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31 October 2020 - Ernest
Investment in Legal Cannabis Business Overseas and UK Law

The cannabis industry has always been big business.

Long before the U.K.'s so called first "cannabis importer," the health benefits of cannabis have been widely discussed.

Why then, is there seemingly a growing "public" demand to legalise cannabis?

In November 2018, the Misuse of drugs (Amendments) (Cannabis and License Fees) (England, Wales and Scotland) Regulations 2018 (the 2018 Regulations), came into force allowing certain cannabis-based products for medicinal use (CBPMs) to be prescribed more easily
Law makers may tell you that medical experts state there are therapeutic health benefits - even despite the fact that experts have known about these benefits long before the U.K.'s so called first "cannabis importer."
You may feel like this is code for "we now know how to control the production and supply, so now we can tax you."

Whatever the reason for legalising cannabis, there are some real legal issues to be addressed.

Under English law, a person who invests in companies whose business activities involve the production of cannabis or sale of cannabis-related products is likely to be at risk of committing a criminal offence.

Proceeds of Crime act 2002 (POCA) / Money laundering

The Proceeds of Crime Act 2002 (POCA), makes clear that a person commits an offence if she or she:
  • conceals, disguises, converts, transfers or removes criminal property (s327);
  • enters into or becomes concerned in aan arrangement which he or she knows, or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person (s328); or
  • acquires, uses or has possession of criminal property (s329).

"Criminal Property"

Criminal Property is defined in s340(3) and s413(1) POCA as "property which consistutes a person's benefit from criminal conduct or which represents such a benefit (in whole or part and whether directly or indirectly)."

"Criminal Conduct"

Criminal conduct is defined in s340(2) POCA as "conduct which constitutes an offence in any part of the UK or would constitute an offence in any part of the UK if it occurred there."

Therefore, the fact that it is illegal to possess, cultivate and supply cannabis in the UK, means that even if these acts were done somewhere, where it is legal, the conduct is still considered to be criminal in the UK and therefore any benefit from that conduct will constitute criminal property.
"UK citizens are still finding it hard to invest their lawful capital in lawful cannabis businesses overseas"
This may seem unfair to you. Sections 327(2A), 328(3) and 329(2A) POCA state that a person does not commit an offence if:
  1. the person knows, or believes on reasonable grounds, that the relevant criminal conduct occurred in a particular country or territory outside the United Kingdom;
  2. the relevant criminal conduct was not, at the time it occurred, unlawful under the criminal law then applying in that country or territory; and
  3. the relevant criminal conduct is not of a description prescribed by an order made by the Secretary of state.

The exception to the rule... there's always one

Legal conduct in a non-UK country will still generate property that is treated as "criminal property" under POCA if that conduct would constitute a serious crime were it to be done in the UK.This includes the possession, cultivation and supply of cannabis.

Anyone engaged (directly/indirectly) with such a business will need to give thorough and careful consideration to the potential for inadvertently committing money laundering offences and the need for and practicalities of making disclosures, for example, to the NCA and/or appropriate regulatory body before investing in any legal cannabis business overseas.

By contacting Ervaid Law before you invest in a legal cannabis business overseas, we will provide you with expert legal advice on how to take practical steps and keep appropriate records so as to ensure that you operate within the parameters of the UK law.