This week, the International Cannabis Bar Association convened at the New York Law School in Manhattan to discuss laws and regulations related to the domestic and global cannabis industry. Topics on the agenda ranged from the possibility of federal legalization to the current state of the industrial hemp industry a year after the 2018 Farm Bill to global drug control treaties.
On Thursday afternoon, panelists talked about two major concerns the legal cannabis industry faces as it becomes increasingly globalized: moving product and moving money.
One panel, called “Cross Border Commerce: Moving Product,” was moderated by Jose Alberto Campos, a partner at Mexican law firm Sánchez Devanny, and the panelists included Kai-Friedrich Niermann, George Reid, and Santiago Concha—lawyers from Germany, Canada, and Colombia, respectively—and Marco Algorta, CEO of CANNAPUR, a Uruguay-based cannabis company.
The multi-national panel—made up of participants who hail from countries where cannabis is legal for adult use (like Canada and Uruguay) and countries where cannabis is tightly regulated for medical use (like Colombia and Germany)—provided a glimpse into the complicated import and export regulations that the industry will have to consider when looking to do business on a global scale.
For example, in Canada, Reid said, “import and export [of THC cannabis products] is permitted for medical and scientific purposes.” Import and export regulations for industrial hemp are different, Reid added, but even then, there are strict rules: hemp grown in Canada has to be from an approved cultivar and “the Canadian industrial hemp import/export rules only allow you to bring in seeds of approved cultivar.”
Algorta added that “the question is always what is cannabis and what is not,” pointing out that importing or exporting, for example, a “molecule of CBD” is different than importing or exporting other cannabis products.
Other important factors to consider when importing and exporting cannabis products that panelists brought up included: tax rates (and therefore the utilization of free trade zones) and the unwillingness, in the current legal climate, of insurance companies to get involved with cannabis or cannabis-based products as they are transported to different countries.
After a short break, a second panel entitled “Cross Border Finance: Moving Money” began, this time led by Steve Schain, the co-chair of the event, called the 2019 Cannabis Law Institute, and senior attorney at Hoban Law Group. Alongside him sat Jonathan Deverill, a partner at London-based law firm DAC Beachcroft and Gordon Cameron, the head of Canadian law firm Bennett Jones, LLP in New York.
“What an exciting week to be talking about financial services in legalized marijuana,” said Schain as he kicked off the panel. “I don’t know if you’ve heard, but there was this little piece of legislation that passed [the US House] called the SAFE Banking Act. I’m here to tell you that’s going to solve all our problems, all the problems in financial services in cannabis are done with. Great job everyone,” Schain continued, sarcastically, to laughter from the audience.
(Read Cannabis Wire’s coverage of the SAFE Banking Act here.)
Changing his tone, Schain admitted that the legislation was “not really going to move the needle much at all,” but that the point of this panel—and the point of banking especially as it relates to cannabis—is about two things: profit and manageable risk.
Most of the panel was focused on a main issue that has long affected the cannabis industry: the lack of access to banking for cannabis-related businesses. Even Canadian banks are reluctant to get involved with cannabis businesses on the U.S. side of the border, according to Cameron. “If you are a large Canadian bank, you are very concerned about running offside of U.S. banking rules or falling on the wrong side of a state attorney general who wants to take a shot at a big international bank for a lawsuit or some other regulatory action.”
This has resulted in a “big push by Canadian banks to stay away from accounts with cannabis companies,” said Cameron. He pointed out that some larger Canadian banking institutions—like the Bank of Montreal, who Cameron described as being on the “forefront” of this shift— are becoming more open to setting up cannabis-related accounts.
Schain noted, that as a general rule, “funds can flow South but not North.” The reason behind this, Cameron added, is that cannabis-related funds flowing from the U.S. to Canada, are “potentially legal, but potentially illegal” because cannabis as a commercial enterprise is legal federally in Canada but not in the United States.
Deverill pointed to a company listed on the stock exchange in London that has a “hemp CBD operation” in Colorado and also sells products in the United Kingdom. Deverill said that this operation represented one of the only instances in which he could see the transfers of cannabis-related money being lawful. “If you had a full on recreational cannabis company in Colorado that wants to send money to the U.K., I think it’s virtually impossible to see how that would be done because you would run into our Proceeds of Crime Act,” Deverill continued, pointing out that criminal law usually doesn’t “see to have extraterritorial application,” but in the case of money laundering, the United Kingdom has “quite a lot of this sort of legislation and regulation, none of which is really directed at cannabis at all,” but applies nevertheless.
The possibility of using cryptocurrency to avoid the restrictions associated with banking (whether domestically or internationally) was also brought up during the panel.
“If you don’t understand cryptocurrency, if you don’t understand blockchain, you’re missing the bigger show,” emphasized Schain. But cryptocurrency as a remedy to the banking restrictions facing the cannabis industry still appears to be a lackluster solution when it comes to moving money internationally. When asked what would happen if someone wanted to redeem cryptocurrency made from cannabis-related businesses here in the United States and then deposit that money in the United Kingdom, Deverill explained that criminal property can take many forms including money. “You’d still be going to jail is the short answer,” he said.