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FCA consults on guidance for cannabis companies
Whilst the technical note is subject to a formal consultation and will only become official guidance once this process has been completed (please see our Corporate and Commercial blog here), the main thrust of the document is unlikely to change, reflecting as it does the FCA’s original stance in September last year. What it does do is provide welcome detail of the evidence would-be applicants will need to provide in order to pass the FCA’s eligibility review which, as the guidance makes clear, is substantial. There are no real surprises in these details but there are several requirements which may not have been fully appreciated before, specifically:
The FCA is quick to point out that its technical note may not be relied upon as guidance on POCA, which of course is the huge area of concern for investors in CRBs, but the proposed blanket application of additional due diligence to all such businesses looking to list in the UK speaks to the FCA’s assessment of the risk these businesses may pose: the FCA will normally only ask for this level of due diligence in exceptional cases where they think there may be a high risk that admission of the applicant’s securities may be detrimental to investors’ interests.
As the FCA notes in its introduction, this new guidance is designed to aid interpretation of the Listing Rules and related legislation but it also serves to put potential investors in CRBs on notice of the risks involved. An investor in an unlisted CRB in the UK or a CRB listed in an overseas jurisdiction may commit a money laundering offence if they receive or deal with income from an aspect of the business which is considered unlawful in the UK only if they know or suspect that the income represents the proceeds of a crime. This latter element is designed to protect the unwitting who may handle property which is in fact the proceeds of crime about which they had no knowledge or suspicion. Suspicion however is a very low bar for an individual to reach before criminal liability might be engaged and the FCA’s guidance and clear stance will make it harder for an investor to argue that they did not suspect the income they received was the proceeds of crime when the potential risks have been so clearly sign posted.
For advice on the issues raised in this blog please contact a member of our team and see our further blogs and news stories in ‘Medical Cannabis: Licensing and Investment Insights’.
Nicola Finnerty is a Partner in our Criminal Litigation team and a leading expert in white collar and business crime, proceeds of crime & asset forfeiture. Over the last 25 years she has been involved in many of the most high-profile, complex criminal and regulatory investigations and prosecutions, both in the UK and in matters which span multiple jurisdictions. Her expertise includes money laundering, fraud & bribery and corruption along with being regularly consulted by individuals and institutions in the regulated sector in respect of the Money Laundering Regulations 2017. Nicola represents high net worth individuals, multi nation corporate clients, financial institutions and professional firms in investigations and proceedings brought by UK enforcement agencies.
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