Download or Read Below Orchid Top 10 Series #3 – Independent FFL Validation In our last two Advisories, we talked about “Dual Blind Entry” and “Real-time Reporting” technology. We emphasized the value of internal control features to drive increased record keeping accuracy.  This week’s focus is on a concept that we call “Independent FFL Validation.” Think you’re okay here? Well, are you sure your employees are consistently validating customer FFLs? Absolutely sure? If not, you’re going to want to stay tuned!  The Federal Firearms Licensing (FFL) Program ensures that only those qualified to engage in firearms industry transactions, do so. In addition to providing the qualification to manufacture, import or deal in firearms, the license provides a transferring party with proof of eligibility to ship related products. As you may know, the responsibility in this process primarily resides on the shoulders of the transferor. Unless you are shipping to an exempt party (i.e., Law Enforcement or recipients of other applicable exempt scenarios) the recipient must be subject to the NICS / F 4473 process – or – they must be a fellow FFL holder. By checking a recipient’s FFL, you are ensuring that he or she is licensed to receive the product. This is a critical part of the Federal regulatory process.  However, your responsibilities don’t end when you receive an FFL’s certified license. Your role as the transferring agent incorporates a role of verification. Best-in-class companies verify licenses at the point of customer acquisition, order entry and prior to the ultimate shipment / transfer. Let’s think of it this way: As the transferring agent, your role is like that of a nightclub bouncer. When a prospective client approaches you, your duties aren’t over when the patron presents you with a license. You have to ensure that the license is applicable, valid, and current.  Modern computer systems can significantly enhance the speed of transaction processing, but they can also increase the risk of violation if not well designed. Expanding on our scenario above lets pretend that a Company’s computer system requires the entry of a license number in order to receive product. How do you know the individual gatekeeper isn’t simply entering “Have a nice day” in the FFL data field, circumventing the internal control? In a high-paced business setting a company could inadvertently transfer firearms to entities with: (1) Revoked licenses; (2) Long-expired licenses; (3) Licenses for similar companies; (4) Licenses linked to incorrect addresses; or (5) That never had a license.  Although your ultimate responsibility is to obtain a certified copy of an FFL prior to transfer, there are additional tools that you can use to validate its accuracy. A well-designed system would include field-level application controls that prevent “dummy license data” that would otherwise permit intentional or unintentional errors. Thankfully, the ATF has provided a useful database, FFL EZ Check that can assist with that effort.   Orchid Advisors’ consulting team has designed a technology solution that solves this problem. The technology integrates your computer system with the ATF’s EZ Check database. Upon receipt of a third party FFL, the certified copy is uploaded into an application. The FFL number, customer name, address and related information are also entered. At the point of Order Entry, Pick, Pack and Ship the system validates the order recipient by comparing the certified copy of the license to the ATF EZ Check database performing an Independent FFL Validation.  Think back to our opening question. Are you reliant upon employees operating under the pressure of a high-demand consumer product to validate forms? Or, are you working with a firm like Orchid to implement preventative software controls that limit your violation risk? Orchid Advisors is transforming the Compliance Ecosystem™ with technical innovation. Over the next few weeks, we’ll continue to share a few operational best practices to reduce your ATF compliance risk. Orchid Advisors provides electronic newsletter (“Advisory and Alert”) and blogs for general informational purposes only. It should not be considered a formal or informal interpretation of law. It is not intended as professional counsel, should not be considered legal advice and should not be used as such.