Cannabis Insurance laws are changing along with the marijuana industry and keeping on top of marijuana news is important for your cannabis business in order to make informed decisions on cannabis insurance. As the marijuana industry changes and sets new precedent when it comes to cannabis insurance, S2S Insurance Specialists are committed to bringing marijuana news from an insurance standpoint and how to mitigate risk for cannabis businesses, by seeing examples in the news of marijuana businesses who were not properly insured.
Since banks remain reluctant to work with marijuana dispensaries, the industry remains burdened with cash for the most part. Needless to say, the liability to cannabis companies that are holding large amounts of cash are obvious. Marijuana delivery robberies are becoming very commonplace in places like California.
In one town close to San Francisco called Concord, police are reporting marijuana delivery robberies are as frequent as four times a month. It only makes sense for these cannabis dispensaries to find the right sort of marijuana coverage to protect against these robberies. Lt. Mike Kindorf with the Concord Police Department recently spoke to reporters concerning these marijuana delivery robberies.
“There’s a significant increase and talking with other law-enforcement agencies,” Kindorf said. “I know that Concord is not alone in that crime trend that it’s occurring in other parts of Contra Costa County as well.”
Because cannabis is still illegal in the eyes of the federal government, California pot sellers are stuck dealing in cash for the most part, which is luring in the criminal element, even more than the drugs.
“In a few robberies that we have they’ve targeted cash and not even touched the marijuana,” said Kindorf.
In December, a driver showed up for a drop off in the parking lot of the Bank of America near the Sun Valley Mall and was robbed by a handgun wielding suspect.
The thief grabbed both the pot and the cash but police later found a duffle bag stuffed with pot products abandoned by the side of I-680.
Concord Police believe that it’s a crime that’s underreported and even in the cases where police are called in, the victims often don’t want to cooperate.
“Even though it’s legal it seems to be a little bit of an off the grid business,” Kindorf said. “It’s kind a virgin territory that we’re in for sure.”
For instance in that armed robbery that happened near the Sun Valley Mall, police have a suspect but they’re having a hard time getting the victim to call them back so we can make a positive ID.
The financial risks associated with owning a marijuana company are made particularly obvious by so much cash being present. Cannabis product liability and insuring against theft is essential considering how often these marijuana delivery robberies are occurring. Reach out to S2S Insurance Specialists, Eric Rahn and David Rahn with any questions.
After Canada legalized marijuana in 2018 and Canadian cannabis companies completed exporting contracts for medical marijuana with European countries and other nations around the world, they immediately began violating international drug treaties. Either marijuana needs to be rescheduled by the U.N. so that those violations stop or they need to take some sort of action. The World Health Organization is recommending that they reschedule marijuana.
The mostly likely scenario seems to be that the U.N. will reschedule marijuana. The European Union Parliament recently rescheduled marijuana, so the trend seems to be heading in that direction in general. If marijuana were removed from its Schedule I status here in the United States, more cannabis insurance carriers would become available and we would see the cannabis industry begin to resemble more traditional industries and will face the same sort of liabilities.
The World Health Organization (WHO) is calling for whole-plant marijuana, as well as cannabis resin, to be removed from Schedule IV—the most restrictive category of a 1961 drug convention signed by countries from around the world.
The body also wants delta-9-tetrahydrocannabinol (THC) and its isomers to be completely removed from a separate 1971 drug treaty and instead added to Schedule I of the 1961 convention, according to a WHO document that has not yet been formally released but was circulated by cannabis reform advocates.
Marijuana and cannabis resin would also remain in Schedule I of the 1961 treaty—they are currently dual-designated in Schedules I and IV, with IV being reserved for those substances that are seen as particularly harmful with limited medical benefits. (That’s different from the U.S. federal system, under which Schedule I is where the supposedly most dangerous and restricted drugs—like marijuana, heroin and LSD—are classified.)
