A straw purchase is any purchase wherein the purchaser knowingly acquires an item or service for someone who is, for whatever reason, unable to purchase the item or service themselves. This term can be applied to any such purchase, but it is most widely used in relation to the sale of firearms, especially in United States federal gun laws.
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A straw purchase is illegal per se in most cases, as noted below. For example, someone may purchase an automobile for another who, due to poor credit, cannot purchase it themselves. The purchase is illegal; however, most financial institutions (i.e. banks) have very strict policies regarding this practice; if the other party defaults on payment, the original purchaser would be liable for the debt even if they could not collect the debt and/or repossess the car from the other party.
In the context of United States federal gun laws, a straw purchase is defined as any purchase from a dealer holding a Federal Firearms License where the buyer conducting the transaction is acting as a proxy for another person. The law does not distinguish between someone who is purchasing on behalf of a person who legally cannot purchase or possess a firearm, and one who is not.
Beginning in 1975, ATF officials apparently reached a judgment that a dealer who sells to a legitimate purchaser may nonetheless be subject to prosecution or license revocation if he knows that that individual intends to transfer the firearm to a nonresident or other unqualified purchaser. This position was never published in the Federal Register and is indeed contrary to indications which Bureau officials had given Congress, that such sales were not in violation of existing law. Rather than informing dealers of this distinction, ATF agents set out to produce mass arrests upon these "straw purchase" sale charges, sending out undercover agents to entice dealers into transfers of this type.
In the United States, straw purchases are a felony violation of the Gun Control Act of 1968 for both the straw purchaser (who can also be charged with lying on Federal Form 4473) and the ultimate possessor. One of the questions on Form 4473 is “I am the buyer of this firearm” and the purchaser must answer honestly yes or no, by checking the appropriate box in ink. However, purchase of a firearm as a bona fide gift for someone who can legally own such a firearm is permitted.[1]
Many gun shops have jointly participated in programs (such as: “Don’t Lie For The Other Guy”) to deter such purchases.[2]
Another example of an illegal straw purchase involves alcohol; these purchases are particularly common as persons under the drinking age frequently request that a person above the legal age purchase alcohol for them. If intent can be proven, this action is illegal and punishable according to state and federal law.
The Criminal Intelligence Service Canada defines a straw buyer as "an individual who pretends to be a legitimate buyer for a property but in reality is in collusion with another criminally inclined individual to further a mortgage scam. The straw buyer often uses fake or stolen identification to prevent being traced."[3] In May 2010 the Bank of Montreal sued hundreds of persons, including Federal Conservative MP Devinder Shory, for allegedly being involved in a mortgage fraud in which the bank lost $30 million.[4] The Bank claims that "straw buyers" were recruited by fraudsters. In exchange for a cash payment the "straw buyers" would allow their names to be used on mortgage applications to obtain real estate properties in the Calgary area.[5]