Insight

Jersey adopts relaxed approach to proceeds of Cannabis investments

Jersey

Recent amendments to the Proceeds of Crime (Jersey) Law 1999 (the Law) are creating a buzz in Jersey.

On 7 July 2021, the Government of Jersey passed certain legislative changes to amend the current definition of criminal conduct in relation to cannabis production, supply and usage.  

The Highs

The knock-on effect of such changes is that, subject to certain conditions, investment in, and receipt of proceeds from, the cannabis sector will no longer be treated as proceeds of crime so long as the returns are from cannabis activity that:

  1. is legal where and when it's taking place
  2. takes place in a country which applies equivalent money laundering controls to Jersey and which reflect FATF international standards concerning money laundering, terrorist financing and financing of proliferation

Providing these conditions are satisfied, cannabis-related funds will no longer be considered as “proceeds of crime” under Jersey law. This will apply even if the proceeds were generated prior to the amendments coming into force.

The Lows

Up until now, the difficulty had always been that Jersey applied a "single criminality test". This meant that if any conduct undertaken in a jurisdiction outside Jersey was unlawful in Jersey, it was deemed to be criminal conduct even if it was perfectly lawful in the original jurisdiction.

The recent changes have amended the definition of "criminal conduct" meaning this is no longer the case in relation to certain aspects of cannabis related activities.

The Deal

The amendments do not provide blanket approval.  As such, when considering whether a cannabis-related investment (or the proceeds of such an investment) complies with the Law, it is important to ensure that:

  1. a thorough investigation is completed in all jurisdictions where cannabis related activities (from production to importation) may have taken place
  2. the cannabis related activities that generated the proceeds were lawful in the place(s) where and when they took place
  3. the jurisdiction(s) in which the cannabis related activities took place are on the approved list of Jersey’s Minister for External Relations and Financial Services (the latest iteration of which can be found here)

The Growth

Globally, the cannabis sector has been flourishing for a number of years.

IQ-EQ regularly receives enquiries from clients wishing to move away from traditional investments and look to invest directly or indirectly in the lucrative recreational and medicinal cannabis sectors.

Until recently, this wouldn’t have been possible.  However, with this latest development, the gateway to investing in cannabis related products and using proceeds derived from cannabis related activities is open.