Once marijuana is viewed like any other normal industry here in the United States, cannabis liability insurance, marijuana D&O insurance, cannabis workers compensation coverage and more will be commonplace. In the meantime the liabilities to insurance businesses are still very real and it behooves cannabis entrepreneurs to understand their marijuana coverage alternatives. Reach out David Rahn or Eric Rahn, your cannabis insurance specialists, to find out more.
https://www.s2sinsure.com/wp-content/uploads/2019/02/the-world-health-organization-is-recommending-rescheduling-marijuana-which-could-open-doors-for-cannabis-insurance-carriers.png13332000David Rahnhttps://www.s2sinsure.com/wp-content/uploads/2019/04/logo.svgDavid Rahn2019-02-20 11:41:152019-02-19 16:20:53International Forces Pressuring United States to Reschedule Marijuana
Finding dispensary insurance, cannabis product liability coverage, marijuana crop insurance and other forms of coverage for cannabis is challenging due to the Schedule I status of marijuana on the federal level. Finding cannabis insurance specialists is also challenging because the industry is so new and insurance professionals are all still learning. That does not mean though that some insurance agents have not spent more time understanding the unique financial risks associated with being a part of the cannabis industry than others.
The banking restrictions may be one of the largest hurdles preventing larger insurance carriers from offering marijuana related insurance policies. The banking system is essential for most insurance companies and the fear of being accused of infractions such as money laundering by working with companies that touch the cannabis plant stops the large players from taking the risk.
“The whole conversation of cannabis crosses the desks of the most senior leaders of the insurance community as they determine whether or not they want to play in this game,” said Tom Fitzgerald, global broking officer at insurance broker Aon Plc. “There’s not every insurance company in the world anxious to write this stuff, at least not yet.”
“Just a few handful of carriers” will write policies for cannabis-related firms, said James Nelson, a retail insurance broker and owner of New Growth Insurance in Alameda, California.
Hartford, based in the Connecticut city of the same name, said it’s abstaining from the industry, and “that is unlikely to change” while the federal ban is in place.
“We do not underwrite any business that sells, grows, transports or distributes marijuana or products derived from marijuana cannabinoids,” the company said in an emailed statement.
There are all sorts for cannabis coverage alternatives for dispensaries, medical marijuana doctors, cannabis product liability insurance and much more. It has not been very easy for companies working with marijuana to find answers on how to cover their financial risks.
While other insurance companies may be too nervous to offer coverage to marijuana companies, S2S Insurance Specialists has embraced the burgeoning cannabis industry. Get in touch with Eric Rahn or David Rahn to discover the best marijuana insurance alternatives available to your company.
https://www.s2sinsure.com/wp-content/uploads/2019/02/understanding-why-cannabis-insurance-is-hard-to-come-by.jpg333500David Rahnhttps://www.s2sinsure.com/wp-content/uploads/2019/04/logo.svgDavid Rahn2019-02-18 11:50:402019-02-18 13:01:27Understanding Why Cannabis Insurance Is Hard To Come By
If California marijuana insurance is a major topic at a wholesaler conference then you know that it is important. California saw over $9 billion in general insured losses last year over the two November wildfires alone. Also, a massive court decision known to as the Dynamex decision is shaking the industry.
The California Wholesaler Association conference is a major conference for insurance agents in the 5th largest economy in the world. California is lacking in cannabis insurance specialists but the industry is ramping up quickly after recreational marijuana became a legal regulated market in 2018. A little over a year later, California is still working out many details and has a long way to go, but the California marijuana insurance business is likely to become much larger.
A number of marijuana insurance agents were present to speak and learn at the conference and spoke with an Insurance Journal reporter. The CEO of one particular insurance company had this to say:
He said most cannabis operators seek the same kind of insurance many businesses want, such as general liability, workers’ compensation, slip and fall.
He said growing facilities with their expensive equipment and sophisticated operations need a lot of insurance.
“We’re seeing high property limits,” he said.
Brown said some businesses have been in operation long enough to have a good loss history, but many operated in grey areas before California legalized adult use, so that history isn’t always a dependable one for underwriting purposes.
Underwriting as a whole for the cannabis industry can be tough, he said, because there are also numerous companies with no loss history at all.
“The business interruption exposure, for example, is a vague and nebulous thing for a lot of startup operators,” he said.
Tatum said that because banks are regulated by the federal government, which still considers cannabis a controlled substance, that many operations have an abundance of cash on hand.
“Finding coverage for the actual cash on the premises has been a problem,” he said.
Quilici said that educating her clients on the ins and outs of cannabis coverage has become a big part of the job, as has educating herself.
