Straw purchase

A straw purchase or nominee purchase is any purchase wherein an agent agrees to acquire a good or service for someone who is unable or unwilling to purchase the good or service themselves, and the agent transfers the goods or services to that person after purchasing them. In general, straw purchases are legal except in cases where the ultimate receiver of goods or services uses those goods or services in the commission of a crime with the prior knowledge of the straw purchaser, or if the ultimate possessor is not legally able to purchase the goods or services. In some jurisdictions straw purchases are legal although the end user is not legally able to purchase the good or service himself or herself.[1]

Examples of legal uses

Examples of legal straw purchases would be purchasing groceries for a senior citizen who is unable to go to a supermarket oneself because of poor health, or a financed automobile for someone who cannot obtain it himself because of poor credit. In some cases, the agent in the straw purchase may receive money or recompense from the ultimate possessor. Obtaining loans through a straw buyer is legal except when the agent and ultimate user of the funds defraud the lender or foreseeable ultimate lender (such as by signing false mortgage documents designed to be mingled with other mortgages and securitized) or when the loan terms expressly prohibit use of an agent to obtain funds.. In cases where straw purchases are legal despite the good or service purchased not being legal for the end user to receive, the end user may become liable for illegally possessing or receiving the good or service, while the straw buyer who was legally able to make the purchase is generally not held liable for his actions.

Illegal uses

Firearms

In the United States, a straw purchaser of a firearm at a federally licensed firearm dealership who lies about the identity of the ultimate possessor of the gun can be charged with making false statements on a federal Firearms Transaction Record. If a firearm is purchased as a gift, the transaction is not a straw purchase, and the person buying the gift is considered the end user. The buyer is also considered the end user if he intends to sell the firearm, as long as the initial purchase is not made at the direction of or as part of an agreement with the second, ultimate buyer. Straw purchases in lawful sales made outside of federally regulated dealerships are not subject to such rules and are legal unless the gun is used in a crime with the prior knowledge of the straw purchaser.[2]

Alcohol

Straw purchases of alcohol are illegal in most jurisdictions when a person under the legal drinking age requests that a person above the legal age purchase alcohol for the underage person, and the straw purchaser knows or might reasonably assume based on the circumstances that the person is under the legal age.

Tobacco and nicotine products

As of October 2015, it is an offence to buy tobacco, cigarette papers (for the purpose of smoking tobacco) or e-cigarettes on behalf of under 18s in the United Kingdom.[3] It was already an offence in Scotland.

Mortgage loans

The use of a strawperson to obtain auto or mortage loan funds is illegal when there is intent of not using property Bank of Montreal sued hundreds of people, including Federal Conservative MP Devinder Shory, for allegedly being involved in a mortgage fraud in which the bank lost $30 million.[4] The bank alleged that straw buyers, in exchange for a cash payment, applied for mortgage loans in the Calgary area on behalf of other parties and knew before submitting the applications that the loans would not be paid. The lawsuits were settled out of court.[5]

In United States v. Quintero-Lopez, two men were charged with locating eight straw purchasers for homes and helping the straw purchasers falsify pay history documents in order to obtain $8.3 million in mortgage loans. The government alleged these loan purchases were illegal because the straw purchasers inflated their incomes as part of an attempt to defraud the lenders. In 2011, one of the two straw purchaser recruiters was sentenced to six years in prison and the other was sentenced to one year of probation.[6] Straw or nominee purchases of mortgage loans are legal when intent to defraud is not present.

See also

References

  1. ↑ Merrick, Jane (November 30, 2013). "Labour would make it illegal to buy cigarettes for children". The Independent. London: Independent Print Limited. Retrieved 22 July 2016.
  2. ↑ "ATF P 5300.4 – Federal Firearms Regulations Reference Guide 2005 General Information discusses "straw purchase" on p. 165 (application/pdf Object)" (PDF). www.atf.gov. Retrieved 2010-05-16.
  3. ↑ The Children and Families Act 2014 ss. 91 and 92 came into force on 1 October 2015. Regulations coming into force at the same time added e-cigarettes, which had become popular since the Act's enactment.
  4. ↑ "CBC News – Calgary – MP Shory accused in giant mortgage fraud". cbc.ca. 2010-05-05. Retrieved 2010-05-16.
  5. ↑ "'Straw buyer' seduced into mortgage scheme". cbc.ca. 2010-05-06. Retrieved 2010-05-16.
  6. ↑ Bell, Alexis (2010). Mortgage Fraud & the Illegal Property Flipping Scheme: A Case Study of United States v. Quintero-Lopez.
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