there is reputation risk, as other bank customers and the community at large may look unkindly at a bank facilitating the distribution of an illegal substance; and


     WHEREAS, there are operational risks, as compliance with FinCEN requirements are significant; and


     WHEREAS, not only are there requirements for extensive due diligence efforts before dealing with a marijuana business, but there are other significant operational challenges on an ongoing basis; and


     WHEREAS, financial institutions must also be cautious in assessing relationships with other clients that might be peripherally related to marijuana businesses, such as landlords and vendors; and


     WHEREAS, and there are lending risks as well, since lending on illegal collateral is prohibited; and


     WHEREAS, this includes lending on marijuana-related real estate; and


     WHEREAS, in those states where marijuana has been legalized for medicinal use, the dispensaries in those states have found that financial institutions in their marketplace have declined to offer banking services; and


     WHEREAS, that includes accepting credit cards for purchases; and


     WHEREAS, so, these dispensaries have had to deal in cash only; and


     WHEREAS, their employees are paid in cash, and they pay all their other bills in cash – even taxes and fees to the government agencies; and


     WHEREAS, in response to the difficulties experience in the State of Colorado, a group of ten citizens organized a Colorado state-chartered credit union to provide much needed banking services to licensed cannabis and hemp businesses, and to thousands of persons, businesses and organizations that supported the legalization of marijuana; and


     WHEREAS, the newly minted credit union promptly applied to open a “master account” at the Federal Reserve Bank of Kansas City; and


     WHEREAS, despite its name, the Federal Reserve Bank is not a federal agency, but a private corporation created by an Act of Congress and run by its own board of directors; and


     WHEREAS, depository institutions can only access the Federal Reserve payments system through a master account or through a correspondent bank that has a master account; and


     WHEREAS, this access is necessary for the electronic transfer of funds; and


     WHEREAS, simply put, without this access, the credit union cannot operate; and


     WHEREAS, on July 16, 2015, the Federal Reserve Bank denied the Credit Union’s application for a master account, and the Credit Union filed suit; and


     WHEREAS, simply stated, the Credit Union claimed that it was entitled to open a master account pursuant to the Banking Act of 1935, as amended by § 107 of the Monetary Control Act of 1980, 12 U.S.C. § 248a(c)(2); and


     WHEREAS, the Credit Union believed that the Federal Reserve Bank was motivated by a desire to exclude it as a competitor for the marijuana industry’s banking business; and


     WHEREAS, the Credit Union sought the United States District Court for the District of Colorado (Court) to exercise its equitable authority to issue a mandatory injunction; and


     WHEREAS, however, the Court held that it could not use its equitable powers to issue an order that would facilitate criminal activity; and


     WHEREAS, citing In re Arenas, 535 B.R. 845, 849-50 (10th Cir. BAP 2015), the Court wrote:


     “. . . In this case, the [credit union is] unfortunately caught between pursuing a business that the people of Colorado have declared to be legal and beneficial, but which the laws of the United States – laws that every United States Judge swears to uphold – proscribe and subject to criminal sanction. . .”; and


     WHEREAS, accordingly, the Credit Union’s motion for summary judgment was denied and the case was dismissed (See, Civil Action No 15-cv-01633-RBJ, United States District Court for the District of Colorado, Order, January 5, 2016); and


     WHEREAS, the Colorado suit illustrates two major points:


(1)  Marijuana-related businesses will not be able to access financial services if financial institutions are not willing to provides these services; and


(2)  It is virtually impossible for the private sector to establish new financial institutions for the sole purpose of providing financial services to marijuana-related businesses since the Federal Reserve Bank, a private entity, has apparently chosen not to do business with these financial institutions; and


     WHEREAS, in testimony provided to the House Committee on Health on March 27, 2015 on House Concurrent Resolution No. 136, the Hawaii Bankers Association indicated that none of its members were planning to provide financial services to any marijuana-related businesses established pursuant to Act 241, Session Laws of Hawaii 2015, the Hawaii Medical Marijuana Dispensary Law; and


     WHEREAS, if financial institutions in Hawaii are not willing to provide services to marijuana-related businesses, and it is virtually impossible for the private sector to establish a new financial institution to provide these services, then marijuana-related business will have to conduct operations in cash only; and


     WHEREAS, having marijuana-related businesses operate solely on a cash basis will make adherence to labor and tax laws difficult for employers as well as pose serious threats to the health, welfare and safety of communities where marijuana-related businesses are situated; now, therefore,


     BE IT RESOLVED by the House of Representatives of the Twenty-eighty Legislature of the State of Hawaii, Regular Session of 2016, the Senate concurring, that this body requests the Commissioner of Financial Institutions to study the feasibility of a state-operated financial institution that would operate solely for the purpose of providing financial services to marijuana-related businesses in the State of Hawaii; and


     BE IT FURTHER RESOLVED that the Commissioner of Financial Institutions ascertain the capitalization requirements for a state-operated financial institution based on the projected revenues of marijuana-related businesses, as reported to the Department of Health from medical marijuana dispensary license applicants in accordance with Act 241, Session Laws of Hawaii 2015; and


     BE IT FURTHER RESOLVED that the Department of Health is requested to provide any financial data necessary for the Commission of Financial Institutions to perform this study; and



     BE IT FURTHER RESOLVED that the Commissioner of Financial Institutions submit a report of the findings and recommendations, including any proposed legislation, to the Legislature at least twenty days prior to the convening of the Regular Session of 2017; and


     BE IT FURTHER RESOLVED that certified copies of this Concurrent Resolution be transmitted to the Commission of Financial Institutions; the Director of Health; the Attorney General; and the Executive Director of the Hawaii Bankers Association.










Report Title: 

Financial Institutions; Marijuana-Related Businesses; State Bank