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ATF Compliance Inspections for Retail FFLs – What You Need to Know

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January 11, 2021

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ATF Compliance Inspections for Retail FFLs – What You Need to Know
ATF Compliance Inspections for Retail FFLs – What You Need to Know A Federal Firearms License (or FFL) is required to engage in the business of “dealing firearms.” Generally stated, the Type 01 Dealer’s License and the Type 07 Manufacturer’s License (which permits dealing) allows a business operator to buy and sell guns. Those activities, combined with gunsmithing, range management and memberships constitute the livelihoods of over 50,000 licensed US firearm dealers. Having a license is a privilege – not a right – and proper compliance is required to pass ATF inspections, minimize legal expense and hopefully mitigate any loss to the business. Protecting your retail, Type 01 license begins with understanding all of the applicable regulations but is sometimes most easily understood by examining more material areas of a retail ATF compliance inspection and the most statistically prevalent ATF inspection results. According to the ATF’s website (atf.gov), “ATF’s industry operations investigators (IOIs) conduct inspections of FFLs to ensure compliance with applicable federal, state and local laws and regulations, and educate licensees on the specific requirements of those laws and regulations. IOIs also review the required records kept by FFLs to identify individuals potentially associated with trafficking firearms or involved in other criminal activity.” Of those retail FFL inspections conducted by ATF, 52.84% of them resulted in no violations (in 2019) while the balance of 35% received some form of a violation (in the Report of Violations (“ROV”)), a Warning Letter, a Warning Conference, or a Revocation / Denial of License. Approximately 12.5% of the licenses went out of business for various reasons. Embedded within the ROV lies all of the ATF inspection violations, but those most frequently cited and are applicable to Type 01 retailers include the following, according to 2019 statistics from the Bureau of Alcohol, Tobacco, Firearms and Explosives: ATF Inspection Results – FFL Form and Transfer Violations
  • Transferee did not properly complete Section A of ATF Form 4473: Firearms Transaction Record
  • Licensee did not properly identify the firearm on Form 4473
  • Licensee did not contact the National Instant Criminal Background Check System (NICS) or state POC and wait the stipulated time before transferring the firearm
  • Licensee did not record NICS contact information on Form 4473
  • Licensee did not sign and/or date Form 4473
  • Licensee failed to obtain and/or document the purchaser’s identification document
  • Licensee failed to complete forms as indicated in instructions
ATF Inspection Results – Recordkeeping and Reporting Violations
  • Licensee failed to record entries in their bound book or A&D record in a timely manner
  • Licensee failed to record manufactured or acquired firearms in an accurate, complete and/or timely manner
  • Licensee failed to report multiple handgun sales
Of these 11 violations, almost all relate to the transfer of firearms between a licensee and a non-licensed “consumer.” And, the violations appear most often in relation to inaccuracies in completing ATF Form 4473, the NICS background check or recording identification related to the purchaser. With nearly 10 years of legal and regulatory compliance experience in the firearm industry, Orchid’s FFL experts have seen countless instances where small “human errors” (not otherwise intentional) led to unwanted ATF inspections followed by return (or “recall”) inspections and more. 4473 violations and those pertaining ATF acquisitions and dispositions can likely be avoided through the use of software like Orchid eBoundTM – applications that are specifically designed to apply system-driven internal controls to ATF regulated transactions to reduce errors. But take note, while technology can be a significant aid, it is never foolproof and requires good training and monitoring to achieve a desired result. If you’re a Type 01 retail FFL operating a small or large gun store, you need to know that ATF inspections are important. And, while they cover many areas of compliance, including those related to your inventory, special care and attention should be given to firearm transfers, ATF form 4473, NICS background checks and properly identifying firearm consumers via approved documentation. If you haven’t been inspected recently or if you’re facing inspection violations now and need assistance, Orchid’s team of firearm lawyers and FFL compliance experts are available, on-call, to answer your questions.

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