Organized Crime Remains Interested In Cannabis Even After Legalization

By Andrew Richards

One of the arguments for legalizing marijuana is that it takes a source of revenue away from organized crime. However, that is not entirely accurate. Legalization and control of cannabis reduces the mob’s take home pay, but it doesn’t eliminate it completely. The economics of black markets simply makes it too attractive.

Tobacco offers us an excellent model for legal marijuana. The product is legal, it is sold in a regulated market, and the government taxes it to raise revenue and discourage over-indulgence. Where organized crime sees the opportunity is in by-passing the regulations and skipping the taxes.

The experience of the Province of Ontario, Canada, is instructive here. A carton of 200 cigarettes is now so heavily taxed that it costs the smoker C$110 (US$85.50). Sold loose without the tax stamp, the same 200 goes for around $20. As many as a third of all cigarettes smoked in Ontario are contraband. A Royal Canadian Mounted Police “estimate suggests at least 175 organized crime groups dabble in the contraband tobacco trade and use proceeds to fund other enterprises such as drugs and human smuggling.”

In the Netherlands, coffee shops legally sell marijuana, but it is illegal to cultivate it. So, the shops wind up buying from criminals, and while the harm reduction is obvious, the criminal element carries on this its business interests. The nation is working on a regulated cultivation program as a test.

In Colorado, home of American legalization, the Marijuana Unit of the Denver Police Department has doubled its headcount of undercover detectives since 2000, when medical cannabis was allowed. The reason is to deal with organized crime.  Sergeant Aaron Rebeterano says illegal growing operations in the state are increasing. “What we’re seeing now is more organized criminal enterprises where they will do anything to protect those grows. Remember there is a lot of money they invest in them and we do see an increasing number of firearms and other crimes associated with them; home invasions, burglaries, robberies, things of that nature.”

The federal government in Canada plans to legalize marijuana and regulate it, passing the appropriate legislation by July 1, 2018. With only about 3-5% of demand in Canada likely to be met by Licensed Producers (LPs), the stage is set for the current black market to adapt to legalization without missing a beat. The RCMP and provincial authorities will still have plenty to do according to analysts.

However, the private sector can help. The four fields that need addressing are compliance with Health Canada’s rules, design of security platforms using cutting edge technology, secure transportation of product, and insurance to manage risks. Get those right, and the effort organized crime must put in to make a profit becomes onerous.

In the US, the private sector is also addressing cannabis risk management and defense against organized crime. General Cannabis, based in Denver, has an entire subsidiary (Iron Protection Group) dedicated to protecting the legal marijuana industry and run by Iraq and Afghanistan combat veterans.

Only a few die-hard prohibitionists believe that marijuana legalization reduces the overall social harm of the drug, but those who believe that organized crime has lost interest in pot are just as wrong.

Andy Richards is CEO of Spire Secure Logistics, a Canada-based company focused on security in all its aspects in the legal marijuana space, and a seasoned leader in both police services and international private security for high-risk regulated industries. After a diverse thirty-four-year career in three separate police agencies, Andy retired in June 2015 as a Deputy Chief Constable in the Greater Vancouver area.