The growth of the U.K. cannabis industry is being hamstrung by legislation initially drafted in response to the 9/11 attacks.
The 2002 Proceeds of Crime Act effectively makes it a criminal offence for U.K. citizen to financially benefit from an activity legal overseas – which is illegal at home. Cannabis industry experts say this is deterring investment with the markets still to catch fire in the way predicted; banks, businesses and investors are wary of breaking the law.
Nick Davis, Chief Executive of London-based law firm Memery Crystal LLP, told CBD Testers at Cannabis Europa: “The Proceeds of Crime Act was never designed to cover what it is currently covering.
The Existing Caveat
“It means that an investment by a U.K. business or citizen into a Canadian company, or any company that is producing or involved in the recreational cannabis space is fine.
“But, if there were to be a dividend or you were to sell those shares and bring money back into the U.K. then potentially that is a proceeds of crime offence, as recreational cannabis is illegal in the U.K.
The cannabis industry is pressing for some clarification on this issue from the Home Office and Serious Fraud Office, and there currently exists a caveat which is being used effectively, but carries an unwelcome element of uncertainty.
Mr Davis continued: “There is a route whereby you can file an SAR – a Suspicious Activity Report – and ask for confirmation that what you are doing is not going to be illegal, and if you don’t hear back within seven days then you have deemed consent.
“That would work on a one-off, but if you wanted to buy and sell shares, in say, a company like Canopy, it’s not going to work. Likewise a Canadian company wanting to invest in a U.K. company has to it secure clearance.”
Money Laundering And Terrorism
Mr Davies says there has been ‘lots of’ SARs filed and there hasn’t been a response to any of them. He added: “Lots of people are buying and selling shares, and that is effectively a money laundering offence, but I can’t for one moment believe that, that is what the regulator the SFO will see as a crime, but the uncertainty is there, and it doesn’t help.”
BNN Bloomberg reports that the law was put in place in the aftermath of the 9/11 attacks allowing authorities to seize cars and homes purchased with ill-gotten gains from crimes like money laundering, drug trafficking and terrorism.
Under the act, repatriated funds from an activity that would result in a lengthy jail sentence, if carried out in Britain, would break the rules. At present, cannabis is still a class B drug in the U.K., so possession can carry a five-year sentence while supplying or producing can carry a 14-year sentence.
The Spanish Bullfighter Exception
However there is a precedent for a law change. In 2006, the so-called ‘Spanish bullfighter’ exception was passed. This allows a matador from Spain to come to the U.K., where fighting bulls is illegal, and spend his work revenues without fear of prosecution.
To date there has only been a handful of cannabis listings on the U.K. stock markets, with many saying the Proceeds of Crime Act is smothering investment activity.
BNN Bloomberg reports Stefano Debolini, a partner at London-based law firm Sheridans saying that two years ago ‘there was a real surge of excitement. It felt like there were overflowing bank balances just waiting to launch’ in the U.K. cannabis markets
But the Proceeds of Crime Act 2002 has had a ‘chilling effect’, he said.
