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UAE Defies Global Trend Towards Cannabis Liberalization

As the cannabis industry is growing across much of Western Europe and North America, businesses would be wise to familiarise themselves with the UAE framework to avoid any unintended consequences as seen in the recent case of Billy Hood (see here). The UAE maintains a strict zero tolerance policy on the use of cannabis as further explained below. UAE Framework: Federal Decree-Law No. 30/2021 On Combating Narcotics and Psychotropic Substances (the “Law”). The Law prohibits the procurement, import, export, manufacture, extraction, separation, production, possession, acquisition and abuse of narcotic drugs and psychotropic substances. Cannabis is specifically mentioned and its definition includes cannabis-derived products (including but not limited to hemp, hemp seeds, and THC and CBD-related products). Medical Use: The Law does allow for the use of cannabis for medical purposes strictly and as long as it is prescribed by a licensed physician in the UAE. Clinical trials can also be conducted, however only controlled medical applications of narcotic drugs and psychotropic substances may be administered…

UAE Zero Tolerance Policy on Cannabis

There have been multiple headlines concerning the recent imprisonment of a British football coach (Billy Hood) in the UAE who was found to be in possession of CBD vape oil that contained elements of THC, the psychoactive component of cannabis. Whilst legal in the UK and other western countries it is strictly prohibited in the UAE. In connection with this case, the General Directorate for Drug Control (”GDDC”) stated that Mr. Hood was found to have ”quantities of cannabis oil intended for trafficking in return for financial gain.” The GDDC report that Mr. Hood was found to have various storage bottles, cannabis oil, 570 cartridges for vaping and a large amount of cash when he was arrested (see here). The offence of trafficking carries severe penalties under the UAE law and has resulted in a 25 year imprisonment for Mr. Hood. According to news reports the vape oil that was found in Mr. Hood’s car contained MDMB-4en-PINACA. The UN for…

SAR Filing and Ancillary Businesses

The Bank Secrecy Act (“BSA”) implementing regulations at 31 CFR Chapter X require covered financial institutions to file reports of suspicious transactions with the Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) in circumstances where the bank knows, suspects, or has reason to suspect that the transaction “involves funds from illegal activities.”  The requirement to file such suspicious activity reports or “SARs” arises under federal law.  Marijuana-related business activity that has been legalized under certain state laws—e.g., recreational cannabis dispensaries in Colorado—remains illegal under the federal Controlled Substances Act.  The conflict between state and federal law is, in the words of Attorney General William Barr, “intolerable.” But thanks to FinCEN guidance, banks’ SAR filing obligations with regard to so-called “plant-touching” customers are relatively clear.  But what about so-called “ancillary businesses” that only service plant touching businesses?  Here, the situation is much less clear. FinCen’s 2014 Guidance FinCEN published guidance in 2014—”BSA Expectations Regarding Marijuana-Related Businesses”—to clarify that “the obligation to…

FBI Uses Undercover Agent to Expose Alleged Corruption in State Licensing

In August, the FBI announced that it would be focusing on public corruption in state marijuana licensing. In September, the Mayor of Fall River, Massachusetts was indicted for extorting more than $250,000 in bribes from cannabis businesses in return for assistance with licenses.  In October, alleged Rudolph Giuliani associates Lev Parnas and Igor Fruman were indicted for, among other things, a scheme to make illegal campaign finance donations in connection with a planned recreational marijuana business in Nevada.  Last week, the US Department of Justice announced charges against two officials of the city of Calexico, California (a small city about 120 miles east of San Diego) for soliciting $35,000 in cash bribes from an undercover FBI agent whom they believed represented investors seeking to open a cannabis dispensary.  As far as we are aware, this is the first time that the FBI has used an undercover agent in a case involving corruption in state cannabis licensing. California law provides local jurisdictions…

Podcast – Episode 4 – Legalization as a strategy to combat drug cartels?

Adam Schleifer is a candidate for Congress in New York’s 17th congressional district. He previously worked as an Assistant U.S. Attorney in Los Angeles where he prosecuted violent drug cartels. In this podcast, he talks about why he believes that federal legalization of marijuana would be an effective means of combating drug cartels. Please join us for a fascinating discussion. Global Cannabis Compliance Podcast · Episode 4 – Legalization as a strategy to combat drug cartels?

DOJ No-Action Letters for the Marijuana Industry?

