Guernsey and cannabis proceeds money laundering and the dual criminality test
In many jurisdictions, laws relating to money laundering and the proceeds of crime attempt to impose their standard on worldwide behaviour.
Some jurisdictions, for example, talk (amongst other things) about conduct that
- Constitutes a criminal offence under the laws of that jurisdiction or
- Which would include such an offence if it were to take place there.
The purpose is to ensure that actions criminalised by particularly chaotic or despotic regimes in isolation are not captured within the proceeds of crime regime.
By taking this view, however, jurisdictions are imposing their criminal system onto perfectly legal actions where they are committed, which is a tricky area, particularly with cannabis.
Imagine a situation where a business takes the best legal advice on offer in respect of its conduct in a specific country. And in doing so, is told everything is permitted. But, once that company pays a dividend to an investor in another jurisdiction, the investors will have 'received the proceeds of crime'.
In this situation, many financial services businesses feel they have no option but to throw the baby out with the bathwater and decline business they think is close to the line. The cost of cross-border legal analysis and the risk of sanction is too significant to ignore.
In some offshore jurisdictions, the position is even more explicit – all cannabis business is off the table.
Happily, recent legislative guidance from Guernsey has clarified our position and provided local service providers with the comfort they need to move forwards in this space.
Last year, 10 June 2020, the Guernsey Policy and Resources Committee (effectively our equivalent of a Home Office) issued an Information Notice on Cannabis Cultivation and Production in Other Jurisdictions.
That note helpfully clarified Guernsey's position, making clear that:
- Where drug-related conduct outside Guernsey generates proceeds, those proceeds only fall within the scope of the Drug Trafficking Law if the behaviour that generated them is unlawful in the jurisdiction where it took place (subject to some limited exemptions not relevant to cannabis).
This test of requiring an offence to have been committed in both jurisdictions is known as DUAL CRIMINALITY.
HM Procureur, Guernsey's equivalent of an Attorney General, issued guidance making clear the Law Officers would only prosecute money laundering offences in respect of the proceeds of cannabis business where:
- That business is illegal in the foreign jurisdiction in which it is operated; and
- The person involved had actual knowledge or suspicion that
- The proceeds of the Target Business are the proceeds of cultivation or production of cannabis-related activities, which are unlawful where it occurs.
Whilst broader regulatory obligations in Guernsey still require businesses to make an effort to understand the legality of the business in question, and this gives comfort around the risk of prosecution for an innocent mistake.
Combining the two above clarifications means Guernsey's institutions are increasingly open to the cannabis business.
SOURCED and edited FROM - https://www.collascrill.com/news-updates/articles/money-laundering-challenges-for-cannabis-businesses/