The legalization of cannabis in Canada has reduced criminal involvement in the long-illicit pot trade, but experts warn ending prohibition has also created new opportunities for law-breakers.
Underregulation in some areas such as transportation, and overregulation in other areas such as retail, have left many legal cannabis businesses vulnerable, they say. Cannabis security expert David Hyde says the situation has improved since the prohibition era, when thefts from grey-market pot shops would often go unreported, but criminals are adapting to the new regime.
“The reality is the criminals are learning more about this new legalized market, where there are very attractive and valuable commodities that are only available in certain places,” said Mr. Hyde, former president of 3 Sixty Secure Corp. who now runs his own cannabis consultancy specializing in security.
“It is hard to find a store that is an exact comparable to a cannabis store, but it is a hybrid between a jewellery store and the check-cashing stores or Money Mart’s of the world, because the latter has the cash and the former has the high-value items, but in a cannabis store they are both in the same place. You’ve got the double-whammy effect there, so they are attractive to criminals.”
Last month, a transport vehicle loaded with “packaged, finished cannabis products” from Aleafia Health was stolen while sitting parked in an unnamed third-party’s facility. Toronto-based Aleafia was quick to release a statement dismissing the loss as “not material,” but Mr. Hyde says the incident was a consequence of federal cannabis regulations that make only “a couple of parenthetical references to transportation.”
“Some of these [producers] use their own trucks and they aren’t fit for the purpose, or they hire a mom and pop operation or a standard freight company that one day might carry a pallet full of cucumbers then they’re going to put cannabis in there the next day,” Mr. Hyde said. “Because there are no strict regulations in place, they can do these things.”
One week after the cannabis-laden truck was heisted, a store clerk was assaulted during an armed robbery of a YSS Cannabis location in northwest Edmonton. One man held the front door closed while another allegedly punched a female employee in the face while demanding cash and cannabis. The incident marked the city’s second legal pot store robbery, after a Cannamart location in west Edmonton was robbed on Dec 12. Both robberies involved two men: one to watch the door while the other gathered money and merchandise, with neither needing to worry about potential witnesses outside the store catching them in the act.
That, Mike Vioncek says, is at least partially because various federal and provincial rules require cannabis products be hidden from public view, meaning the easiest way for retailers to ensure compliance is to simply cover their exterior windows.
Having to put security film on windows is “the biggest [security] issue I have,” said Mr. Vioncek, chief operating officer of legal cannabis retail chain Fire & Flower. “Back in the day in liquor stores, the initial regulations for liquor was that you had to have wrap. Then, as time progressed, there was a realization that the wrap on the exterior of the windows actually creates a security issue for the people inside because there is no visible access from the street into the shop. That allows the bad guys to feel more comfortable going into these shops and holding them up.”
After the Cannamart robbery, manager Chris Wilson partially removed the store’s window coverings. The boyfriend of one employee was standing directly outside the store at the time of the Dec. 12 incident, Mr. Wilson told the Edmonton Journal last month, oblivious to the violent threats employees were facing inside.
Making legal pot shops even more enticing to thieves is customers’ propensity to pay with cash. In May, the provincial agency in New Brunswick responsible for overseeing both alcohol and cannabis retail published sales data showing 34 per cent of cannabis purchases were made using cash, compared to just 26 per cent of alcohol purchases.
Shortly after recreational cannabis was first legalized in October 2018, federal Privacy Commissioner Daniel Therrien released a formal statement encouraging Canadians to use cash for their cannabis purchases in order to avoid having their personal data collected.
Now that the industry is starting to experience some crimes, Mr. Hyde says pressure to tighten security is more likely to come first from insurers before regulators consider updating any rules.
“Really, in the cannabis sector, I am seeing a little bit more influence by insurers,” Mr. Hyde said. “It is happening now and it is only just starting to happen because all these stores need to have insurance. I think we are going to start to see a little more focus now that we are seeing some crimes [and] in my view, we are going to see the insurance industry leaning forward and taking more interest in really pushing for more robust security.”
Adam Mitchell, president of insurance broker mitchellwhale.com, agrees with Mr. Hyde’s assessment. His firm offers insurance coverage to various cannabis businesses, including retail stores.
“Theft exposure for any good is directly tied to [the criminal’s] ability to re-sell that good,” Mr. Mitchell said. “So selling fine art, you can’t really easily resell that, but with jewellery you can hawk a diamond or melt down some gold anywhere and it is the same thing with pot. I think theft is going to be a really big one [for cannabis retail insurance] going forward.”
Mr. Mitchell says insurers are still determining how to best assess potential risks and liabilities for legal cannabis stores, and Mr. Vioncek of Fire & Flower says he’s expecting change.
“Right now we are still in the fact-finding and the growth stage of the industry,” Mr. Vioncek said, “so I am sure at some point down the road there will be different discussions with [our insurance provider].”
As for the lack of clear rules surrounding cannabis transportation, Mr. Vioncek said regulators will need to take action if the industry at large is going to raise its collective standards.
“We are very cautious in ensuring transportation is kept at a very high level of security,” he said, “[but] I think we are more the exception to the rule.”
Perhaps the greatest security risk created by cannabis legalization, Mr. Hyde argues, is the sheer number of times legal pot products are moved from place to place before reaching the end consumer.
“There is more cannabis moving on the roads in Canada than ever before and I think the public would be surprised to know just how much cannabis is constantly moving around,” he said. “Think about all the transfers from LP to LP, from cultivator to irradiation facility, processor to packager to wholesaler or distributor and then finally to retailer. There is more and more cannabis moving around and that exposure increases the risk of crime.”