“I’ve got retailers that know this business than I ever could, and I’ve got retailers that know nothing,” she said.
Cannabis coverage is essential and it is not surprising that marijuana business owners are looking for the same sort of Directors and Officers insurance, slip and fall insurance and other logical forms of coverage as mainstream industries. California has been the home of illegal marijuana grows since the 1960’s and the idea of getting any sort of marijuana insurance coverage probably never really occurred to growers.
The marijuana industry is growing rapidly and so proper cannabis insurance coverage will be as normal for cannabis companies as any other industry. Cannabis crop insurance is certainly important with the wildfires in that region of the country. Beyond that, normal dispensary insurance, marijuana lab testing insurance and other forms of coverage become that much more important the bigger the California marijuana industry grows.
https://www.s2sinsure.com/wp-content/uploads/2019/02/california-marijuana-insurance-is-very-important-considering-all-the-wildfires-burning-down-cannabis-crops.jpg6821024David Rahnhttps://www.s2sinsure.com/wp-content/uploads/2019/04/logo.svgDavid Rahn2019-02-15 16:21:322019-02-18 11:28:03California Marijuana Insurance Big Topic at Wholesaler Association Conference
The amount of liability in the marijuana industry is staggering. Possibly the greatest financial risk of owning a cannabis dispensary, or any business that handles the marijuana plant on a regular basis, is that most cannabis based companies are left with no choice but to work on a cash-only basis leaving them vulnerable to robbery. The House Financial Services subcommittee met recently to discuss the challenges banks are facing by working with cannabis companies and potential solutions. The meeting included discussing the newly introduced SAFE Banking Act of 2019, also known as the Secure And Fair Enforcement Banking Act of 2019.
While some robberies at cannabis companies involve violence, including one incident in Colorado that left a security guard dead, the greatest threat of robbery may be internal from trusted employees. The temptation when cash money is laying around is often too much to overcome. Dispensary insurance is of the utmost importance with the current banking challenges that cannabis companies must contend with. Cannabis insurance specialists are difficult to come by since most insurance companies steer clear of any business that is associated with a Schedule I controlled substances.
While the House of Representatives may vote on and pass the SAFE Banking Act of 2019 during the current legislative session, the bill will face a much greater challenge passing in the Senate. Senate Majority Leader Mitch McConnell does not support the legalization of marijuana, or anything that furthers marijuana reform, even though he does support the legalization of hemp. Regardless of what happens, S2S Insurance Specialists are here for any cannabis company’s insurance needs as we have attained a clear understanding of the financial risks associated with the cannabis space.
“The conditions are as good as they’ve ever been for legislation to proceed,” said Ryan Donovan, chief advocacy officer for the Credit Union National Association, a trade group that lobbies for credit unions. “75% may be a little high, but [the odds] are better than they were in the last Congress.”
“This hearing is part of an effort to try to generate some momentum in the House of Representatives,” Donovan said. Prospects for cannabis-banking legislation “might be easier to see once we get past the shutdown threat and get into more of a normal legislative environment,” he added.
“The safety of thousands of employees, business owners, security personnel, police officers and community members is in your hands,” Neill Franklin, the Law Enforcement Action Partnership’s executive director, told the subcommittee on consumer protection and financial institutions. LEAP is a nonprofit known for opposing the “war on drugs.”
The ranking member of the House Financial Services subcommittee, Missouri Rep. Blaine Luetkemeyer, argued against the SAFE Banking Act of 2019 and his thoughts were echoed by the chairman of Smart Approaches to Marijuana, Jonathan Talcott.
“You really need to address the Controlled Substances Act and its prohibition on marijuana … before any of the proposed changes and safe harbors would be effective,” Talcott said in his testimony. Luetkemeyer made a similar point, saying lawmakers were “dealing with an illegal industry at the federal level” and “putting the cart before the horse” by focusing on the industry’s banking needs.
