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  • ATF
    Compliance Inspections

        The ATF, pursuant to the Gun Control Act (“GCA”), is allowed to conduct one warrantless annual compliance inspection of a Federal firearms licensee.  Inspections are conducted to educate a licensee about its responsibilities, evaluate the licensee’s level of compliance, as well as protect the public by preventing and detecting diversion of firearms from lawful commerce into the illegal market.  In 2012, the ATF conducted more than 13,000 compliance inspections.  It is estimated that 50% of licensees inspected were deemed to be in full compliance.  In addition, 67 licensees were revoked or denied renewal due to “willful” violations of the GCA.  It should be noted that this figure is approximately 0.5% of the licensees inspected.

        In a compliance inspection, an ATF agent will inspect a pawnbroker’s shop to determine whether the pawnbroker has properly verified a purchaser’s eligibility, maintained proper records, properly filled out all forms, and can account for all firearms in its inventory.   Where during an inspection deficiencies are ascertained, the ATF may issue a warning letter or revocation notice. 

    Passing a Compliance Inspection

        The goal of the ATF compliance inspection is to ensure compliance with the GCA and determine whether the licensee is making a good faith effort to comply with the Act.  It is the authors’ experience that the ATF is not seeking perfect record keeping. Rather, the goal of a compliance inspection, is attempting to ensure compliance with the GCA and determine whether the licensee is making a good faith effort to comply with the Act.  A pawnbroker must take active steps to make a good faith effort to comply with the GCA.
     
        In general, a pawnshop should maintain a firearms manual, hold repeated in-house training courses on how to properly maintain records, establish a calendaring system for multiple sales, conduct a complete firearm inventory, and designate only certain employees to handle firearm transactions. 

        As a practical matter, a pawnbroker should always have a firearms handbook.  The handbook should be generated by the pawnbroker and should be specific in its application to a particular pawnshop. Certainly, there is no general standard for what a pawnbroker should include in its pawnshop’s firearms manual as each pawnshop will have its own unique needs and issues.  However, at a minimum, the pawnbroker should include in its firearms handbook the following:

    1. A list of requirements for an employee to be qualified to handle firearm transactions.
    2. The general employee policy manual of the pawnshop.
    3. A firearms sales policy procedure that denotes which employees may be involved in firearm transactions.
    4. An ATF checklist that notes the literature an employee must review the forms a store must maintain, and general compliance procedures.
    5. A checklist with instructions and commentary regarding the proper completion of Federal Form 4473.
    6. Specific federal firearms compliance literature whether from this book and/or the ATF.
    7. Gun Safety rules from a source such as the National Rifle Association.
    8. A form for verification by an employee that he or she has met all the requirements to be involved in firearms transactions.
    9. A firearms handbook must be reviewed by all employees and updated by the pawnbroker on a regular basis. The firearms handbook should be the blueprint for a pawnbroker’s compliance with the GCA.    Another way for a pawnbroker to stay in compliance is to hold in-house training courses on a regular basis.  The first type of training should be organized and taught by the pawnbroker training its employees regarding the pawnshop’s firearms manual and its contents.  In particular, the employees should be trained by the pawnbroker to properly fill out and maintain the pertinent federal forms.

         The second type of training involves the pawnbroker inviting a third party to hold training courses with its employees.  If possible, the pawnbroker should attempt to host the ATF at the pawnshop to hold a course for employees.
    A third type of training a pawnbroker should consider for its employees is a basic gun safety course.  Although not directly tied to the ATF and enforcement of the GCA, a gun safety course requirement is good idea from a practical safety standpoint and will also be another indicator that the pawnbroker is making an overall good faith effort to comply with the GCA.  A simple gun safety course may be held by the pawnbroker local law enforcement, a shooting instructor or a local shooting range.

        Additional actions for compliance must be part of the regular routine of the pawnshop.  For example, the pawnbroker should conduct a monthly gun count and at least a quarterly complete inspection of every gun and documentation of every firearm transaction.  Finally, a pawnbroker should have two employees handle each firearm transaction to avoid mistakes.  If possible, the pawnbroker may even designate only certain employees as eligible to handle firearm transactions.

    A pawnbroker can take many steps to comply with the GCA and reduce the potential for violations.  However, even the most organized and professional pawnbroker will, at some point be found to have violated the GCA.  As a result of finding such violations during a compliance inspection, the ATF will issue a warning letter or revocation letter.  In either instance, a pawnbroker must fully respond in a timely, professional and comprehensive manner to protect its rights and its business interests.