Top 5 Things That I Need to Know About ATF Inspections

ATF Inspections

Top 5 Things That I Need to Know About ATF  Inspections

In this article, we will answer five key questions about ATF Inspections:

  1. What is an ATF Inspection (otherwise known as an FFL Compliance Inspection)?
  2. What Happens During an ATF Dealer Inspection or ATF Manufacturer Inspection?
  3. What are the Top ATF Compliance Inspection Violations?
  4. What Happens After an ATF Inspection?
  5. How Do I Pass an ATF Dealer Inspection or ATF Manufacturing Inspection?

1. What is an ATF Inspection (otherwise known as an FFL Compliance Inspection)?

An ATF Inspection Advisory applies to all Federal Firearms License (FFL) types including firearm manufacturers, firearm importers, firearm distributors and firearm dealers (otherwise known as firearm retailers).

The ATF’s Public Affairs Division issued a fact sheet titled “FFL Compliance Inspections.” That fact sheet read, in summary:

  • The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), pursuant to the Gun Control Act (GCA) and the Federal firearms regulations, is responsible for licensing persons engaging in a firearms business.
  • With certain exceptions, the GCA allows ATF to conduct one warrantless, annual compliance inspection of a federal firearms licensee (FFL).
  • The purpose of the inspection program is to educate the licensee about regulatory responsibilities and to evaluate the level of compliance.
  • Compliance inspections also serve to protect the public in that they promote voluntary internal controls to prevent and detect diversion of firearms from lawful commerce to the illegal market.”

Fact Sheet – Federal Firearms Compliance Inspections and Revocation Process

Fast Facts – According to the ATF’s 2017 Website
ATF is responsible for licensing persons engaged in manufacturing, importing, and dealing in firearms and ensuring that those who are licensed to engage in those businesses do so in compliance with applicable laws and regulations.There were more than 139,000 FFLs in fiscal year 2015. This includes firearm licenses for dealers, manufacturers, importers, and collectors. During that time, ATF conducted 8,696 firearms compliance inspections.It is critical that federal firearms licensees comply with the Gun Control Act of 1968, and its implementing regulations, in order to assist law enforcement efforts, prevent the diversion of firearms from lawful commerce to the illegal market, ensure successful tracing of firearms, and to protect the public.

2. What Happens During an ATF Dealer Inspection or ATF Manufacturer Inspection?

During inspections, ATF industry operations investigators (IOIs) review records, inventory, and the licensee’s conduct of business. To assist in meeting and maintaining compliance, investigators also provide instructional and educational materials about the requirements of the law and regulations and best business practices.”

A major part of the inspection is what is called a Book to Physical or “Bi-Directional Serial Number Inventory.” During this audit step, the ATF performs a tracing of serialized assets found at your facility to the Book of Acquisition and Disposition (or Bound Book). Likewise, the test is performed in the reverse direction – Serial Numbers found in the Bound Book are traced back to the physical asset. Both steps are performed to ensure that the records properly match the serialized firearms under the control of the company. To learn more about conducting a leading Bi-Directional Serial Number Inventory in advance of an ATF Inspection, read the following whitepaper called Serialized Inventory Analysis for the Firearms Industry – Ten Steps That Will Make a Difference Today.

3. What are the Top ATF Compliance Inspection Violations?

Compliance failures, which constitute violations of law and regulation, commonly disclosed during the inspection process include those shown below.

2016 ATF FFL Inspection Statistics

9,760 Inspections – 45.8% without ATF FFL Violations
Meaning that Inspection Violations Increased
Most frequently cited violations:
  • Transferee did not properly complete Section A, F 4473 – 27 CFR 124(c)(1)
  • Failure to timely record entries in bound record (Acquisition and Disposition Book) – 27 CFR 478.125e
  • Failure to complete forms as indicated in instructions (this violation is often cited when the licensee failed to properly complete a form, but there is not a separate regulatory citation addressing the omitted or misdocumented item) – 27 CFR 478.21 (a)-(b)
  • Licensee did not record on F 4473 the date on which NICS was contacted – 27 CFR478.124 (c)(3)(iv)
  • Licensee failed to obtain and/or document purchaser’s Identification document – 27 CFR 478.124(c)(3)(i)
  • Licensee did not sign and date F 4473 – 27 CFR 478.124 (c)(5)
  • Licensee failed to report multiple handgun sales – 27 CFR 478.126a
  • Licensee failed to properly identify firearm on F 4473 – 27 CFR 124(c)(4)
  • Licensee failed to contact NICS and wait stipulated time prior to transfer of firearm – 27 CFR 478.102(a)
  • Licensee disposed of firearm to a person he had reasonable cause to believe was prohibited – 27 CFR 478.99(c) 

4. What Happens After an ATF Inspection?

“When violations of the law and regulations are disclosed during an inspection, a Report of Violations is issued to the licensee that outlines the discrepancy and the requirements for corrective action. ATF also works to gain cooperation and compliance from FFLs by issuing warning letters and holding warning conferences. Despite these remedial actions, on rare occasions ATF encounters a licensee who fails to comply with the law and regulations and demonstrates a lack of commitment to improving his or her business practices. In such cases where willfulness is demonstrated, ATF’s obligation to protect public safety may require revocation of the federal firearms license.

ATF investigators assist licensees in developing corrective actions when violations are identified and encourage licensees to constructively engage in the remediation process. In this way, ATF attempts to bring licensees into compliance before it becomes necessary to take administrative action against the licensee. When an ATF inspection results in a warning conference or potential revocation, the licensee is provided an opportunity to develop a written plan that details the steps taken to correct the problems identified and measures implemented to ensure future compliance.”

5. How Do I Pass an ATF Dealer Inspection or ATF Manufacturing Inspection?

There is no full-proof, secret answer to ensuring that you will pass your Dealer Inspection or Manufacturing Inspection with zero violations. But there are many things you can do to decrease the likelihood of receiving a violation. The most obvious answers are: (1) know the regulations; and (2) comply with them.

The following are a few recommended steps for minimizing your FFL inspection risk.

  • Get educated on the latest in ATF Firearms Compliance. There are only a few very detailed programs available for firearm retailer compliance education and even less for firearm manufacturing compliance education. One of the most thorough programs available is called the Firearms Compliance University. The University is available on-line and offline and is designed for every employee of every FFL in the United States. Almost 100% of ATF inspection violations can be prevented with solid education.
  • Hire an expert to help you implement good business processes. For example, our team of Former ATF Industry Operations Investigators (IOI), former attorneys and FFL executives have performed countless ATF inspections of Firearm Dealers, Firearm Manufacturers and Firearm Importers. We continue working with FFLs like yours to deliver best-in-class advice from ATF experts.

  • Practice your inspections before the big day. Orchid Advisors ATF Consultants have been involved with ATF inspections and mock ATF inspections for years. In fact, our staff has collectively performed Mock FFL Compliance Inspections and Bi-Directional Serial Number Inventories of well over a million serialized firearms.

Other Meaningful ATF FFL Inspection Articles