Until marijuana is rescheduled on the Controlled Substance Act, or completely descheduled, cannabis companies must make sure that their financial risks are covered and marijuana insurance policies are the smartest alternative. We offer CBD product liability insurance, cannabis crop insurance, D&O insurance and cannabis dispensary insurance. Contact Eric Rahn or David Rahn, your cannabis insurance specialists.
https://www.s2sinsure.com/wp-content/uploads/2019/02/safe-banking-act-of-2019-would-protect-banks-working-with-cannabis-companies-1.jpg30364048Eric Rahnhttps://www.s2sinsure.com/wp-content/uploads/2019/04/logo.svgEric Rahn2019-02-14 11:13:392019-02-14 11:18:16SAFE Banking Act of 2019 Would Protect Banks Working with Cannabis Companies
Opinions on the emerging cannabis industry are so numerous that they are beyond my ability to track them. Everyone is either claiming to be an authority on the business of legal marijuana, or are striving to become the authority. The truth is that nobody is a complete authority on legal cannabis. It is still too new of an industry, and the proof is how inconsistent the rules and regulations pertaining to marijuana/hemp/CBD vary from state-to-state, and within each state! One moment Michigan has a restricted medical marijuana program, the next moment they have legalized adult-use marijuana. How can anyone be an authority, when fragmented state and federal regulations continue to evolve?
You should all know by now the largest barrier to entry into this industry is the Schedule 1 status of cannabis. This particular legal barrier unavoidably looms in our background everyday. Attending B2B cannabis conferences, from smaller more intimate ones such as C-LAB events to massive conferences like MJBiz, I consistently listen to speakers, vendors and attendees bring up the same topics. All of these cannabis conferences serve to educate and communicate, but no matter where I go people still talk about banking restrictions, merchant service problems, taxes being too steep to turn a profit due to IRS Tax Code 280E, inability to engage in interstate commerce and all sorts of marketing challenges. For us of course, it is the barriers to suitable marijuana insurance policies that we focus on the most.
How long does it take for a state regulated body to be funded, staffed, implemented, grow and stabilize? Depending how fast current laws are adopted or changed, it will take a long time and a lot of discussions as to how the cannabis Industry, the federal government and the cannabis approved states will come together to implement best in classlicensing and regulations, product quality standards, taxation and enforcement. Through this evolution of an industry, we will witness successes and failures along the way.
Look at Massachusetts, voters legalized adult-use marijuana in 2016, and it took over two years for sales to begin with only two dispensaries allowed to open by December of 2018. Florida has multiple lawsuits filed over unconstitutional medical marijuana laws that do not match what voters approved in 2016. State laws are changing on a regular basis and have not even stabilized in states like Colorado and Washington which began selling adult-use cannabis in 2014 and medical marijuana well before that.
The evolving marijuana industry is full of so many financial and regulatory uncertainties that insurance policies for cannabis companies are not consistent from one carrier to another. Marijuana insurance companies like S2S Insurance Specialists have to stay current with many state and federal regulations. Federal prohibition continues to plague the cannabis insurance industry by preventing it from operating in a free market environment. These restrictions have made most big insurance companies reluctant to enter the cannabis market place, therefore we are restricted to a couple of surplus lines carriers.
Best practices in business are still evolving in the cannabis space. The time for cannabis entrepreneurs to build, scale and stabilize their businesses is now! We have all read and heard about the growth projections of the cannabis industry. Projections that cannabis will represent the next $20 billion industry are probably conservative. We will eventually rival the multi-billion dollar snack, alcohol and pharmaceutical industries. As companies scale up, management teams become the forefront of any successful operation.
Most professionals I have met have pivoted into the cannabis Industry from other specialized professions. Like myself, they see an opportunity to do something new and exciting. We need to bring the best of our skill sets to this very young and emerging industry. Come into this industry with your eyes wide open. The opportunities in cannabis are great, but the competition is fierce. It takes more than just a love of marijuana or the passion of wanting to see the social injustice of marijuana prohibition come to an end. It takes a strong understanding of the fundamentals of business. It takes organization and constant research to understand the next big trend or new state mandated rules.
As cannabis insurance specialists, David and I stay current on industry trends, data points, cannabis research and the full spectrum of the supply/distribution chain. The biggest problem we all face in this young emerging industry is the lack of credible and actionable data. Like most institutional markets, insurance relies heavily on the data acquired across the industry in order to rate, compare and assess risk. We also follow current industry news and insurance trends in cannabis.
