Your cannabis license is valuable. Learn what regulations compliance officers cited the most.
Table of Contents
Your cannabis license for a dispensary, cultivation, or manufacturer must be protected. To obtain a cannabis license involved a tremendous amount of time, money, and other resources. This means shielding your cannabis license from damage should be your number one priority.
Yes, the cannabis industry has a lot of rules when it comes to selling, growing, and manufacturing cannabis. It doesn’t matter where your business is located, each state has their own set of regulations that can be overwhelming at times.
The New Mexico Regulation and Licensing Department’s Cannabis Control Division (“NMRLD”) is the agency responsible for consumer protection, cannabis licensing, rules and regulations, and enforcement. They are the gate keeper if you want to be in the cannabis industry and licensees must follow those rules to have a cannabis license.
The process when rules are violated entails the NMRLD to issue a formal NOTICE OF CONTEMPLATED ACTION to a licensee. This means the Cannabis Control Division is contemplating disciplinary action. Each notice describes the rule violation, supporting facts, and informs the licensee of their right to hearing.
What rules were broken most frequently over the past 2 years by New Mexico cannabis licensees?
We wanted to know what rules were allegedly broken by New Mexico cannabis businesses by analyzing enforcement action letters sent over a 2 year period to a variety of licensees. The Notice of Contemplated Action outlines the name of the licensee, rules violated, and factual circumstances to support the violation. Certain licensees had a small number of violations. There were other licenses with multiple multiple citations with serious consequences.
Our goal of the analysis is to help New Mexico cannabis companies shield their cannabis license from problems.
Violation #1: No Chain of Custody in Place Cited 49 Times
Not knowing how your product gets from point to point within or outside of your operations was a problem for many licensees.
The “I’m not quite sure what happened to that 40 pounds of flower” is just not going to work that could place your cannabis license in jeopardy. The rule that was violated is titled No Chain of Custody Procedures in Place 16.8.2.12 NMAC and was cited 49 times in the enforcement actions analyzed by us.
Knowing every detail of how your product moves from point to point is the purpose of 16.8.2.12
Basically, each licensee must have a chain of custody and documentation that tracks and traces cannabis products. This includes knowing the original location, time and date of transfer, size/number, batch and lot numbers, and signatures of the person receiving the cannabis. There are security requirements for the transportation of cannabis.
Implement a Chain of Custody process through detailed documentation or electronically
This rule is clearly meant to prevent cannabis from ending up where it shouldn’t. In order to avoid the number 1 rule violation, you must have a chain of custody that tracks and traces cannabis every step of the way.
16.8.2.12 CHAIN OF CUSTODY:
A. Licensees shall adopt, maintain, and enforce chain of custody procedures and documentation requirements to ensure appropriate tracking and tracing of cannabis and cannabis products. Licensees shall use a paper-based or electronic chain of custody form that documents the possession of cannabis or cannabis products, and includes the following: (1) the originating location of the cannabis or cannabis products; (2) the time and date of transfer of the cannabis or cannabis products; (3) the size, number of boxes, and number of pieces of cannabis or cannabis products; (4) the internal batch or lot numbers, and if different, the track and trace batch or lot numbers; (5) a dated signature of the person receiving the cannabis or cannabis products; and (6) for cannabis samples, in addition to the above, the types of containers, mode of collection, the authorized individual who collected the sample, the date and time of collection, preservation, and requested analyses of the sample. B. Licensees shall also adopt, maintain, and enforce security requirements to ensure security and the safety of cannabis and cannabis products and transport personnel.[16.8.2.12 NMAC – N, 08/24/2021]
More information can be discovered here: 16.8.2.12
Violation #2: Denying the Division Access to the Premise or Information
“Sorry officer we’re closed for the day. Come back when we have our S#%$ together. ”
Licensees decided not to allow compliance officers access to their premise or information. This violation Denying Timely Access to Premises 16.8.2.20(C) NMAC was cited 42 times against New Mexico cannabis licensees. It also begs the question “are you hiding something?”
Saying no to NMRLD requests for information or access will cause them to dig even deeper
This is under the category of “Monitoring of Licensee” allowing the NMRLD access to any material, information and access to the premises. This means NMRLD has the right to enter your business premise. Saying no to a compliance offer could lead to your cannabis license being revoked. It also sends the message we have something to hide.
