Legal ramifications that UK cannabis investors should consider

Published Nov 9, 2020 12:00 p.m. ET
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If you are among the many cannabis pot stock investors who are looking to invest in marijuana in the UK, then you might want to take heed. The legal pot stock market comes with complications related to the Proceeds of Crime Act, which came into effect in 2002. Have you ever wondered what the reasons for this are?

Currently, possession, cultivation, and sale of marijuana remain illegal in the United Kingdom, with the exception of some types of medical marijuana. Illegal property is recovered under the Proceeds of Crime Act (POCA) with guidelines that give a broad definition of the word property means, which represents a person's benefit from actions that would amount to a criminal offence in the UK if it was to occur there.

To further explain these guidelines and law proceeds would include investment income and revenue from Canada's legal cannabis industry as criminal property in the UK. Going forward, if one were to acquire property through illegal and unlicensed deals, it would amount to the crime of money laundering, a criminal offence in this region.

How to invest

So, if you want to learn how to invest in a pot stock in the UK, look for the assistance of a Defense Against Money Laundering (DAML)from the National Crime Agency. This includes obtaining the consent before any transaction or investment activity dealing with criminal property is initiated. This would result in no offence being committed under the Proceed of Crime Act. Recently there has been an increase in DAML application regarding this issue.

Moving forward

The alarm has been sounded for changes to the law, arguing that the POCA is out of date and needs to be updated to keep up with market developments. Cries have also been heard from the cannabis industry for guidance since the legal variance is readily noticeable on what is permissible. The Financial Conduct Authority (FCA) in September 2020 offered guidance on marijuana entities that wanted to be added to the list.

The FCA said that proceeds from recreational marijuana, even if the location is within legal boundaries, are proceeds of crime under the POCA guidelines. There is still an issue with proceeds from the medical cannabis business, as they may still be recognized as criminal property. This can include situations where the cannabis company holds a license issued by an overseas pharmaceutical or medicine licensing authority.

Prosecution

It appears that there is little action by the UK enforcement agencies to prosecute these offences. In fact, to date, there have been none. To the United Kingdom cannabis investor, this might seem like a bonus. However, it doesn’t mean that there has been no test case which would provide guidance for the future. As more consultancies and analysts are opening in London, investors need to be very careful about the legal ramifications since there is no indication that recreational marijuana will become legal any time soon.

Final thoughts

Perhaps the cannabis investor in the UK can seek comfort from obtaining a DAML before embarking on investment activity in cannabis companies based overseas, and this would apply even if the cannabis company has a subsidiary in the United Kingdom.

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