The most recent industry change was the passing of the2018 Farm Bill. It allows for broad cultivation of hemp, not simply pilot programs for studying market interest in hemp-derived products. Its language clearly allows for the transfer of hemp-derived products across state lines for commercial use and other purposes. It also puts no restrictions on the sale, transport, or possession of hemp-derived products, so long as those items are produced in a manner consistent with the law.* Now that hemp will be descheduled, along with hemp derived CBD, hopefully insurance for these products will be more widely available and competitive. There is hope that states will offer state sponsored crop insurance for hemp growers.
Another big trend we are seeing is the need for companies to raise capital for future growth. Many cannabis companies are looking towards the Canadian stock exchanges such as the TSX, VSE and CSE to raise funding. When companies engage in selling shares of stock to the public, there is a greater need for Directors and Officers Liability insurance (D&O). A Directors and Officers Insurance policy protects you as a director or officer of the company if your actions negatively affect the company’s profitability or if the company is sued because of your actions. The policy will pay for legal damages and fees. D&O helps preserve the company’s cash flow against expensive legal bills. These sorts of risks will become even more apparent as the number of cannabis stocks continue to grow and the amount of active investors and traders diligently following these companies hope to capitalize on the market by challenging management and business development goals.
We continue to follow various insurance claims affecting the cannabis Industry. We are seeing claims in the product sector, D&O claims from shareholders, employment dismissal issues and crop/property claims due to the fires on the west coast. California’s gray market persisted for 20 years, but over the summer it became mandatory that any cannabis product intended for commercial sale undergo product safety testing by state certified labs. A Sacramento testing facility that had serviced the industry for years was just suspended for failing to test for 22 pesticides. The cannabis was distributed to California consumers and the recall will cost many companies in legal fees, fines and potentially their licenses while the state courts figure out who is at fault for the lost revenues. Stories like this will hopefully start to weed out the bad actors in the industry.
We highly recommend that management review their insurance policies, policy limits and deductibles every six month to make sure that as your business grows, you are maintaining adequate coverages. Many things change in the course of a year, it is important to constantly manage your risk assessments. S2S Insurance Specialists are dedicated to helping you insure, from seed to sale, all your cannabis, CBD and hemp insurance needs.
Reach out Eric Rahn and David Rahn to find the cannabis insurance policies that are most suitable for your company.
https://www.s2sinsure.com/wp-content/uploads/2018/12/hemp-field-3661214_960_720.jpg720960Eric Rahnhttps://www.s2sinsure.com/wp-content/uploads/2019/04/logo.svgEric Rahn2018-12-18 13:53:072018-12-18 14:08:39The Evolution of the Emerging Cannabis Industry
Cannabis advocates, for the most part, are very well versed in the socio-economics of legalizing cannabis. They can tell you historical criminal data, they can talk to you about the health benefits and impacts of the plant along with many other data points. While all that is fantastic, if you’re new to the world of recreational and medical cannabis, you may have some basic questions about what type of marijuana products are out there.
Let’s be honest, many people are interested in cannabis for its psychoactive effects, but what if you’ve steered clear of marijuana up until this point and know nothing. What do you do? We at S2S Insurance Specialists are not only experienced insurance specialists, but we take all aspects of the cannabis industry seriously as well. Check out these tips below on how to shop for cannabis based on the experience you believe suits you the best.
The basic marijuana product, the dried and cured buds of the cannabis plant, is now called flower. Dispensaries often display it in glass jars for customers to stick their noses in.
Flower comes in three main categories. Indica, sativa and hybrid. According to stoner tradition, indicas induce a nighttime sedentary effect, while sativas offer a peppier daytime buzz.
While virtually everything available in dispensaries today is a hybrid of some kind, indica became associated with certain observable characteristics like broader leaves, and most importantly, its earthy smell. Sativas, meanwhile, are generally associated with bright smells like citrus and pine.
Each of the three main categories are divided into thousands of “strains” just as there are many varietals of grape. The difference is there is a formal recognized difference between, say, malbec and merlot grapes. But even with the best known marijuana strains – such as sour diesel, OG kush or durban poison – it is largely up to the beholder to determine what a plant is.
Savvy buyers understand that what one shop calls sour diesel, won’t necessarily resemble what another shop calls sour diesel. The defining trait of a sour diesel – a diesel-y smell – is up to the beholder to look for or not, as she wishes. Similarly if the sour diesel isn’t selling, there is nothing to stop a dispensary from renaming it something that will sell better.
