An RCMP investigation into illegal cannabis dispensaries led to an Edmonton-based online payment service, which the force alleges helped facilitate tens of thousands of transactions worth $15-million.
Four directors of the company, Moxipay, have been charged with money laundering and other offences in a case that underscores how governments and the industry have struggled to lure consumers away from the black market, where online sales have made it easier than ever for illicit stores to operate.
RCMP Superintendent Chad Coles said investigators allege Moxipay had been facilitating online payments to eight illegal cannabis dispensaries from January to December of last year. He said the dispensaries directed consumers to Moxipay’s online payment system, which used e-mail transfers to collect money before transferring it back to the dispensaries.
Supt. Coles said some customers may not have realized they were shopping at an illegal store – in most provinces, online sales are controlled by the government – but he said many would have known they were buying from the black market.
“There might be some unfamiliarity, but the onus is on the consumer to make sure that they are purchasing their products from legal sources,” he told a news conference in Edmonton.
Investigators laid a number of charges against four directors of the company: Nando Covelli, 67; John Oluk, 67; Marco Bonnani, 45; and Daniel Tse, 39. An employee, Lorenzo (John) Covelli, 31, was also charged.
The charges include laundering the proceeds of crime; possession of the property obtained by crime; trafficking in property obtained by crime; and commission of a crime for a criminal organization. The four directors also face a number of charges related to financial reporting laws.
The allegations have not been proved in court and none of the people who were charged could be reached for comment on Thursday.
Supt. Coles said the company no longer exists.
Dave Berry, a vice-president with the Crown-owned agency, Alberta Gaming, Liquor and Cannabis, said the province has a well-developed legal market that includes more than 300 retail outlets and a government-run online store. He said the recent approval of edible products will allow the province to continue to siphon business away from the illicit market.
“The rollout of the next class of cannabis products is an important measure for that,” Mr. Berry said. “Across the country, regulators and law enforcement are doing their best to educate the public on ways to access those legal products.”
The first year of the legal recreational market has been plagued by problems, including undersupply, particularly in the first few months, and, in some provinces such as Ontario, a lack of bricks-and-mortar retail options. Those issues, combined with complaints about high prices and poor quality, have made it more difficult to persuade some users who are used to purchasing from dealers or illegal dispensaries, whether in-person or online, to switch to the legal system.
Michael Armstrong, a Brock University professor whose work has focused on the cannabis industry, said a significant number of users have continued purchasing cannabis from the illicit market. The bust announced on Thursday represents only a small fraction of the illegal market, he said.
He said the strategy of targeting the drug supply is the same approach police took during the war on drugs, which didn’t have a significant effect on curbing use. Instead, he said many users will only move to the legal market once they can purchase the products they want at comparable prices.
“You’re dealing with the vice. If shutting down the supply side was going to stop this vice, it would have stopped it during the war on drugs,” he said. “When you have a good legal alternative, that’s the time to crack down on the black market. But there’s not much point in doing that until you have the stores, until the stores have products that are competitive.”
Daniel Bear, who teaches about criminal justice at Humber College in Toronto, agreed that the legal system has not been able to compete because many users believe they can still find better prices, quality and selection on the black market.
“If we can reduce the difference in price, we have a good chance of bringing people into the legal market, which provides tax revenue, ensures a safer product and, most importantly, gives us access to consumers so that we can engage them with harm reduction and public-health information,” he said.
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