Cannabis Compliance Risks & How To Avoid Them

In a highly regulated space like the cannabis industry, businesses need to be aware of pertinent laws and work to operate within them. However, the legal status of cannabis is ever evolving as new markets come online and established markets refine their regulations, making staying compliant a challenge. 

What to Know About Cannabis Compliance

In many ways, cannabis compliance is more nuanced and complicated than other consumer industries, and the risks can be severe and even business-ending. Here are a couple things to consider when working to remain compliant. 

Regulations are complex and layered.

Cannabis businesses can fall under both state and local regulations, creating a patchwork of compliance procedures to navigate. Some of this confusion is caused by a lack of federal guidance or oversight due to the illegal status of cannabis at the national level.  

Compliance isn’t always about cannabis.

Often compliance can be related to other aspects of your business or even focus on the consumer. Data privacy is increasingly important to consumers, resulting in measures like the California Consumer Privacy Act (CCPA). For businesses in the medical cannabis space, adherence to patient privacy laws is critical to safeguarding patient information. 

Consumer Safety 

As in any consumer market, the safety and satisfaction of your customers should be a top priority for cannabis businesses. To further ensure consumer safety, regulating bodies have included strict guidelines aimed at boosting product quality and minimizing potential hazards. Required independent third party lab testing has been implemented to verify accuracy in labeling and to improve consumer safety by screening for possible contamination. Likewise, current Good Manufacturing Practice (cGMP) provides guidelines for manufacturers to create quality products that are safe for consumers to use.

Security Requirements

There are also security risks that come with operating in the cannabis space. This is a result of the industry still largely being regulated to the use of cash for transactions and of the lucrative value of cannabis products on the black market. 

In response to these risks, many legal cannabis states and locals have put in place regulations requiring security measures to protect businesses, consumers, and products. These include security guards, lockable doors between entry and sales floor, age checks and customer tracking, and more for retailers. Cultivators often must install fences, lighting, and other similar deterrents to protect their crops. 

Part of compliance, when it comes to security, is properly training employees to identify security risks: such as preventing loopers that make repeat purchases with the goal of reselling on the black market or identifying false or expired identification to protect their business from fraudulent customers.

Inventory Tracking

Legal cannabis jurisdictions require inventory tracking throughout the product’s life from seed or clone to sale. The primary motivator for these requirements is keeping cannabis products from “leaking” to the black market. For some businesses, especially those still operating using analog record keeping, this can be a daunting task. And the consequences of failing to properly track inventory can result in penalties that include fines or losing your business license. Thankfully, there are software solutions that help a wide range of cannabis companies from cultivators to distributors and retailers track and even report inventory data to state regulatory bodies. 

Protecting Your Business

Knowing the compliance concerns facing your business can help minimize the associated risks. However, it is also recommended that cannabis businesses protect their investments against the unexpected with adequate insurance coverage. While it won’t prevent adverse events taking place, it will ensure you have the funds to secure or rebuild your business when they happen. 

More Cannabis Industry News

Want to stay up to date on the latest? You can find more on important topics in the cannabis industry on our blog.

Or get more information about comprehensive insurance solutions for the cannabis, CBD, and hemp industries from CannGen here.  

Disclaimer: Information shared is for general purposes only.