The Cost of Non-Compliance
May 08, 2020 | Heather Despres
While most cannabis and hemp businesses understand that they must follow a set of guidelines and implement certain quality control factors into their daily operations, many do not understand the depth of compliance and documentation needed to meet all state and federal requirements. Countless operators complain about the cost of compliance, without factoring in the costs of non-compliance. As enforcement activities increase across states and as the federal government establishes guidelines for hemp and CBD production, it is more important than ever that businesses take the necessary steps to reach and maintain compliance.
Type of Penalties
The types of penalties that can come from non-compliance are wide ranging, from the seemingly minimal up to steep fines and incarceration. Penalties can also come from a number of sources from local and state government agencies up to the FDA, DEA, and IRS. Businesses may also be subject to employee whistleblowers who may report any violations to the rules and regulations.
In the last 4 years, the FDA has issued 30 different warning letters to companies for promoting false claims that CBD can prevent, treat, or cure various diseases, ailments, and symptoms related to them. They may also seize products, file an injunction in court against the offending business, or prosecute the business on criminal charges. Criminal charges can carry fines up to $500,000 depending on the type of charges brought against the business.
At the state level, penalties can include citations, fines, and imprisonment. One dispensary operator in Denver experienced all three of these, when its three owners were sentenced to one year in prison each, for diverting cannabis products to the illegal market. In Washington, DC, any non-compliance issues that are not addressed come with a $2000/day fine until they are remedied. In states that require employees to obtain background checks prior to getting a state issued employee badge, employees may lose their badge and ability to work in different states if they have their badge revoked or suspended.
What This Means for Operators?
It means that all operators should be prepared to have someone from a regulatory body, whether that be the fire department, police department, or any regulatory agency in charge of cannabis, come knocking on their door at any time. Many operators are prepared for initial inspections related to licensing, but what happens after that, during the regular day to day operations? What happens when there is employee turnover and new employees are brought on that weren’t part of the initial opening team?
Independent compliance organizations, such as ASA’s PFC program, were created to help operators solve these problems. The PFC program helps businesses achieve compliance. This process includes a documentation review and on-site assessment , including interviews with employees and managers. While compliance and regulations may be scary, the PFC program is designed to take away that fear and help businesses through regulatory challenges. PFC ensures that any problems are caught well before a regulator has the chance.
The goal of the PFC program is simply to help operators become compliant so that when a regulator shows up, and they will show up at some point, businesses are prepared and ready.
For more information on the PFC Program, visit www.PatientFocusedCertification.org.