How to eliminate the marijuana black market? As the COVID-19 crisis continues to ravish state budgets, this question has become even more important, particularly in states like California, which have legalized marijuana but have not seen the expected tax revenues due to the persistence of the “tax exempt” black market. Increased enforcement would help, of course. But the best way to eliminate the illegal market is to support market entry by legitimate businesses. Several states have declared marijuana businesses “essential” and exempt from COVID lockdown requirements. Congressional appropriations riders prevent DOJ from prosecuting medical marijuana businesses that comply with state law. Attorney General Barr has stated that he “accepts” the Cole Memorandum (which essentially says that DOJ will not prosecute state-compliant businesses) and that DOJ will not “go after” state-compliant businesses, whether recreational or medical. As far as we are aware, there have been no federal prosecutions of state-compliant businesses during the Trump Administration. Nevertheless, the possibility of federal prosecution, no…

USDA Delays Enforcement of Hemp Testing

The U.S. Department of Agriculture (“USDA”) announced on February 27, 2020, that it would give hemp farmers a 20-month reprieve from a regulation requiring growers of hemp to have crop THC levels tested at laboratories registered with the Drug Enforcement Administration (“DEA”). The requirement had raised concerns in the industry that DEA-registered labs would be overwhelmed with crop samples at harvest time, leading to delays that could cost farmers sales. Delay in Requirement for DEA Lab Registration The 2018 Agriculture Improvement Act (known colloquially as the “2018 Farm Bill” or simply the “Farm Bill”) removed hemp, defined as cannabis containing less than 0.3 percent THC on a dry weight basis, from the scope of the Controlled Substances Act. The 2018 Farm Bill left open many questions about the requirements for establishing that a substance meets the legal definition of “hemp” and required the USDA to issue guidance on this and related issues arising under the Farm Bill. On October 31, 2019,…

The Sessions Memorandum: Two Years Later

January 4, 2020 marked the two year anniversary of the “Sessions Memorandum” in which (then) Attorney General Jeff Sessions rescinded the Cole Memorandum and other Obama era DOJ guidance which essentially stated that DOJ would not prosecute state-compliant marijuana-related activity.  Many saw the statement as a declaration of a new “War on Drugs.” However, a review of DOJ cases brought over the last two years reveals that the Trump Justice Department has largely adhered to the Obama Administration’s enforcement priorities. The Cole Memorandum The Cole Memorandum stated that federal cannabis enforcement resources would be concentrated on cases involving: Revenue from the sale of cannabis going to criminal enterprises, gangs, and cartels,State authorized cannabis activity being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity,Violence and the use of firearms in the cultivation and distribution of cannabis,Distribution of cannabis to minors,Diversion of cannabis from states where it is legal under state law in some…

High return, high risk? AML risks arising from investment in the cannabis industry

The prospective relaxation of cannabis regulations in jurisdictions around the world offers opportunities for investment for UK businesses. However, investors should be wary of potential exposure under UK anti-money laundering (“AML”) legislation and consider taking appropriate safeguarding actions prior to any transaction. Pot luck: cannabis law in different jurisdictions In the UK, it is a criminal offence to produce or supply cannabis under the Misuse of Drugs Act 1971, punishable by up to 14 years in prison and/or an unlimited fine. There is a limited exception relating to supply for certain medicinal purposes which may be supplied under licence. However, there is an emerging global trend towards looser cannabis regulations. In 2018, Canada legalised the production and supply of cannabis for recreational purposes under the Canadian Cannabis Act (production and supply for medicinal purposes has been legal in Canada since 2001). Other developed jurisdictions are expected to follow suit in the coming years. Proceeds of Crime Act 2002 A discrepancy between…

Community Impact Fees and Corruption Risks in State Licensing

The risk of corruption in state cannabis licensing has once again been highlighted by recent reports that a federal grand jury has subpoenaed at least seven Massachusetts cities, including Boston, for information about contracts between cannabis firms and municipalities. The subpoenas apparently relate to “host community agreements,”  a contract between individual cannabis operators and their host community that is required by state law in Massachusetts.  Host community agreements, and similar arrangements in other states that have legalized cannabis, are well intentioned.  But like any arrangement that involves payment for permission to operate, they can be abused for corrupt ends.        Host Community Agreements Massachusetts law requires that, before being awarded a state license, every marijuana business execute a host community agreement (“HCA”), “setting forth the conditions to have a marijuana establishment or medical marijuana treatment center located within the host community which shall include, but not be limited to, all stipulations of responsibilities between the host community and the marijuana establishment…