Labels are not especially helpful, but that doesn’t mean customers can’t tell the difference between good pot and bad pot. Or, given the abundance of product available in legal places, good pot and even better pot.
Marijuana and many other plants get their smell from chemicals called terpenes. And many connoisseurs look for rich terpene bouquets. Other aromas, Kornberg said, can clue buyers into lower-quality product. The smell of hay can indicate the plant was improperly cured or dried, she said, and is “kind of the worst”.
As interest in cannabis grows, the demand and market for cannabis related businesses will grow as well. No matter what aspect of the cannabis industry you are interested in, do not neglect risk management while you’re putting together your business plan. Insurance is a necessary component of any business plan and it is no different when starting and running a cannabis related business. Contact Eric Rahn of S2S Insurance Specialists to discuss your risk management strategy.
CBD, there are a lot of questions about what it is, what it can do, and whether it is legal. We’ll help clarify some of this for you to help you make a decision as to whether it is right for you. What is CBD? CBD is officially known as cannabidiol, it is typically extracted from the cannabis or hemp plant. One of the main keys to the extract is that it is not psychoactive because it does not contain tetrahydrocannabinol or THC. Without THC, there is no high. The ability to use cannabidiol without getting high makes it an attractive option for many that seek the medical benefits of cannabis and hemp, but want to avoid the high for various reasons.
Cannabidiol oil is steadily gaining momentum in the health and wellness world, because there is evidence that suggests it may help treat a variety of ailments from chronic pain to anxiety. There is some controversy around CBD oil because of the stigma attributed to recreational marijuana use. There is growing awareness about the possible health benefits of this natural elixir.
Until now, CBD has existed in a kind of legal gray area: In many places it is not necessarily legal, but it’s also not illegal. But this month, the passage of the 2018 Farm Bill will remove hemp and CBD from the Drug Enforcement Administration’s list of “Schedule 1” controlled substances, making it an ordinary agricultural commodity and allowing it to be legally sold in all 50 states.
With laws around it relaxing, CBD is going mainstream. Beverage giants like Coca- Cola KO, +2.52% and Pepsi PEP, +0.78% are eying CBD-infused beverages as consumption of traditional soda declines. The market for CBD products is anticipated to grow to more than $2 billion in total sales by 2020. People are using CBD for anxiety, sports injuries, and face serums, and even giving it to their pets.
Cannabis plants contain hundreds of chemical components called cannabinoids, but the two main ones are delta-9-tetrahydrocannabinol (THC) and cannabidiol. THC is an intoxicating substance that interacts with endocannabinoid receptors in a user’s brain, activating reward mechanisms that produce dopamine and get a user high.
CBD does not affect these receptors the same way and, therefore, does not have a psychoactive effect. Like THC, the extract can be consumed in liquid and other edible forms or through a vape pen.
While CBD is advertised to treat insomnia, chronic pain, depression, and anxiety, there is little scientific evidence to prove it is effective for these ailments. Cannabidiol may be effective for depression and anxiety treatment, studies on rats have shown, but there’s little research on the effects of the extract on humans.
If you are looking into starting a cannabis related business around cannabis and hemp extracts, your need for a risk management strategy does not change just because the product does not have THC in it. Business owners should reach out to a cannabis insurance specialist like Eric Rahn of S2S Insurance Specialists to help with your insurance needs.
https://www.s2sinsure.com/wp-content/uploads/2018/10/MW-GS541_CBD_va_20181026172655_ZH.jpg501890David Rahnhttps://www.s2sinsure.com/wp-content/uploads/2019/04/logo.svgDavid Rahn2018-11-19 11:22:042018-11-16 20:13:08CBD And What You Need To Know About it | S2S Insurance Specialists
The enthusiasm towards the marijuana industry is palpable. The cannabis space is growing at a remarkable pace and both voters and legislators are going through the slow process of adapting laws to make room for the industry in the mainstream. However, it is easy for a marijuana company to get lost in the enthusiasm and lose sight of the bigger picture. The reintroduction of cannabis into the mainstream at this time, an era where technology is advancing at a speed most people are challenged to keep up with, presents risks any cannabis entrepreneur should stay current with on a consistent basis. These are the sorts of risks that only the proper marijuana insurance policies may be able to cover. Many companies may feel they have solved their cyber security problems by having anti-virus software throughout their network of company computers. But, many cyber attacks have little to do with the vulnerabilities present in a computer, but instead with the users of the computers.
