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Government Enforcement

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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…

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,…

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?

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”…

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…

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 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…

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…

Although prosecution of state-legal sales by licensed and compliant cannabis businesses may not be a current priority for federal law enforcement, prosecution of corruption in the industry clearly is. Consider the following, all of which have occurred within the last three months: The indictment of alleged Rudolph Giuliani associates Lev Parnas and Igor Fruman for, among other things, a scheme to make illegal campaign finance donations in connection with a planned recreational marijuana business in Nevada (according to various reports,…

The Federal Trade Commission (“FTC”) announced on September 10, 2019 that it sent warning letters to three unidentified companies for making claims regarding their products that contain cannabidiol (“CBD”), a compound derived from cannabis. The products, which range from “gummies,” and creams to oils, tinctures and capsules were advertised with claims that the products could treat serious diseases and conditions. In prior posts, we have mentioned Food and Drug Administration (“FDA”) regulation of drug claims. When claims are made regarding…