16.8.2.20 MONITORING OF LICENSEE:
A. Monitoring: The division may perform on-site assessments of an applicant or licensee during normal business hours to determine compliance with the Cannabis Regulation Act, the Lynn and Erin Compassionate Use Act, or division rules. B. Record access and review: The division may review any and all records related to the operations of the licensee and may require and conduct interviews with such persons or entities and persons affiliated with such entities, for the purpose of determining compliance with division rules or applicable laws. The division shall have access to the financial records of a licensee, including sales records and data from point-of-sale systems, and shall be granted immediate access to inspect or copy those records upon request. C. Access to premises: Licensees shall provide the division timely access to any material and information necessary for determining compliance with division rules or applicable laws. Failure by a licensee to provide the division access to the premises or materials may result in disciplinary action.
More information can be discovered here: 16.8.2.20(C) NMAC
Violation #3: Not having a Recall of Cannabis Plan
“Our product recall plan is not to have any products recalled“
The third most frequent violation was not having a plan in the event cannabis must be recalled. This violation was cited 41 times. The rule is 16.8.2.11 Recall of Cannabis requires licensees to have written procedures for recalling cannabis products that have been sold or distributed to customers or other cannabis licensees.
These procedures must include the notification of other parties such as customers and NMRLD.
16.8.2.11 RECALL OF CANNABIS:
A. Written procedures: Licensees shall establish and implement written procedures for recalling cannabis and cannabis products that have been sold or otherwise distributed to the public or other cannabis establishments. Recall procedures shall be made available for the division’s inspection upon request.
B. Recall procedures: The recall procedures shall identify:
(1) the circumstances in which a recall will be conducted, including the circumstances involving the mislabeling or contamination of products;
(2)personnel responsible for implementing the recall procedures;
(3)procedures for notification of all customers who have, or reasonably could have, obtained an affected product, including communication and outreach via broadcast media, as appropriate;
(4)procedures for notification of any other cannabis establishment that supplied or received the recalled product;
(5) instructions to be provided to customers or other cannabis establishments for the return or destruction of the recalled product; and
(6) procedures for the collection and wastage (as may be required by the division) of any recalled product.
C. Destruction of recalled product: All recalled products that are intended to be destroyed shall be wasted in accordance with the wastage requirements of the division.
D. Division notification: The licensee shall notify the division of any recall within 24 hours of initiating the recall.
E. Division recall order: The division may order the immediate recall of cannabis or cannabis products if it deems such action necessary to protect public health and safety.
More information can be discovered here: 16.8.2.11 NMAC
Violation #4: Cannabis consumption is prohibited at a licensed premise.
“Lighting up a joint at a licensed facility maybe considered fun, but it’s illegal.”
You have a cannabis license, sell cannabis, and figure what harm is there in consuming the product on premise. The NMRLD cited consumption on premise 28 times in the enforcement action letters. This rule falls under the category of General Operational Requirements of Cannabis Establishments 16.8.2.8(D) NMAC.
Consumption of cannabis or cannabis products is prohibited on or at the licensed premises unless the licensee has been approved by the NMRLD.
This means employees smoking in the parking lot and social gatherings could result in your license being yanked.
More information can be discovered here: 16.8.2.8(D) NMAC
16.8.2.8 GENERAL OPERATIONAL REQUIREMENTS FOR CANNABIS ESTABLISHMENTS:
A. State and local laws: Pursuant to the Cannabis Regulation Act, applicants and licensees shall comply with all applicable state and local laws that do not conflict with the Cannabis Regulation Act or the Lynn and Erin Compassionate Use Act, including laws governing food and product safety, occupational health and safety, environmental impacts, natural resource protection, construction and building codes, operation of a cannabis establishment, employment, zoning, building and fire codes, water use and quality, water supply, hazardous materials, pesticide use, wastewater discharge, and business or professional licensing.
B. Licensure on federally recognized Indian Nation, Tribe or Pueblo: The division shall not approve an application for licensure to operate within the exterior boundaries of a federally recognized Indian Nation, Tribe or Pueblo located wholly or partially in the state, unless the tribal government and the department have entered an intergovernmental agreement to coordinate the cross-jurisdictional administration of the laws of New Mexico and the laws of a tribal government relating to the Cannabis Regulation Act or the Lynn and Erin Compassionate Use Act.
C. Age requirements: All applicants for licensure, including controlling persons of applicants, must be at least 21 years of age. All employees of a commercial cannabis establishment must be at least 21 years of age.
D. Consumption prohibited: Licensees shall prohibit the consumption of cannabis or cannabis products on or within the licensed premises unless a cannabis consumption area has been approved by the division.
Violation #5 (Tied): Improper Digital Surveillance System
“I’m not sure why the security company installed the cameras facing in the wrong direction”
The 5th most frequent violation that was cited 21 times is surveillance of the product. The rule 16.8.2.10 NMAC Improper Digital Surveillance System is meant for cameras to follow and record cannabis being sold, stored, weighed, cultivated, weighed, and packaged.