Recently, the SEC issued a warning to mainstream publicly traded companies that they will soon have little tolerance for negligence in maintaining cyber security. While the advancement of technology is swift, companies have now had decades to become accustomed to electronic financial transactions and the criminal efforts to fool companies into making deposits into fraudulent accounts. Sections 13(b)(2)(B)(i) and (iii) of the Securities Exchange Act of 1934 (“Exchange Act”) requires that companies “devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorization,” and that “(iii) access to assets is permitted only in accordance with management’s general or specific authorization.”
In the SEC report, none of the companies referenced, which lost nearly $100 million in total to cyber fraud, were found to be guilty of negligence. However, the report is a clear warning by the SEC to these companies and others, that anything but the strictest protocol for tracking transactions will be sufficient for publicly traded companies moving forward in order to protect investors. Hardly any of the funds stolen from these companies were recovered. To have a reparation filed against a company by the SEC for negligence in accounting controls on top of losing millions of dollars would scare shareholders away. The incidents referenced in the report involved the simple use of email. In some cases, an email address was created that looked like an official request for payment from an executive at a vendor. On the surface the email may have looked official, but employees working in processing plainly rushed through their tasks without reading emails thoroughly, or they would have likely identified discrepancies. The other cases involved hacking into company email accounts and manipulating financial ledgers. The criminals blended future transactions into the their look-alike vendor accounts with legitimate future transactions. The SEC’s point should be well taken. The stolen funds were ultimately due to the fact that the companies were not following their own sets of checks and balances and failed to identify the scams, when a diligent eye would have caught them.
Now, if we take a look at the cannabis industry, the vulnerabilities to these sorts of attacks seem obvious. Cannabis companies have much more to track on their own due to the federal Schedule 1 status of marijuana. A marijuana business does not have the benefit of bank record keeping to track transactions since most banks refuse to accept the funds of a cannabis company in fear of violating anti-money laundering laws. Granted, cyber attacks like the ones identified in the SEC report rely upon electronic transactions, therefore a cash business would not be the target of this specific sort of cyber crime. However, as long as a criminal can isolate a flaw in a company’s tracking of financial transactions, they will see an opportunity to steal. Should the federal government look to legalize cannabis, and banks do start accepting the funds of the marijuana industry, then cannabis companies may be the biggest target of all. Phases of transition are where mistakes are most likely to occur, and hackers know it.
Tracking products all the way from seed to sale is not only happening in the cannabis industry. With the creation of blockchains that are commonly associated with cryptocurrency, comes a means to create verifiable ledgers for all sorts of transactions that are not centralized and therefore are not as easy to hack. So, if you want to know that you are eating a tomato grown on a certain farm in the United States, the tracking system can confirm where the tomato was grown and where the seed came from. To do this, a strict log of all transactions must be kept and quickly verified by third parties. Any discrepancy in that log throws up red flags and any fraudulent transactions can be rooted out quickly. It is this sort of organized tracking that is the way of the future and intended to eliminate these very sorts of fraudulent cyber attacks. While the advancement of technology provides new and different opportunities to steal, it also provides solutions.
The unfortunate incidents cited by the SEC in their report shows that human involvement is still very necessary when it comes to accounting and logging transactions. It is necessary for all protocol to be be followed exactly on a consistent basis in order to prevent these sorts of breaches that can result in the loss of millions of dollars. Computers are nothing without people still, which means that human error will continue to be a factor. However, cyber security or data breach insurance for a marijuana company can counter those financial losses. It is up to the pioneers of the cannabis industry to set the standard, once marijuana goes completely mainstream, by recognizing cyber threats and continuously staying updated on new threats. Things are happening fast, and should marijuana become rescheduled or even descheduled, then a multi-billion dollar industry will suddenly be thrust upon the banking sector. Clever criminals will identify this transition phase as a time when sloppy accounting and other slip ups are likely to happen leaving cannabis companies vulnerable to cyber attacks.
