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CHARGING GUNS: What’s In Your Holster

Much debate has taken place about whether the financial industry could create detection mechanisms to flag suspicious gun purchases. Many individuals and organizations are exploring ways to address the growing mass shootings in the U.S. CBS News, The Wall Street Journal, The New York Times, and KPCC radio have all contacted me for an interview to explore the potential of one of the proposed solutions by asking the following question, “Can credit card data be used to prevent some gun related violence?”  Let’s detail this idea.

How could the financial industry help more to prevent gun violence?

Charging Guns-Whats In Your Wallet f1 by Kevin Sullivan President The AML Training Academy and Advisory LLC at AMLtrainer.comOne method is for credit card networks to completely shut off access to some gun shops, or all gun shops, and/or to specified types of firearms.  However, this would limit purchasing options to the legitimate and law abiding public.  Some banks have already shut off services to specific types of gun stores such as stores that sell certain types of weapons and/or sell to someone below a particular age.  There are also banks like Amalgamated Bank that do not maintain banking relationships with businesses involved in gun sales.  In addition, several payment service providers including PayPal, Stripe, and Square already prohibit the use of their services for the purchase of firearms and ammunition. 

Downfalls With How Credit Card Transactions are Monitored

When an individual purchases an item at a store the SKU number may not attach the name or description of the particular item being sold to the transaction monitoring software.  In other words, the credit card networks and the banks know that you purchased an item at Store X and they know how much money it cost but they don’t know the exact item.  Did you buy a handbag, shoes, or jeans?  Depending on the transaction monitoring software this can be the case with many retail stores, sporting goods stores, or even gun stores.  The credit card networks and subsequently the banks know how much you spent and where, but they do not always know if you bought a gun or a pair of hiking boots.

Charging Guns-Whats In Your Wallet f2 by Kevin Sullivan President The AML Training Academy and Advisory LLC at AMLtrainer.com 

So how could credit card companies help to dissuade gun related violence?  In the current format they can not do much to help.  To do so would require a change in policy and a uniform application of regulations across each credit card network and its counterparts including merchants, the acquiring bank, the payment processor, and the bank that issued the card and of course the aforementioned transaction monitoring software industry.  With all these moving parts it would not be a simple flip of the switch to start reporting gun purchases via credit cards.  Many moving parts would have to come together and a series of regulations would need to be established, instituted, and monitored.  Much like the current anti money laundering regulations.

Let’s drill down and take a look at some of the areas that would need to be regulated:

  • First, merchants would be required to provide SKU numbers or merchant codes and the corresponding product for each item they sell.  That would enable certain gun related purchases to be notated by the credit card networks and that info would need to be relayed to the banks through the payment processor.  Then the banks could filter gun related transactions for review.
  • The next issue would be establishing the guidelines for banks that define a suspicious gun transaction and instituting what could be a fine line for identifying what’s suspicious and then the difficult task of determining when that threshold is crossed.  It would not be feasible for the bank to review every single gun related purchase so parameters would have to be established.  First, what exactly is a gun related purchase?  Is it only the actual weapon(s) or does it include sales of ammunition, body armor, scope(s) etc?  Will the number of guns purchased be a determining parameter and if so what is that number?  Will there be a financial ceiling on the amount of money spent, or how often it is spent?  What if gun related purchases are made at several different stores, with several different payment methods, and none of these individual transactions are above the set parameters?  How would that be addressed?  Would there be some coordination between banks, gun sellers, the credit card industry, and state and federal checks and registrations?  
  • Will banks have to hire more personnel to review reported gun related transactions?  If a gun related purchase exceeds the parameters will the banks begin an enhanced due diligence process on the gun purchaser?  Will the bank conduct social media research?  What would be the parameters for the bank to create a gun related Suspicious Activity Report (SAR) and submit same to the government.  Current SAR’s monitoring financial crimes and terrorist activity are filed with the Financial Crimes Enforcement Network (FinCEN  – a division of the Department of the Treasury).
  • Charging Guns-Whats In Your Wallet f3 by Kevin Sullivan President The AML Training Academy and Advisory LLC at AMLtrainer.comHow long would it take between the time an alert of a possible unusual or odd purchase was generated by the triggering mechanism of the bank software, to the bank investigators determining if the purchase and their banking customer warranted further investigation, to determining that the purchase is suspicious and a gun related SAR should be filed with the government, to that report being referred to one or more of several law enforcement agencies, and finally to law enforcement launching an investigation.  Geez, just saying all that was difficult.  Imagine this like an assembly line where the information is on a conveyor belt and it slowly moves down the line with stops at different stations for review, updates, and further investigation.  Note:  currently banks have 30 days once an issue has been determined to be suspicious to prepare and submit the SAR to the government.  This would not have been any help in incidents where the shooter purchased the weapon and committed the crime during the time period needed to run the course of identifying the suspicious activity.  In other words, if the shooter buys the weapon(s) and in the considerable number of following days it takes this suspicious purchase to run its course, he uses the weapon, the aforementioned SAR reporting system would not be effective and virtually useless.  Time is of the essence.  All SARs related to guns would have to be triaged and be given top priority by the banks and law enforcement, much like how reports are handled regarding potential terrorism.  This would mean longer wait times between purchase and pick up of the weapon allowing all the moving parts time to complete their respective due diligence.
  • Once the suspicious report is submitted to FinCEN will there be one law enforcement agency responsible for investigations of suspicious firearm transactions?  Should it be the local police, the ATF, or anyone of a dozen other law enforcement agencies?  Who could provide the quickest response? Who has the manpower and resources? As mentioned above, time is of the essence.  