Basically, the NMRLD wants cameras to see what’s going on with the product every step of the way.
6.8.2.10 SECURITY AND LIMITED-ACCESS AREA: All phases where cannabis or cannabis products are cultivated, stored or held, weighed, packaged, manufactured, disposed or wasted, all point-of-sale areas, and any room or area storing a digital video surveillance system storage device shall take place in a designated limited-access area where cannabis and cannabis products are not visible from a public place without the use of binoculars, aircraft, or other optical aids. For purposes of this rule, cannabis or cannabis products are not visible if it cannot be reasonably identified. Licensees shall comply with the security requirements set out in this rule to ensure that licensed premises and limited-access areas, including a vault, are secure.
More information can be discovered here: 16.8.2.10 NMAC
Violation #6 (Tied): Not having written policy and procedures
“My policy and procedures are stored in my brain”
The NMRLD doesn’t care if you are just a little mom and pop cannabis company or large behemoth with 10 locations, they want to see if you have written policy and procedures. This area is 16.8.2.26 NMAC NMAC Cannabis Producers Policy and Procedures covering topics such as:
- Employee safety
- OSHA
- Storage and testing
- Procedures for emergencies, accidents, and robberies.
- Alcohol and drug free workplace procedures.
- Record keeping and chain of custody
- Training requirements
- Testing
- Etc….
This rule was violated 21 times and tied with rule violation #5. In order to avoid being subjected to this rule violation and protect your cannabis license document, document, and document.
16.8.2.26 CANNABIS PRODUCER POLICIES AND PROCEDURES:
A. Minimum policy and procedure requirements: A producer shall develop, implement, and maintain on the licensed premises, standard policies and procedures, which shall include the following: (1) cannabis testing criteria and procedures, which shall be consistent with the testing requirements of the Cannabis Regulation Act, the Lynn and Erin Compassionate Use Act, or division rules, and shall include at a minimum, the following topics: (a)employee health and safety training materials; (b)training requirements for the proper use of health and safety measures and controls; (c) representative sampling and analytical testing of cannabis or cannabis products for contaminants prior to wholesale or transfer to another cannabis establishment; (d)recordkeeping and chain of custody protocols for transportation of cannabis or cannabis product samples to a cannabis testing laboratory; (e)recordkeeping and chain of custody protocols for transportation of cannabis or cannabis products to another cannabis establishment for any purpose; (f)protocols to ensure that cannabis or cannabis products, including any samples of cannabis or cannabis products, are transported and stored in a manner that prevents degradation, contamination, tampering, or diversion; (g)protocols for testing sample collection that ensures accurate test results; and (h)procedures for remedial measures to bring cannabis or cannabis products into compliance with division standards or destruction of a tested batch of cannabis or cannabis products if the testing samples from the tested batch indicate noncompliance with applicable health and safety standards; (2) employee policies and procedures to address the following minimum requirements: (a)adherence to state and federal laws; (b)responding to an emergency, including robbery or a serious accident; (c) alcohol and drug-free workplace policies and procedures; (d) safety and security procedures; (e) occupational safety; (f)crime prevention techniques; and (g) if applicable, confidentiality laws, including the Health Insurance Portability and Accountability Act of 1996; and (3) training documentation prepared for each employee and statements signed by employees indicating the topics discussed, names and titles of presenters, and the date, time, and place the employee received said training. B. Retention of training documentation: Licensees shall maintain documentation of an employee’s training for a period of five years for current employees and at least six months after the termination of an employee’s employment.
More information can be discovered here: 16.8.2.26 NMAC
Violation #7 (Tied): Reconciling cannabis stock is required at least once per month
“I’m not quite sure what happened to that 30 pounds of flower.“
According to rule 16.8.2.40(K) NMAC, once a month cannabis licensees much conduct an inventory reconciliation to make sure it balances. This is a rule to safeguard your cannabis license. This means licensees must figure out how much cannabis was taken in, sold, and what remains.
This rule violation is tied with rule violations 5 and 6 by being cited 21 times in various enforcement actions.
K. Inventory reconciliation:
(1) A licensed retailer shall perform a reconciliation of its inventory at least once every calendar month.
(2) In conducting an inventory reconciliation, a licensed retailer shall verify that the licensed retailer’s physical inventory is consistent with the licensed retailer’s records pertaining to inventory.
(3) The result of inventory reconciliation shall be retained in the licensed retailer’s records and shall be made available to the division upon request.
