Turning ATF Compliance Efforts into ATF Compliant Results

We live in an age when we expect quick results. Our oil changes take about 10 minutes, our fast food restaurants boast a 60 second turnaround; we are in a hurry and we want things done.  In the firearms industry we would love to apply that same “speed” to our compliance efforts, however there is a big difference between a quick “sweep under the rug” and a “compliance transformation.”

We have said, “Compliance happens in your business operations”.  It is your operational activity that drives compliance with the Federal Firearms Laws and Regulations.  This is true, regardless of ATF license type.  For example, if you are a manufacturer, your serialization process controls the consistency of proper height and depth requirements as stated in 27 CFR 478.92.  If you are an importer, your procurement, receiving and ATF Form 6A process drives accuracy, completeness and timeliness.  And, at the retail level the sales transaction and ATF Form 4473 process ensures that you complete the form the detail required by 27 CFR 478.124.

Compliance doesn’t begin with the corrections of errors or during an ATF inspection; it starts with ensuring that the transactions which drive your ATF compliance are conducted properly, the first time around.  Understanding and implementing this type of “turnaround” doesn’t happen overnight. It requires a significant and focused effort, but it can produce results. After all, an effective turnaround requires far more than simple cost cutting and paper controls. Well, at least if you want the business to be successful.

A compliance transformation is essentially a three-step process 1. Assessing the current processes, as they exist today.  2. Looking for the compliance gaps or root causes of noncompliance and 3. Re-engineering processes and implementing proper controls. Since we know that compliance resides within operations, we must identify what could go wrong and address those risks.  Focusing on after-the-fact compliance errors alone can create a lengthy and costly process that is full of regulatory risk.

We recently led the turnaround of a major FFL company. From floor to ceiling, every process and operation was analyzed.  Best in class internal controls were designed and compliance technology was implemented.  The effort was supported from the CEO-to-staff, and the entire team determined change was necessary. The team’s underlying principle was to ensure that operations didn’t heal themselves with “band aids” and that lasting results were a primary initiative.

The results of the transformation was telling, 100% serial number based inventories of approximately 100,000 firearms resulted in zero loss both internally as well as during an ATF compliance inspection.  When the big day came, the company was prepared both through their transformed operations as well as the well-planned inspection logistics.  The ATF inspection was a success.

As you consider your  transformation there are a few things to keep in mind. 

  1. It’s not the same for everyone:

    While the firearms laws and regulations are the same, each business has unique factors that affect the success of a compliance transformation.

  2. It’s an ongoing process:

    Compliance doesn’t end.  It is something that needs to be consistently re-assessed, tweaked, and audited (both internally and externally).  Operations or personnel may change, new ATF Rulings may be introduced; there are many factors to stay on top of.

  3. It takes a full commitment:

    The success of transforming the compliance of your business depends on the amount time, effort, and company wide support.  It doesn’t reside in compliance and requires ownership from every function. 

  4. It must be “project managedTransformation is like a puzzle; all of the pieces must fit together.  Often one change affects another and the timing can be very important.  It is a project that must be monitored carefully.
  5. Practice compliance cuts; Shaving expenses without care can be dangerous.   We all recognize that a business operates to make money. But, executive responsibility includes clear understanding that the firearms industry is regulated, political and public. Failure to get ahead of the compliance curve can be penny-wise and pound-foolish.

Compliance change isn’t always easy, but once the transformation is complete, it’s rewarding. The time and effort put into doing things right the first time can reduce risk and improve your financial and operational performance at the same time.

If you’re interested in benchmarking your performance against FFL leaders, give us a ring.