A point of light is that there is already a system partially in place that may streamline the identification of a suspicious gun purchase and notification of that transaction to law enforcement. Currently, licensed firearms dealers are already required to report the sale of two or more handguns in a five day period to The Bureau of Alcohol, Tobacco, and Firearms  (ATF – Form 3310.4).  Also, any purchase of a firearm at a licensed firearms dealer must be reported to the ATF (Form 4473).  However, if a person purchases a firearm from a private individual who is not a Federal Firearms License (FFL) dealer, the purchaser is not required, in most states, to complete a Form 4473. Although, out of state purchases by non FFL dealers are required to be reported. This would need to change to regulate all gun purchases.  

How banks currently aid law enforcement to identify suspicious gun transactions

The concept of financial institutions reporting on suspicious activity using a SAR has been a mandatory process since 1996.  Previously known as a criminal referral form it is part of the Bank Secrecy Act of 1970.  It was originally designed to advise law enforcement of potential criminal activity with a very heavy emphasis on organized crime, gun/drug/human/counterfeit goods trafficking, and since 2001, terrorism.

If established, a gun related SAR should not be designed to report every gun related purchase, instead a SAR would be created  upon initial review by the bank where the transaction appears to be unusual based on the defined parameters of a gun related unusual or suspicious transaction.  These guidelines, like current SAR guidelines for other activities, would be created to determine what is considered unusual or suspicious. Guidelines might address instances such as a gun purchase by someone who lost their job, has money issues, is recently divorced, has an order of protection and known domestic issues, has made local threats or been involved in problematic situations (and how would the bank know?), or someone who buys multiple weapons and ammunition out of character and above their means, etc.  Law Enforcement investigations start with identifying a potential crime. Law Enforcement  initially assesses an individual in context and determines if a more in depth review is needed.  They would not review every individual based on the purchase of a single gun. This is also why local police play an important role and should be consulted along with any larger county, state or federal law enforcement agency, as they may have a better indication as to who the gun purchaser is and the individual’s history and perhaps some significant recent events in the purchaser’s life.

For a more indepth article on the Suspicious Activity Report (SAR) see “A SAR is Born” at https://amltrainer.com/a-sar-is-born/

What about Ghost Guns?

I hate the name “Ghost Gun” as it does not communicate to the average person exactly what the term means.  A ghost gun is a do it yourself, construct of a gun from a kit using unfinished frames and parts of the firing mechanism.  The “kit” comes with all the parts of the gun that a person would need to turn the collection of parts into a functional weapon.  It looks like a real gun, and it shoots like a real gun…it is a real gun.  However, it is unregulated, untraceable, requires no background checks, has no serial numbers, and no registration needed – hence the term ‘Ghost Gun’.  Is it as reliable a weapon as a real Glock or H&K?  Probably not, after all, it is a cheap DIY imitation, but, make no mistake, it can certainly be and has proven to be quite deadly.  

The thing that scares me the most with ghost guns is the type of person who may want to buy an unregistered, untraceable firearm that requires no background check. Bothersome is the fact that any individual may have access to an unregulated, unregistered, untraceable weapon.  No background checks, no bill of sale, no involvement of a federally licensed gun dealer.  This screams bad intentions that can send a chill down the spine.  I am sure that there are legitimate and honorable firearms enthusiasts who might enjoy building their own gun, but until a method of accountability is developed, these DIY weapons are too easy for the wrong person to obtain.  You can build your own car, but you still have to pass a state inspection and register the car within the state.