(4) If a licensed retailer identifies any evidence of theft, diversion, or loss, the licensed retailer shall notify the division pursuant to Subsection N of 16.8.2.8 NMAC.
More information can be discovered here: 16.8.2.40(K) NMAC
Violation #8 (Tied): Sales records that are inaccurate
“We are not sure why we keep having technical difficulties on Friday’s before a holiday weekend”
Another tie at 21 times, the rule violation involves Inaccurate Sales Records 16.8.2.40(L) NMAC. This rule requires retailers to record every cannabis transaction sold to a customer. The NMRLD requires name of employee, date of transaction, amount purchased , what was purchased, etc… NMRLD wants detailed information on product sales records to maintain your cannabis license.
The friend of the bud tender looking for a side deal won’t fly.
L. Record of sales:
(1) A licensed retailer shall maintain an accurate record of every sale of cannabis and cannabis product made to a customer.
(2) A record of cannabis or cannabis product sold to a customer shall contain the following minimum information:
(a) the first name and employee number of the employee who processed the sale;
(b) the date and time of the transaction;
(c) a list of all the cannabis or cannabis product purchased, including the quantity purchased; and
(d) the total amount paid for the sale including the individual prices paid for each cannabis or cannabis product purchased and any amounts paid for cannabis excise tax.
(3) For the purposes of this section, an employee number is a distinct number assigned by a licensed retailer to their employees that would allow the licensed retailer to identify the employee on documents or records using the employee number rather than the employee’s full name. A licensed retailer shall be able to identify the employee associated with each employee number upon request from the division.
More information can be discovered here: 16.8.2.40(L) NMAC
Violation #9 (Tied): Illegal Sale or Distribution
A legal cannabis business selling illegally was hopefully not the reason you obtained a cannabis license.
This violation has a lot of thorny issues that could cause the NMRLD to terminate your cannabis license. Another tie at 21 times, this one gets your attention because of the word Illegal is being used and knowing what you did was wrong.
This rule violation doesn’t sound good when you have a legal cannabis license. This rule is cited as Illegal Sale or Distribution 16.8.2.8(E) NMAC. This means licensees were cited for selling cannabis illegally.
E. Illegal sale or distribution: Licensees shall not knowingly and intentionally sell, deliver, or transport cannabis or cannabis products to any person that is not authorized to possess and receive the cannabis or cannabis products pursuant to state law or division rules.
More information can be discovered here: 16.8.2.8(E) NMAC
Violation #10 (Tied): No Usage of Required Track and Trace Software
“We use google sheets to track our cannabis. Is that a problem? “
The NMRLD control division has approved track and trace software. The letters of enforcement actions cited this rule violation 21 times when licensees were not using approved software and equipment.
Excel spreadsheets are great, but simply don’t cut it with the NMRLD.
J. Inventory and sales equipment: The division shall require licensees to utilize division approved track and trace equipment, software, and services.
More information can be discovered here: 16.8.2.8(J) NMAC
Key Take Aways from the Top 10 Violations:
Protecting your cannabis license is critical. The common theme from our top 10 research indicates a failure by cannabis licensees to know exactly where and how much cannabis stock is in their operations. This was either from not using software to track and trace, failure to account for inventory, not having a chain of custody, making illegal sales, and not allowing compliance officers access to the licensed location.
Hiring a dedicated compliance person to know and take action will go a long way to allow your business to focus on what it does best and ensure your cannabis license is not at risk.
Summary of violations over 2 year period
| Violation Type | New Mexico Rule | Number of times cited |
| No Chain of Custody Procedures in Place | 16.8.2.12 NMAC | 49 |
| Denying Timely Access to Premises | 16.8.2.20(C) NMAC | 42 |
| Non-Compliance with Closed-Loop Extraction Systems | 16.8.2.11 NMAC | 41 |
| Unauthorized Consumption of Cannabis | 16.8.2.8(D) NMAC | 28 |
| Improper Digital Surveillance System | 16.8.2.10 NMAC | 21 |
| Lack of Required Standard Policies and Procedures | 16.8.2.26 NMAC | 21 |
| No Physical Inventory Reconciliation | 16.8.2.40(K) NMAC | 21 |
| Inaccurate Sales Records | 16.8.2.40(L) NMAC | 21 |
| Illegal Sale or Distribution | 16.8.2.8(E) NMAC | 21 |
| No Usage of Required Track and Trace Software | 16.8.2.8(J) NMAC | 21 |
If you are seeking cannabis insurance in New Mexico, please note we are licensed in your state and happy to help. Please visit our contact page and send us a message for NM cannabis insurance.