Anti-money laundering laws in the UK are preventing sufficient investment in the cannabis industry in the EU, according to a new report by the Financial Times.
Investors are reportedly fearful about taking the leap of faith into the European cannabis industry in light of the UK’s strict law entitled ‘The Proceeds of Crime Act’.
In the UK, cannabis is legal as a medicinal drug on prescription or as the non-psychoactive CBD, which has recently proved popular with health, cosmetic, and beverage retailers.
The Proceeds of Crime Act 2002 (POCA) details a variety of money laundering offences in section 327-329 – namely offences revolving around criminal property under which cannabis is considered, including being grown and distributed abroad even if it’s legal in the destination country.
The law basically outlines that any benefits received from any actions that would be deemed a criminal offence in the UK are considered criminal property.
This also puts many UK investors seeking to reap the benefits from early investment in the industry in a precarious position, as funds and previous investments they already possess may already be moving into the cannabis sector, and they therefore may inadvertently become vulnerable to committing a criminal offence.
UK investors funding companies based in countries with a legalised status of cannabis may potentially be in breach of the Proceeds of Crime Act and be indirectly found guilty of money laundering.
Similarly, investors dealing with cannabis-related businesses in the US and Canada – where the potential for a big return is extremely appealing – may be caught out by the POCA.
“In general, there’s a big fear around POCA, but it’s misunderstood, and in some cases it’s used as an easy excuse to stop people investing in the sector when it’s probably totally legal,” said Jonathan Summers, chairman of the UK medicinal cannabis company EXMceuticals.
Existing investors in these businesses may take consolation in the knowledge that there are already a couple of defences against the POCA and how it can be interpreted that hold up in court, as in a few sections it states that a person does not commit an offence if they make an authorised disclosure and obtain correct consent.
Existing and future shareholders can safeguard their investments by making an authorised disclosure. They can submit a suspicious activity report to the National Crime Agency (NCA) who can give consent to continue with their ventures.
As reported previously by the Leaf Desk, the laws on cannabis in the UK remain fairly murky – a stark contrast to the US and Canada where free reign has been given to a number of states who have now legalised it for recreational purposes.
Will Brexit save the EU’s cannabis hopes?
The United Kingdom is expected to leave the European Union on October 31. If EU investors are currently afraid of investing in cannabis in the light of the UK’s laws, Brexit may serve as a notable opportunity to hop on the cannabis bandwagon within the EU and leave the UK in the dust.
If the UK leaves the EU without a deal, it will most likely have no effect on the legality of cannabis. However, it may see the UK fall behind on the collaborative progress being made by some EU states that have been moving towards decriminalising the plant.
Many countries within the EU have been debating the legal definition of medical cannabis to further promote the development of medical cannabis products and clinical research, which consequently means that the UK would not benefit from the conclusions or decisions made within this area with a hard Brexit or no deal.
Last week, it was reported that Luxembourg became the first EU country to plan on legalising cannabis, highlighting a change in perspective from the country which admitted that drug prohibition simply isn’t working anymore.
If the EU takes it upon itself to bolster the local cannabis industry following Brexit, the UK may be forced to adapt its archaic laws and finally consider making cannabis prescriptions and even recreational cannabis more accessible.
It’s undeniable that cannabis is one of the most rapidly growing industries in North America, where the blossoming sector is predicted to be worth an annual figure of $47.3 billion by 2024.
Additionally, with the global cannabis market set to become a whopping $66.3 billion industry by 2025, the question of whether the EU will be part of that monumental figure will only be answered in time.
If Europe can begin to adopt cannabis as a budding industry, it could help save the flailing euro and the Eurozone as a whole, which has been tipped to collapse over the coming years due to failure to integrate a fiscal strategy between individual nations and apprehension over another significant country choosing to follow the UK’s lead and leave.
Is it time for the UK to step up?
While the Brexit scenario is potentially a bonus to hopeful investors in the EU, the UK will not want to fall behind and fail to capitalise on the increasingly profitable cannabis industry.
With the uncertainty surrounding Brexit, the UK government could utilise the revenue received from the cannabis industry to prop up the future potential troubles it may run into and secure the many economic and service benefits the sector could bring.
With that in mind, UK Prime Minister Boris Johnson may try to deflect the Brexit disappointment by focusing on this emerging and innovative industry.
The Leaf Desk reported last month that Johnson had hired two prominent cannabis campaigners to his senior team at number 10. This demonstrates that the pendulum may be swinging in the favour of cannabis legislation in the future within the UK.