It was a stressful day at work. ATF showed up unannounced for a compliance inspection. Depending upon the size of your retail store, warehouse, or manufacturing facility, you may have had one to thirty IOIs (Industry Operations Investigator – the personnel tasked to perform inspections designed to carry out the federal government’s regulatory responsibilities pertaining to the firearms and explosives industries) show up at your front door. Under ideal circumstances, your company has an established and reliable compliance program in effect which includes regular self-audits and you only have slightly elevated stress levels. If you are like the majority of FFLs, your company’s compliance program is less effective than it can be (or nonexistent) and you are dealing with highly elevated levels of stress.
No matter the structure or effectiveness of your compliance program there is always a chance that you were not 100% perfect. In fact, perfection requires every employee in your organization to perform every aspect of their job perfectly on a day-in, day-out basis and to be aware of a multitude of nuances of ATF regulations. As we are all humans, perfection is unlikely.
For the purposes of this discussion, we’ll assume your compliance program had some gaps and there were some regulatory violations identified during the compliance inspection. ATF’s response and what happens next depends upon both the severity of any given individual violation (e.g., an impact to firearm traceability or issues related to background checks), and in other cases, the volume of certain violations (e.g., the same minor issue occurs again and again). Let’s take a look at what typically happens after an inspection where violations were discovered in order from least to most serious.
Report of Violations
The Report of Violations, commonly referred to as the “ROV”, is the “least serious” of the negative outcomes. The ROV will list each violation for which you are being cited along with the regulatory section under which the citation is issued, as well as each instance of the violation and ATF’s recommended action to resolve the issue. While it may be the proverbial “slap on the wrist” the ROV is very important as it establishes a history of the violation and that the FFL knows his prior actions led to a specific regulatory violation.
The Warning Letter is the second rung on the seriousness ladder. If the ROV is a slap on the wrist, consider the Warning Letter a more formalized admonishment. The Warning Letter will also identify the violations for which you are being cited. However, you will be formally advised to improve your compliance efforts. For FFLs who have received a Warning Letter, they should understand the seriousness of this solely based on the small amount of Warning Letters issued by ATF in relation to the total number of inspections conducted. FFLs who have received a Warning Letter should take proactive steps and invest in their compliance health. Often, there is a gap in both internal knowledge and controlled and repeatable processes that are leading to the violations for which the FFL is cited.
At this point, things have gotten very serious. Generally speaking, Warning Conferences are relatively rare. In advance of the Conference you would have received a Warning Letter which would notify you that you are to attend a Warning Conference. The Conference will be held by local ATF executives at your Field Office or Division. The FFL should be prepared to show up at the Conference at a minimum with a deep knowledge of the regulatory requirements for which they were cited as well as detailed plans on how they plan to address the issues. It is a good idea to appear with a representative (e.g., a regulatory advisor or an attorney). This is likely your last shot at addressing your compliance gaps.
Finally, the last rung on the regulatory penalty ladder is license revocation. There is a fair amount of nuance once you get to the step involving formal hearings. Suffice it to say, if you have been notified that the ATF has decided it will revoke your FFL and you want to keep your FFL, it’s time to hire a professional to help you.
The foregoing are the most common results of an ATF inspection when ATF has discovered you failed to meet your regulatory obligations. As with anything, there are always exceptions to the rule and there could be other outcomes of your inspection (e.g., suspension of your FFL, civil fines in certain circumstances, and even criminal prosecution in other circumstances).
Hopefully you have an effective compliance program in place designed to prevent errors from occurring. One thing FFLs should be cognizant of is that not all regulatory obligations are created equal. For example, a single instance of failing to complete a background check is a very serious offense, however, a single instance of not ensuring the customer enters his ZIP Code on a Form 4473 is not so serious. However, errors on 75% or more of your Forms 4473 could demonstrate to ATF a plain indifference of the regulatory requirements, or a willful decision to not follow requirements of which you are aware. Even more important to note, is that it has been previously decided that a single violation is enough to warrant FFL revocation. The best way to avoid any of the foregoing outcomes is to implement a compliance program professionally tailored to your unique environment; one size certainly does not fit all. If you would like to hire a professional who does this on a day-in, day-out basis, contact Orchid Advisors.