Best Practices

Compliance From The Perspective Of Enforcement: Top 5 Things They’ll Look For

As a cannabusiness owner, you should be sure to always be in compliance

Below are the top five compliance issues that regulators are most often on the lookout for when conducting their investigations. As a cannabusiness owner or employee, you should be sure to always be in compliance with both your state and local jurisdictions’ regulations to ensure a routine inspection doesn’t spiral into a full-blown audit.


  • Sales to Minors

The Issue – Most states where adult-use cannabis has been legalized require customers to be 21 or older. Sales to minors are considered to be amongst the most serious violations that a retail marijuana store can commit because they present a threat to public safety in the eyes of regulators. Therefore, it is necessary for cannabusiness owners to remain in compliance with all of their local jurisdiction’s age requirements. One of lawmakers’ constituents’ major concerns is that children and minors will get their hands on marijuana in legal states because it will become more easy to obtain. Lobbyists pressure regulators to ensure enforcement of age requirements in states with adult use measures in place quite often. Compliance checks are proven tools to reduce the sale of age-restricted products to minors.

The Enforcement – The go-to compliance enforcement tactic that regulators choose to employ is performing undercover checks to see whether retail stores are selling to minors. Underage investigative aids between ages 18-20 pose as customers with invalid IDs and try to gain admittance to retail marijuana stores. In Washington, 18 recreational retail marijuana businesses sold marijuana to an underage investigative aide during a round of compliance checks of retail marijuana stores. In cases such as this, individual employees can be subject to criminal prosecution; businesses may receive citations or fines. Repeated violations and sales to minors can result in a retail store having their license suspended or revoked. Employees must be absolutely sure to abide by the state-mandated identification checking standard when checking ID cards of patrons.


  • Packaging & Labeling

The Issue – Regulations surrounding packaging and labeling of retail marijuana serve to protect non-consumers, including minors, while also further legitimizing the state regulatory regime to protect business owners from federal intervention. A common example surrounding packaging in most recreational states currently is that a company’s product must be packaged and sold in child-resistant packaging.

The Enforcement – As an example of an enforcement attempt to protect children from accidental consumption or ingestion, Colorado introduced regulations requiring all edibles to be physically stamped – each and every individual edible serving – so that people could more easily visually identify that the food product contained THC. If this doesn’t happen, the product can be pulled and the dispensary can be facing compliance violations.


  • Taxes & Cash Flow

The Issue – Figuring out a proper cash management workflow that helps your business remain in compliance with banking laws is critical, considering that not doing so has felony-level ramifications. Securing a banking relationship is also no easy task for a licensed cannabis company, but doing so is critical in order to avoid catching unwanted attention from the IRS.

The Enforcement – Cannabis companies that arouse the suspicion of the federal government for violating one or more of its drug enforcement objectives, outlined in the Second Cole Memo and summarized here, often do so by having shifty financial systems in place. The Department of Justice does not hesitate to work together with the Treasury Department and the IRS to bring money laundering charges against cannabis companies if they are found to be out of compliance with financial laws and regulations. However, this is not likely to happen unless there is an obvious pattern of deliberate noncompliance by the business.


  • Tracking & Inventory

The Issue – It’s important for cannabusinesses to take time to carefully vet and select their inventory control systems. These point-of-sale tracking systems, or seed-to-sale tracking systems, are extremely important to retail stores working to remain in compliance with the law. Be sure to check which system will best integrate with your local and/or state’s required reporting system to maximize workflow and efficiency by integrating systems to avoid double data entry. And, since you should already be doing it often to check that you’re in compliance, make sure the system you choose allows you to easily check your inventory, sales, and taxes.

The Enforcement – Compliance officers are most likely to check a retail store’s numbers through METRC, or Marijuana Enforcement Tracking Reporting and Compliance software. METRC was created specifically to meet Colorado’s needs but has currently been adopted by three other states: Alaska, Maryland, and Oregon. If a retail store’s inventory doesn’t match up with the numbers entered into the state database, notices of violation can be issued, and consequences can escalate from fines all the way up to license suspension or revocation.


  • Illegally Obtained Product

The Issue – An illegally obtained product is that which was sold by an unlicensed, or otherwise illegal, entity to the store. Since one of federal law enforcement’s top priorities is still ending large-scale drug trafficking operations, this is a pretty big priority for state compliance enforcement regulators as well. A good seed-to-sale tracking system is also important when it helps prove that your retail store didn’t obtain any marijuana or marijuana products illegally.

The Enforcement – In Colorado, state inspectors from the Marijuana Enforcement Division can show up to any retail marijuana store at any time to inspect it. These investigators are always sure to verify that the amount of flower and the source from which it came truly match up with the information they have in their real-time inventory database.


You Can Never Be Too Compliant

Remember, remaining compliant is a central pillar of staying not only operational but profitable. A cannabusiness’s whole business model is predicated on a license which requires continues compliance with all state regulations. To continue to be profitable, a retail marijuana store must focus on compliance continuously.

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