What could credit cards do about ghost guns?  Any on-line storefront that sells DIY kits could be cut off from the credit card network.  Consider the parallel of credit card functionality that is currently turned off for on-line gaming sites in certain states.  In addition, as of April 11, 2022 the Department of Justice (DOJ) issued a final rule banning the business of manufacturing “buy build shoot” kits that could be purchased online or at a store.  Now that the ruling has banned the manufacturing and purchasing of ghost guns, we’ll now have to predict how these DIY manufacturers will react.  There is a good chance that some of the kit manufacturer’s will disguise their operation, cloak their transparency, operate from a non-US territory, and/or go underground.  Making things illegal always sounds great, and politicians can give a great stump speech, but, in reality, if the government does not have the fortitude to follow through, then criminals will find a way.  Hence, look at the continuing drug problem. Everytime the government builds a ten foot wall, the criminals construct an eleven foot ladder.  We need to be like a good chess player and always think four or five moves ahead.  Now that the DOJ has banned ghost guns are there other weapons that credit card companies should not allow to be purchased via their platform?  What about fertilizer and other bomb making materials?  Should so much responsibility be placed on the shoulders of private financial institutions and should they be the ones to absorb the cost of the additional workload?  

As you can see, this is a complex and multifaceted issue.  I don’t see monitoring credit card data as the answer to gun related violence.  Further, this does nothing for the purchase of firearms with cash.  Since there is a system already in place for background checks and reporting of multiple handgun purchases in a five day period, it would make more sense to mandate and expand background checks on private sales than it would to try and expand efforts into the banking sector.   It should also be noted that background checks, as important a function as they are, do not prevent the theft of firearms, black market sales, or legitimate purchases via a straw man who in turn gives or sells the weapon to a bad guy.  People who follow the law are not usually the ones likely to commit heinous acts of violence.

Credit Card Regulation and Data Protection

Charging Guns-Whats In Your Wallet f4 by Kevin Sullivan President The AML Training Academy and Advisory LLC at AMLtrainer.com

I also see where the process of reviewing and identifying individual credit card purchases has the potential of becoming a slippery slope.  Would merchants, credit card companies, payment processors, banks, software providers, use gun purchasing data for additional marketing or sell that information to their affiliates?  In this age of data collection we’ve all experienced the scenario of looking up info about things like a new car on the internet and then getting inundated with tons of advertisements from car manufacturers and dealers.  Would data be used by political parties, special interest groups, the mental health industry, insurance companies, lenders, etc? Could you be subjected to the cancel culture if you purchase a product or buy at a store that is not politically correct? Would you be chastised if you used your credit card to pay for an abortion?  Would you be drawn and quartered if you donated to a conservative candidate?    Policies for the use and or dissemination of personal purchase information would need to be established so this credit card purchase information is not used for any other purpose.

Summary

The gun related violence solution is not a simple fix.  We already have some systems in place but they need to be expanded.  Attempting to use credit card purchase information would appear to be redundant reporting since firearms purchased via a FFL dealer are already reported.  Except in cases where the sale is from a non-FFL dealer, whose customer purchases using a credit card.  In these instances it makes more sense for the non-FFL dealer to also be mandated to file reporting forms at the time of purchase.  This system would also cover cash purchases and it would make the complex and time intensive mechanisms of credit card monitoring moot.

Each patch that we apply, small as it may be, could save lives.  We have other patches such as hardening targets, age restrictions, expansion of background checks, and mental health records to name a few.  All these combined may translate into saving more lives.  There are a lot of good ideas from both sides of the fence that should be considered and implemented.  At some point we have to realize that doing nothing is not helping.  This issue is very polarizing and we will never make everyone happy, but, there is a level where the pro-gun and the anti-gun crowds should be able to meet with the common goal of saving lives.

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About the Interviewee

Kevin Sullivan, CAMS, CCI is a retired New York State Police Investigator and Federal Agent who dedicated his career to AML and continues that work through his company, The AML Training Academy and Advisory LLC. Kevin coordinated AML investigations for the state of New York while being detailed to one of the worlds largest AML task forces, the NY High Intensity Financial Crime Area (HIFCA) El Dorado Task Force. He has helped develop and implement global AML guidelines and trained and advised all industries and government agencies requiring AML around the globe. He helped to write various certification programs for the Association of Certified Anti-Money Laundering Specialists’ (ACAMS) and was the co-founder and former chair of their inaugural chapter which was in NY. Follow Kevin or reserve a seat in one of his live webinars. Space is limited!

I work with AML/BSA compliance programs large and small, if you need a customized and quality anti-money laundering program, training, or advise I invite you to contact me to learn how I can help with your compliance needs.

Kevin Sullivan, CAMS, CCI
President of
The AML Training Academy and Advisory LLC

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