Operation Choke Point | Subjective Regulation | Firearms Considered A "Reputation Risk" By Banks

Lack of objectivity in Operation Choke Point.

A  relatively obscure program,"Operation Choke Point", may be causing banks to sever relationships with merchants engaged in "firearms sales" due to what some view as subjective regulatory criteria. Relatively new regulatory guidance encourages financial institutions to scrutinize the activities of merchants "that have been associated with high risk activities"(1). However, according to Congressman Jeb Hensarling, regulators are using subjective criteria instead of long established objective assessments as part of regulatory agency's prudential supervision. According Hensarling, agencies are incorrectly using "reputational risk" as a stand alone basis to suggest that banks cease providing a particular product or service to a particular merchant or industry(2). Hensarling details what is in his view is "vaguely defined" criteria that leaves too much room for subjective interpretation. Some believe that banks would choose to sever relationships with certain industries in order to avoid regulatory problems based on this criteria, and thereby choking out industries from financing, payment processing and other merchant services.

Firearms Dealers Are "High-Risk" For Banks(1)(2).

To date, there appears to be a lack of evidence available to the public indicating firearms dealers are engaged in activities requiring extra vigilance from banks. It might be beneficial to the firearms industry if members are made aware of the specific activity that has placed firearms dealers in the "risky" category. Firearms dealers should clearly be interested in identifying the risky behavior in order to ensure that they don't inadvertently engage in it, create a perception that they are engaged in it, and ensure policies are in place that prevent the "high-risk" activity from occurring. For obvious reasons, persons engaged in federally licensed firearms sales or other related activities want to work with bankers to ensure they are doing nothing to jeopardize their baking relationships. At this time, there appears to be no guidance on the matter that has been disseminated to the firearms industry by any regulatory body. It may serve the firearms industry, banks, regulators, and the consumer to clarify this issue somewhat by issuing guidance to "firearms dealers" on what type of activity is or may be perceived as "risky".

Furthermore, terms such as "firearms sales" encompass a broad spectrum of activity. Banks may overly scrutinizing the wrong businesses because of confusion about the term. For example, a mom-and-pop retail firearms business and a large gun store may be placed in the same category even if the businesses are in fact extremely different; even if some of the business is conducted online.  A large firearms importer and a small manufacturer may also be classified as "firearms sales" when in fact the two businesses couldn't be more different, and likely require significantly different types of banking services. 

Here is a sample of the types of businesses that have been identified as "high-risk" by federal regulatory bodies. The entire list can be viewed at the link above.

Credit Card Schemes
Dating Services
Drug Paraphernalia
Firearms Sales
Ammunition Sales
Fireworks Sales
Get Rich Products
Pay Day Loans
Pornography
Telemarketing
Travel Clubs

(1) FDIC Supervisor Insights Summer 2011
(2) Letters from Jeb Hensarling to Fed Chair, Office of the Comptroller of Currency, Chairman FDIC, and NCUA.

By JR Valdes
Firearms Licensing And Consulting Group, LLC
Firearms Consulting
Firearms Regulatory Compliance

Copyright 2014 All Rights Reserved

ATF Public Safety Violations | Second in the series | NICS check exemption | ATF Compliance Best Practices

Second in the series. TOP 10 ATF commonly cited public safety violations.

Topic: Failure to conduct a background check when required.

There are only 3 exception to the NICS requirement when a FFL transfers firearms to a non-licensee.  The article deals with those three exceptions.  

One) NFA transfers 

Two) When a qualifying "permit" is presented by the transferee.

Three) When it is "impracticable"

Some reasons for this violation are addressed, and some FFL best practices suggestions are given.

Excerpt: "FFLs should assume that all transfers to non-licensees require a NICS background check unless it can be positively shown in writing that NICS is not required. Strict compliance is your safeguard against ATF action as well as civil liability."

JR Valdes

FFL Consulting Group 

2014 All Rights reserved

Top 10 ATF Public Safety Violations

ATF Compliance Inspection Avoiding Public Safety Violations

First installment in a series dealing with the violations most commonly cited by ATF and considered to affect the public safety.

When is the ATF Form 4473 required?

The ATF Form 4473 must be obtained by an FFL prior to transferring a firearm to a non-licensee except when returning that firearm or a replacement to the same person from which it was received after a repair or a customization was performed.

