Cyber Attack, Fraud, and Hacking Threatens CannabisThreats for the cannabis industry require businesses to think of solutions.
Similar to the Gold Rush, the legal cannabis market records enormous opportunities. But as a new industry, the cannabis business can also be prone to threats. It’s common for emerging industries to be at risk, and cannabis isn’t excluded. Experts have predicted that the industry, which is prone to exponential growth, may face the risk of cybercrime, fraudulent activities, and other threats. Aside from COVID-19, let’s explore new threats for cannabis retailers or companies and what potential solutions are available to protect the industry.
As seen with cryptocurrencies and blockchain, threats may hamper the growth of the exponential cannabis business.
Tremendous opportunities exist for cannabis retailers and companies — for instance, the access to new markets, the launch of creative marketing campaigns, increased CBD and legal marijuana sales, or the creation of innovative technologies within the industry, but certain risks can happen.
In specific, cannabis retailers may experience fraud, cyber attacks, and non-compliance to laws that may expose them or their consumers to losing business or revenues.
Fraud: as the next big thing, cannabis can also be in danger. The business offers ample opportunities for legitimate investors. But fraudsters are also lurking at the cannabis business’s immense potential. And since the industry is not entirely legal on the federal level, fraudulent actors may feel they won’t face any punishment or fine.
A recent cannabis fraud included the case of Greenview, a marijuana investment company operated by Michael Cone, who fooled investors to inject money in a scam project. The SEC investigated the matter and found out Cone spent $3 million on personal expenses.
But the “get-rich-quick” scheme pursued by some fraudsters in the cannabis business has been set out in the light. The US Securities and Exchange Commission (SEC) has warned, “If you are thinking about investing in a marijuana-related company, you should beware of the risks of investment fraud and market manipulation.”
Cybercrime: hacking — or cybercrime — is another threat for cannabis businesses. Experian has predicted that the cannabis industry, alongside green energies and cryptocurrencies, would be at risk of cyber attacks in 2020. Online activism may involve stealing relevant data about consumers, such as hacking on payments or email attacks, for instance.
Since many cannabis companies operate without a traditional bank system (due to the lack of regularisation on the federal level), a data breach may happen. However, the cost of a data breach is hard for small business retailers — such as dispensaries or innovative cannabis businesses.
According to the US National Cyber Security Alliance, over 50% of small businesses that suffered a data breach have vanished in less than one year. And consumers don’t trust a company anymore who has experienced hacking or cyber fraud.
Yet in 2019, cybercrime in the cannabis industry accounted only for 10%.
Non-compliance to laws: compliance is critical in the cannabis industry. Companies should inform consumers about their compliance strategy. As stated by Allison Kopf, CEO of Artemis Growth Partners, compliance in the cannabis industry is a way to demonstrate accountability to consumers. When you protect your customers, you protect your business.”
Despite substantial risks, some solutions can be adopted to protect the cannabis industry and its businesses from frauds, attacks, and cybercrime.
Regulations at the federal level and government control: one of the first attempts to protect the fast-growing emerging cannabis industry would be to get the full support from the government on the federal level. While Canada has fully legalized the marijuana business, the same is not true for the States. Until federal laws have been set up, cannabis businesses may need extra protection.
Protection of cannabis businesses and consumers: increased cybersecurity is essential for cannabis retailers and companies to protect themselves. Some tips include to set up a credible security technology solution, but also not clicking on suspicious links. Relying on sound judgment and researching companies and partners thoroughly before investing in some cannabis technology companies may be a strong strategy, too.
Set up a compliance program: Cannabis businesses should also communicate upon their adherence to laws and compliances and develop a full-program that goes along these lines. Such a program should articulate an action-plan that aims at protecting industry companies against frauds or cyber-attacks.
As a young industry, the cannabis business may be exposed to threats or scammers. But such risks may be tackled soon enough, depending on how fast regulations may happen — and how important cannabis businesses set up a security and compliance program.