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Health Canada aims to demand financial information about pot investors to fight organized crime

OTTAWA — Health Canada is planning to take on “considerable new authorities” to compel cannabis producers to provide financial information about their investors, as part of the government’s attempt to crack down on organized crime once recreational marijuana is legalized.

The plan is Ottawa’s latest move to try and prevent criminal groups from infiltrating the legal cannabis market. Police organizations have argued the government has too little oversight over producers and investors in the medical marijuana industry, and have urged the government to set up tougher rules for recreational cannabis.

According to a summary of Health Canada’s 60-day consultation on proposed marijuana regulations published Monday, the government is considering requiring legal producers “to submit financial information (including information about investors) as part of the licence application process.”

On Monday, a government official said the measure would give Health Canada “considerable new authorities to compel the disclosure of financial information.”

The plan marks a change from proposed regulations published last fall, when the government suggested it would guard against organized crime by requiring any shareholders that own more than 25 per cent of a private company to apply for security clearance. The health minister could have denied clearance to anyone associated with organized crime.

But Health Canada is now planning to scrap that requirement, after getting feedback that it would be too easy for shareholders to structure their investments so as to avoid having to apply for clearance.

“At this point in time we want to enhance the security features and we want to make sure that in no way that the organized crime will infiltrate our system,” Health Minister Ginette Petitpas Taylor told reporters on Monday.

Trina Fraser, an Ottawa lawyer who advises cannabis businesses, said the proposed regulations would be an improvement over the existing rules for the medical marijuana industry. “Under the (medical cannabis regulations), there’s no disclosure of ownership and there’s no disclosure of source of funds,” she said. “Listen, anything’s better than what we have right now.”

Police agencies like the Ontario Provincial Police have also sounded the alarm over the involvement of criminal organizations in the medical marijuana industry and the lack of government oversight. “It is … the OPP’s belief that Health Canada’s security clearance processes do not go far enough to prevent the infiltration of organized crime in the medical marijuana industry,” OPP deputy commissioner Rick Barnum told a House of Commons committee studying the government’s marijuana legalization bill last fall.

But Fraser isn’t convinced that requiring producers to disclose their investors’ financial information will be any more effective than the previous security clearance proposal when it comes to fighting organized crime.

“It’s pretty easy to move money around,” she said. “They’d be able to find a way to do it.”

Many felt that failing to provide an opportunity for these individuals to work in the legal industry could result in them continuing their illegal activities

The government’s consultation also asked respondents how they felt about allowing those with “histories of non-violent, lower-risk criminal activity” in the illegal marijuana market to obtain security clearance and participate in the legal industry. The summary document shows a “strong majority” favoured a more lenient approach.

“Many felt that failing to provide an opportunity for these individuals to work in the legal industry could result in them continuing their illegal activities,” it reads.

Fraser said she was pleased to see “strong support for this more permissive and inclusive approach to security clearance.” Still, Health Canada has yet to make a decision about low-level offenders, saying only that the feedback will be considered.

“We believe that if they do not represent a threat to the integrity of the system that we are establishing, that we have to look at ways in which such individuals can be allowed to participate,” Liberal MP Bill Blair told reporters on Monday.

The summary document sets out more details about the government’s planned plain-packaging rules. Health Canada is suggesting packages would need to be child-resistant and either opaque or translucent, with only one “brand element” beyond the product’s name. All packages would have to display a yellow box with a health warning and a standard symbol of a red stop sign containing a cannabis leaf and the letters THC, to warn of the psychoactive ingredient in marijuana.

Health Canada has also provided more information about how it plans to regulate micro-cultivators and micro-processors of recreational cannabis.

Micro-cultivators would be restricted to a “plant canopy area” of 200 square metres, or about half the area between the blue lines of a hockey rink. Micro-processors would be allowed to process up to 600 kilograms of dried cannabis per year.

The Liberals’ pot legalization bill is currently before the Senate. The government is aiming to legalize cannabis this summer.

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