The global cannabis industry has grown rapidly in recent years as a number of jurisdictions have liberalised cannabis regulation and trade in cannabis products.

The global cannabis market is predicted to experience a compound annual growth rate of 15% to 30% over the next five years, and shortly before this article went to press the Isle of Man Government announced that the local regulator had issued the first "approval in principle" to cultivate, extract, manufacture, import and export medicinal cannabis.

With all of this in mind, it is easy to see why the sector attracts so much interest. However, the international regulatory relaxation does not mean the sector is without legal risk for investors in the Isle of Man.

This article considers the legal and regulatory risks to investors in the Isle of Man, as well as their advisers, representatives and service providers, before going on to consider the position in other similar jurisdictions. It concludes by proposing a simple legislative amendment that would remove those risks.

It is essential reading for anybody who has invested, or is considering investing, in lawful cannabis businesses, whether directly or indirectly, including through investment products or exchange-traded funds. It will also be of interest to directors, heads of compliance, chief risk officers and money laundering reporting officers of, and the holders of similar positions with, regulated entities.

KEY TAKEAWAYS

The key takeaways from this article can be summarised as follows:

  • Investing in a business that carries on lawful overseas cannabis activities can cause significant legal issues for an investor, or its representatives or advisers, in the Isle of Man.
  • The proceeds of lawful overseas cannabis activities have the potential to form the basis of a money laundering offence. These offences are very broadly framed and can be committed by people who do not use or possess those proceeds.
  • If a company commits such an offence, the criminal liability could also extend to its directors and other officers, including its registered agent.
  • If you are in any doubt about the legal position, seek legal advice.
  • If you or your business might inadvertently be exposed to the issues described in this article, there are some practical steps that can help to mitigate the risk.

For more information and to request the full in-depth article, please contact Garry Manley.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.