Inexperienced FFLs erroneously fail to execute the ATF Form 4473 for a number of different reasons. However, repeated violations of the type affecting the public safety determined to be "willful" will be sufficient cause for revocation of the license.

The article list some reasons for this failure and the steps FFLs can take to avoid this violation.

http://www.fflconsultinggroup.com/atf-compliance-inspection-top-10-atf-public-safety-violations-atf-form-4473-atf-license-revocation-criteria/

JR Valdes

Can ATF remove or copy records of firearms purchases from FFLs?

Published a new article on ATFs right to remove and copy firearms transfer records from FFLs.  

Under certain circumstances, ATF Officers can copy or remove records from FFLs that contain information about purchasers of firearms.  Concerns have been raised regarding the propriety of this action, as some believe that ATF is keeping a permanent record of persons who purchase firearms in the United States. 

The article explains ATFs policy, the law and regulations pertaining, and links to documents from ATF responding the the concerns of U.S. representative Don Young about alleged improper seizing of records by ATF.  The response from ATF addresses the issue of keeping permanent records as well.

See the article here.

http://www.fflconsultinggroup.com/firearms-record-books-atf-form-4473-and-atfs-authority-to-copy-records/

JR Valdes

Personal Gun Log Private Gun Collections ATF Compliance Inspections

Protecting Your Firearms Business

A personal gun log of private gun collections is your best protection against confusing inventory during ATF compliance inspections.

Protecting your firearms business from unnecessary entanglements with ATF and other regulatory authorities should be a high priority for you as an FFL. Failure to comply with federal regulations, especially those deemed to be public safety violations will begin to create a record of administrative action taken against your business, and may cause ATF to visit you more frequently than if your inspections reveal no violations.

One common record keeping violation occurs when ATF Investigators find firearms within a business premises that are not properly logged in the A&D record because they are part of a "personal collection", but not adequately identified as such.  ATF will always assume that firearms are part of a business inventory unless they are segregated or appropriately tagged.

This article addresses this issue; giving some reasons for taking specific action, and detailing the action to take.
http://www.fflconsultinggroup.com/personal-gun-log-private-gun-collections-atf-compliance-inspections/

JR Valdes
Copyright 2014 Firearms Licensing And Consulting Group, LLC



        

Broadened definition of "Adjudicated as a mental defective" and "Committed to a mental institution"

DOJ/ATF Notice of Proposed Rulemaking comment period ending

The proposed rule changes the language in 27 CFR 478.11 to more clearly define the statutory term "adjudicated as a mental defective".  The summary indicates that the Justice Department "recognizes that the term is outdated", but cannot be amended by regulation. Justice proposes amending the definition to clarify the term and seeks public comment.

In essence, the NPRM indicates a proposal to broaden the meaning of terms and cites the intent of Congress to broadly apply the prohibition of receipt and possession of firearms to "mentally unstable" or "irresponsible persons".  

Among other changes, The Department of Justice proposal would amend the definition of "committed to a mental institution" to include both "inpatient and outpatient treatment".  

DOJ Press Release

The NPRM can be viewed at federalregister.gov

Comments must be submitted on or before April 7th, 2014.

JR Valdes
FFLConsultingGroup.com
research@fflconsultinggroup.com

NSSF reports on the thriving U.S. Firearms Industry

NSSF Firearms Economic Impact 2013

Citing data from research firm John Dunham and Associates, the NSSF published the 2013 Economic Impact Report on their website. According the report, companies that "manufacture, distribute and sell firearms, ammunition and hunting equipment employ nearly 112,000 people" directly and generate just under 134,000 additional jobs in "supplier and ancillary industries". According to the report, that's an over 48% increase since 2008.

Firearms industry direct economic impact

The firearms industry's direct economic impact is cited as nearly $37.7 billion in calendar year 2013. Federal and state taxes paid by the industry amount to just over $5.2 billion for the same period.  The state of California leads the way in direct employment, with over 9,400 industry jobs followed by Texas (8,496) and Florida (6,233). The report states "...these are good jobs, paying an average of $47,709 in wages and benefits (their source: Bureau of Labor Statistics).

The report is posted at the NSSF website and can be viewed or downloaded as a PDF document.

JR Valdes