Question Period Note: CANNABIS: LICENSING AND SECURITY

Cultivating, processing and selling cannabis requires a licence under the Cannabis Act.

Regulations that set out strict rules controlling cultivation, processing and other activities with cannabis were updated on October 17, 2019 to include new controls governing edible cannabis, cannabis extracts and cannabis topicals.

• Why does it take so long to get a cannabis licence?
• How are you keeping organized crime out of the legal market?
• Why are there so few small cannabis producers?

• Under the Cannabis Act, a federal licence is required to cultivate, process and sell cannabis to provincial and territorial retailers or to individuals who have the authorization of their healthcare practitioner to access cannabis for medical purposes.

• Applicants for a federal licence need to meet strict requirements, including:
o Physical security controls
o Security clearances for key personnel, and
o Strict product quality control

• The processing times for applications depends on several factors, including the quality, completeness, and complexity of applications.

• In May 2019 Health Canada introduced changes to the licensing process in an effort to better allocate resources and reduce wait times for licence approval.

• To help support applicants, Health Canada has made extensive guidance available additional guidance on the regulatory requirements, including on good production practices and physical security controls.

IF PRESSED ON REPORTS REGARDING POTENTIAL SUSPENSION OR REVOCATION OF A HEALTH CANADA LICENCE

• Ensuring the integrity of Canada's legal cannabis production, distribution and sales system is a top priority for our Government.

• In the event that a licence holder is found to be not compliant with the law or regulations, Health Canada has a range of enforcement tools at its disposal to protect public health and safety, including licence suspension and revocation.

• As part of the established process for a licence suspension or revocation, the company has the opportunity to provide information that Health Canada should take into consideration as part of its final decision-making.

IF PRESSED ON WHETHER ORGANIZED CRIME HAS INFILTRATED LICENCE HOLDERS

• I can assure you that Health Canada would not, under any circumstances, issue a security clearance where the RCMP has provided information of an association with organized crime.

• There is a very rigorous security screening process in place for all federally licensed facilities that produce cannabis.

• The screening process is similar to that which is in place for other areas of sensitivity or national importance, such as the handling of human pathogens or aviation security.

• Since the establishment of the medical regime in 2013, Health Canada has had no evidence that organized crime has infiltrated any of the more than 250 federal licence holders.

IF PRESSED ON CANNABIS SUPPLY

• Our Government is committed to protecting the health and safety of Canadians through the legalization and strict regulation of cannabis.

• The Cannabis Act and its regulations took effect on October 17, 2018 and set out strict rules controlling cultivation, processing and other activities with cannabis. This includes strict requirements related to personnel and physical security and product quality.

• Since October 2018, the number of licensed sites has more than doubled from 132 to 263 sites.

• As of September 2019, there were in excess of 1,700,000 square meters of active cultivation space. This is enough to produce nearly
two million kilograms of cannabis per year once at full production, which is sufficient capacity to meet demand.

IF PRESSED ON NEW SECURITY REQUIREMENTS

• The Cannabis Regulations expanded the list of roles that require a security clearance including, among others, the directors and officers of any parent company, in addition to those of the licensed company.

• Health Canada has the authority to identify additional positions and/or individuals in an organization who require a security clearance.

• In addition, applicants for a federal licence are required to submit organizational charts that describe who is responsible for key functions such as inventory control, as well as a list of all key investors.

• Individuals who have histories of non-violent, lower-risk criminal activity (such as simple possession or small scale cultivation of cannabis plants) may be able to participate in the legal industry.

• This approach supports our Government’s objectives to displace the illegal market and keep the profits from the sale of cannabis out of the hands of criminals and organized crime.

IF PRESSED ON NUMBERS OF LICENCES FOR SMALL PRODUCERS

• Our Government is committed to encouraging a diverse market of large and small cannabis cultivators and processors.

• The micro and nursery licences have regulatory requirements and fees proportional to their size.

• As of October 31, there were 9 micro licence holders and 2 nurseries.

• In 2019, Health Canada held in-person meetings in eight cities and webinars with more than 500 prospective micro-applicants to share information on the licensing process.

IF PRESSED ON OFFSHORE FUNDING

• Rules to protect against illegal funds being invested in Canada or Canadian companies or industries and rules governing beneficial ownership transparency are set out in a number of different federal acts and associated regulations.

• Law enforcement authorities and a number of federal government agencies have authorities and the tools to deter, detect, prevent, investigate and prosecute financial crimes. Investigations involving organized crime specifically, including money laundering and other nefarious financial activity, are generally conducted by the RCMP.

• Under the Cannabis Regulations, all officers and directors of a company -- as well as a parent company -- must obtain a security clearance and undergo thorough law enforcement record checks before the company can be licensed.

• Also, the Cannabis Act provides the authority to require an applicant to submit any additional information, including financial information that pertains to the information in an application.

• Since May 8, 2019, Health Canada requires new applicants for cultivation, processing or sales for medical purposes licences to have a fully built site that meets all the requirements of the Cannabis Regulations at the time of their application.
• Health Canada implemented these adjustments following a review of the former licensing process, which identified opportunities to better allocate resources. For example, more than 70% of applicants who successfully passed Health Canada’s initial paper-based review of their application over the previous three years had not submitted their evidence package to demonstrate to the Department that they have a built facility that met the regulatory requirements. As a result, a significant amount of resources were being used to review applications from entities that were not ready to begin operations, contributing to wait times for more mature applications and an inefficient allocation of resources.
• The Department is working to establish additional service standards for the review of applications, which will increase predictability for applicants.
• On October 17, 2019 The Regulations Amending the Cannabis Regulations (New Classes of Cannabis) came into force which established the regulatory controls to address the public health and public safety risks associated with edible cannabis, cannabis extracts and cannabis topicals.
• Health Canada works closely with the RCMP to conduct a security screening process that involves a criminal record check and the verification by the RCMP of relevant files from other law enforcement agencies, as well as intelligence gathered for law enforcement purposes. This information is assessed to identify potential ties to criminal organizations and other risk factors.

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