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Credit card data may 'narc' on legal pot buyers at the U.S. border

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An American Express and a Visa credit cards are seen on a computer keyboard in this picture illustration taken September 6, 2017. REUTERS/Philippe Wojazer/Illustration/Files
An American Express and a Visa credit cards are seen on a computer keyboard in this picture illustration taken September 6, 2017. REUTERS/Philippe Wojazer/Illustration/Files

Swiping a credit card for recreational cannabis will be a first for many Canadians next week. But paying for that inaugural lawful drug deal with plastic could risk consequences at the United States border.

The privacy agreements of the big five banks, as well as Visa, Mastercard, and American Express make no guarantees that financial data will remain in Canada, beyond the reach of U.S. authorities eager to enforce federal anti-pot laws.

Emily Gilbert, a University of Toronto professor and Canada-U.S. border expert, expects U.S. officials to expand their use of data beyond individual laptops and mobile devices as part of a cannabis crackdown once legalization takes hold in Canada on Oct. 17.

“I would fully anticipate, especially if this becomes more of a tense issue between Canada and the U.S., that we will see data collection having a much deeper kind of implication for people where there are cases built up against you,” she told Yahoo Canada Finance.

“Searching of data far beyond the border is starting to happen. But I haven’t yet heard of them building profiles against people before they actually arrive at the border to exclude them.”

U.S. law allows border officials to slap a lifetime ban on Canadians found to have consumed marijuana, even once it’s legal here.

Less than a week before legalization, much remains to be seen about how the digital footprints from buying recreational cannabis could come back to haunt those who indulge.

Several provincially-run retailers, and e-commerce partners like Shopify Inc. (SHOP.TO), have promised to keep purchase data on servers in Canada. How payments will materialize on bank records will depend on where the purchase is made.

Mastercard affirmed its commitment to cardholder privacy in a statement to Yahoo Canada Finance, explaining that data collected from transactions is limited to card numbers, locations, dates, the amount spent and merchant names.

Visa and American Express did not respond to questions about transaction data in time for the publication of this story.

The collection of merchant names could pose a problem for cardholders shopping at retailers whose name identifies them as a seller of cannabis.

Nick Pateras, vice president of growth and international strategy at the cannabis data firm Lift & Co., said illegal dispensaries that accept non-cash payments have often resorted to tongue-in-cheek names to mask how their business appears to their customers’ banks.

“A lot of them are like ‘Flower Centre’ or ‘Bouquet Shop,’ that kind of thing,” he said. “The biggest concern from a consumer standpoint is whether or not it says the word ‘cannabis’ or ‘marijuana’ on the credit card bill.”

Some provincially-run retailers who also handle alcohol sales are simply using their agency names. Bank records won’t show if the customer bought booze or bud.

Pot purchased from Alberta Gaming, Liquor & Cannabis will show up on credit card statements as “AGLC,” according to a spokesperson.

The Nova Scotia Liquor Corporation said marijuana purchases will show up as “NSLC,” plus the name of the store location. NSLC spokesperson Beverley Ware said differentiating cannabis purchases would only be possible at the one cannabis-only brick-and-mortar store in the province.

British Columbia’s Liquor Distribution Branch told Yahoo Canada Finance that it has requested that credit card companies “display transactional information on cardholder’s statements in a manner that is considerate of the sensitivities related to purchasing cannabis.”

“However, these fields are ultimately completed by credit card companies in their systems during their merchant setup process,” the agency said in an email.

New Brunswick Liquor Corporation told Yahoo Canada Finance that it has yet to decide on a name to appear on customer banking statements, but it has ruled out Cannabis NB, the name of the provincial crown corporation cannabis subsidiary.

“We are aware that credit card data is stored in the United States, and therefore we would not want to contribute to that data,” said New Brunswick Liquor Corporation spokesperson Mark Barbour.

The Ontario Cannabis Store, the online-only retailer set to serve Canada’s largest province by itself until sales are privatized in April 2019, has not responded to questions about non-cash transactions.

“Some provinces, quite frankly, I don’t think have even thought about this,” said Deepak Anand, vice president of business development and government relations for Cannabis Compliance Inc., an industry consulting firm.

“For Ontario, they are going to have a huge customer apprehension to overcome to make people feel comfortable with buying online,” said Pateras of Lift & Co. “If there is a case of someone whose data has been identified or used against them to demonstrate that they have purchased cannabis and consumed it . . . it becomes a massive issue.”

Cannabis industry giant Canopy Growth Corp. (WEED.TO) said the company is not concerned about U.S. authorities tapping into Canadian credit card data to keep out recreational weed buyers. Vice president of communications Jordan Sinclair told Yahoo Canada Finance the issue would have reared its head with medical marijuana sales.

“Oct. 17 doesn’t create a new risk for credit card use. That risk has been tested by our business and consumer base with more than a million cannabis transactions in the last five years without a single instance of U.S. authorities seeking private records from Canadian citizens,” he said in an emailed statement.

Payments to Tweed, Canopy’s main consumer-facing retail brand, will not be disguised. They will show up on bank statements as “Tweed,” plus a corresponding store number.

“There is no reason to assume the recreational cannabis market will be treated any different than the existing medical framework, which is federally legal in Canada and federally illegal in the United States,” Sinclair added.

U of T border expert Gilbert disagrees. She said wide-spread recreational access in Canada will up the scrutiny of U.S. border agents, especially if Canadian cities start attracting American marijuana tourists.

“As the cannabis industry grows, as it is anticipated to do, I can imagine them collating information on people who are involved at all levels of production and consumption in Canada,” she said. “I think at the federal level the so-called war on drugs is still very much alive.”

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