Eric and David Rahn of S2S Insurance Specialists understand these cyber risks well. With over two decades of working experience in mainstream business and watching technology advance at such a rapid pace, they can help you understand the cyber security risks of your marijuana company. They can review with you the cannabis company data breach policies that would most benefit your company. Contact Eric and David Rahn, the cannabis insurance specialists, for more information.
https://www.s2sinsure.com/wp-content/uploads/2018/11/New_office.jpg27363648David Rahnhttps://www.s2sinsure.com/wp-content/uploads/2019/04/logo.svgDavid Rahn2018-11-01 10:05:392018-11-05 09:39:34The SEC May Find Your Marijuana Company Negligent in Cyber Fraud Cases
The cannabis industry in the United States and across the world continues to expand at a rapid pace. Canada, Jamaica, Argentina, Spain, The Netherlands, even Russia have either decriminalized cannabis for personal use or legalized recreational use, growing and the sale of cannabis. There are many other countries and regions where legalization and decriminalization are happening as well. As the world becomes more accepting of cannabis and begins to remove the stigma, we should take a closer look at the history of cannabis.
Much of the reasoning behind the legalization of cannabis deals directly in the history of cannabis. Cannabis is not something that hippies discovered for the first time during Woodstock. The use of cannabis in medicine can be tracked as far back as 5,000 years ago to Asia. It showed up in the Americas with the first European settlers because of it’s textile uses. Below is an excerpt from “A Complete History of Marijuana, According to Scientists” found at Marijuana Moment.
Before its medical properties became known, the fibrous plant was commonly used for textile manufacturing. Archeologists have discovered “sophisticated plaited basketry” based on cannabis at Czech Palaeolithic sites, for example.
“In fact, it has been referred to as the oldest known cultivated fibre plant and even today it is used as a constituent of fishing nets,” the researchers, who are from Italy and Sweden, wrote.
There are a couple schools of thought on this topic. But from a “Western-centered viewpoint,” researchers generally believe that natural events caused the plant to be accidentally burned, inadvertently revealing its “psychotropic nature.”
There’s certainly room for debate on this, but the researchers said that the timeline started about 5,000 years ago in China. The so-called “father” of Chinese agriculture, emperor Chen Nung, included the plant in the first Chinese pharmacopeia. That text said cannabis was prescribed for “fatigue, rheumatism and malaria.”
Marijuana didn’t show up on American shores for thousands of years after it was first discovered. It was “not known in the Americas until the ar
rival and settlement of the first European colonists,” according to the researchers. “During this period [cannabis] was used primarily for the strength and the resistance of its fibres.”
Swedish botanist Carl Linnaeus coined the term “Cannabis sativa” in the middle of the 18th century, the researchers wrote. Subsequently, French naturalist Jean Lam
ark distinguished between Cannabis sativa and Cannabis indica, writing that the former was a European plant and the latter came from “Indian origin varieties.”
This snippet of the history of cannabis tells us that it has been around a long time with many uses and possible benefits. What the history of cannabis also tells us is that we are likely only scratching the surface as to what the full benefits of the plant are. Due to the Schedule I status of Cannabis, which makes it a controlled substance in the United States, there has been limited ability for scientists to study cannabis. Legalization of cannabis allows for scientists to take the history of cannabis and use modern scientific testing technology and knowledge to understand the plant and its benefits better. At S2S Insurance Specialists, we not only want to help you with your risk management needs, but we are also cannabis legalization advocates. A better understanding of the history of cannabis, the benefits of cannabis and the legal implications of cannabis, assists us in helping our clients in this complicated field. Contact Eric Rahn today for your cannabis business risk management needs.
https://www.s2sinsure.com/wp-content/uploads/2018/10/s2s-insurance-eric-rahn-history-of-cannabis.jpg405720Eric Rahnhttps://www.s2sinsure.com/wp-content/uploads/2019/04/logo.svgEric Rahn2018-10-26 09:10:422018-11-05 09:39:35The History of Cannabis - A Quick Look At The History of the Plant
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S2S Insurance Specialists LLC is an international insurance intermediary and brokerage firm, specializing in the placement of insurance and other risk insurance services to businesses operating in the Medical And Recreational Marijuana Industry.