New legalized marijuana retailers in the United States, and the potential legal consequences for the Cayman Islands financial services industry, provide a ready reminder of our islands’ interconnectedness with the wider world.
While we here in Cayman tend to be, shall we say, cautious when it comes to the acceptance of new societal norms, there is a difference between rushing to imitate other countries’ experimentations and being cognizant that what is occurring in Colorado, London or Luxembourg can have an impact on us here — even if it is they, not we, who have changed.
We find the legality of U.S. marijuana financing, which we reported on in Tuesday’s Compass, to be a particularly interesting issue. In brief, several individual states in the U.S. have recently legalized marijuana for recreational and/or medicinal use. That has created (or at least “legalized”) a new sector of agribusiness. However, the sale and use of marijuana remains illegal in many other states, and is still considered illegal under U.S. federal law, although enforcement has generally become more lax (or “selective”) under the Obama White House.
The situation has given rise to a dilemma for marijuana entrepreneurs, whose businesses have the blessings of their cities or states, but not their country. In a nutshell, the cannabis is going out and cash is going in, but they’re having a hard time finding banks — regulated under federal law — to accept them as customers.
(This scenario in the U.S. also doubles as a cautionary tale against selective enforcement and patchwork lawmaking.)
At the AML/Compliance and Financial Crime Conference here last week, a Miami lawyer warned Cayman’s financial services providers against doing business with those legal U.S. marijuana dealers because, under Cayman law, such activity would be considered money laundering. Depending on the prosecutor and the venue, money that could be regarded as revenue from a legitimate business operation could, in the next breath, be deemed as proceeds of crime.
While that may seem odd, Cayman’s courts, attorneys and accountants regularly must navigate through similarly complex (and sometimes conflicting) legal statutes from other countries in order to keep our financial services industry humming along. In fact, you could say it’s an integral function of being an offshore financial center.
For the record — despite what your nose may inform you to the contrary as you pass by certain establishments, front yards and other gathering places — marijuana remains an illegal substance in Cayman.
Technically, marijuana also remains illegal in nearby Jamaica, although legislators in our former colonial sister “decriminalized” possession of small amounts of cannabis earlier this year. Cayman’s Police Commissioner David Baines has said that Jamaica’s (even more) relaxed attitude toward marijuana could lead to even greater amounts of the drug reaching Cayman’s shores.
While Mr. Baines is no advocate of marijuana use (nor are we), he is well aware that Cayman’s courts are overwhelmed with low-level offenders facing all manner of petty charges, clogging up our judicial system and delaying the delivery of justice in serious violent criminal cases. Mr. Baines has said that, given the facts, it might make sense to deal with some offenses, such as simple ganja possession or drunk and disorderly behavior, through a system of fixed fines, rather than hauling everybody off to jail and before a magistrate.
We think Mr. Baines’s suggestions are worth consideration. While Cayman should not embrace all trends occurring in other countries, it is wise for us to be willing to be flexible in our own approaches, in order to maintain the culture that we have created for ourselves — rather than breaking under the weight of external forces.