No 'strong' reason for organized crime to infiltrate legal cannabis market: Government memos

Cannabis harvested at the CannTrust Niagara Greenhouse Facility in Fenwick, Ont., is photographed on Tuesday, June 26, 2018.Tijana Martin / THE CANADIAN PRESS

OTTAWA — Federal officials see no reason why organized crime would invest in legal cannabis over any other industry, despite allegations shady money is already tainting the business, an internal government memo says.

Organized crime has dominated the illegal cannabis industry for decades but public-safety and health officials do not see “strong pull factors” for criminal infiltration of the legal business, the memo says. And they appear confident that existing and planned efforts to ensure corporate transparency will reveal any trouble.

The documents, disclosed through the Access to Information Act, show officials from nine federal agencies became seized with the issue early this year after media reports said questionable foreign money was supporting legal marijuana enterprises.

Using offshore bank accounts for investing is not illegal, nor was there evidence such sources were being used by organized crime to profit from the legal cannabis sector, the internal notes say.

The Trudeau government recently legalized recreational cannabis use with the aim of denying criminals hefty profits from the illicit pot trade. The government has overseen licensing of medicinal marijuana suppliers for years.

The February memos say the legal industry’s ability to raise capital should be seen as a positive sign, as long as the money comes from legitimate sources.

“The potential for organized crime to invest in the legal cannabis market through offshore tax havens exists, but does not appear fundamentally different from the potential for such investments in any and all sectors of the economy,” says a memo to the Public Safety Canada deputy minister, the ministry’s senior bureaucrat. “Given the government’s stated objective to strictly regulate the cannabis industry, there does not appear on the surface to be any strong pull factors for organized crime to invest in this sector, as compared to any other sectors.”

The RCMP had no active high-priority investigation related to organized crime’s suspected financial involvement with licensed pot producers, though the police force continued to monitor the situation, the Feb. 27 memo adds.

The French-language CBC’s flagship investigative program, Enquete, reported this month that the government had granted marijuana licences to companies and people with links to the criminal underworld.

Organized Crime Reduction Minister Bill Blair said Tuesday he has not seen evidence of any criminal enterprise infiltrating a licensed producer. “And should I see any evidence of that I am very confident that the RCMP and Health Canada would take all the steps necessary to protect Canadians,” he said during an appearance at the Senate’s question period.

The government is being “a little bit naive on the issue” of criminal involvement, Conservative Sen. Claude Carignan said in an interview.

Earlier this year, the Liberals cited privacy concerns and other challenges in rejecting a legislative amendment backed by Carignan that would have created a public registry of marijuana-company investors.

Blair said Tuesday the cannabis regulations that did come into effect “provide for significant financial transparency.”

The internal memos also note various federal efforts to screen foreign investments, fight international tax evasion and make it clearer who owns stakes in Canadian corporations. In addition, federal, provincial and territorial finance ministers have agreed to work together on making ownership data more accessible.

“This will help law enforcement and other authorities know who owns which companies in Canada, including companies who invest in cannabis production,” say the internal government notes.

Carignan said he is skeptical the government is actually peeling back the layers of secrecy. “This government is talking about transparency but it is one of the most opaque that we have seen.”

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