A straw purchase or nominee purchase is any

purchase Purchasing is the procurement process a business or organization uses to acquire goods or services to accomplish its goals. Although there are several organizations that attempt to set standards in the purchasing process, processes can vary g ...

wherein an

agent Agent may refer to: Espionage, investigation, and law *, spies or intelligence officers * Law of agency, laws involving a person authorized to act on behalf of another ** Agent of record, a person with a contractual agreement with an insuran ...

agrees to acquire a

good In most contexts, the concept of good denotes the conduct that should be preferred when posed with a choice between possible actions. Good is generally considered to be the opposite of evil. The specific meaning and etymology of the term and its ...

service Service may refer to: Activities * Administrative service, a required part of the workload of university faculty * Civil service, the body of employees of a government * Community service, volunteer service for the benefit of a community or a ...

for someone who is often 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 if 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 the ultimate possessor is not legally able to purchase the goods or services. In some jurisdictions, straw purchases are legal even if the end user is not legally able to purchase the good or service themselves.

Legal uses

Examples of legal straw purchases would be purchasing groceries for

senior citizen Old age is the range of ages for people nearing and surpassing life expectancy. People who are of old age are also referred to as: old people, elderly, elders, senior citizens, seniors or older adults. Old age is not a definite biological sta ...

s who are unable to go to supermarkets themselves because of poor health or financing an automobile for someone who cannot obtain a loan 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. If 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, but the straw buyer who was legally able to make the purchase is generally not held liable for their actions.

Illegal uses

Firearms

In the

United States The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...

, 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, which is a

felony A felony is traditionally considered a crime of high seriousness, whereas a misdemeanor is regarded as less serious. The term "felony" originated from English common law (from the French medieval word "''félonie''") to describe an offense that r ...

. Note that in this case, purchasing the item for another person is

ipso facto is a Latin phrase, directly translated as "by the fact itself", which means that a specific phenomenon is a ''direct'' consequence, a resultant ''effect'', of the action in question, instead of being brought about by a previous action. (Contras ...

illegal, regardless of that person's status as a legal possessor. 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. It is illegal for any person not in possession of a Federal Firearms License to purchase a firearm with the intention of resale. Private purchases in lawful sales made outside of federally regulated dealerships are not subject to such rules and are federally legal unless the gun is used in a crime with the prior knowledge of the straw purchaser.

Alcohol

Straw purchases of alcohol are illegal in most jurisdictions when a person under the legal

drinking age The legal drinking age is the minimum age at which a person can legally consume alcoholic beverages. The minimum age alcohol can be legally consumed can be different from the age when it can be purchased in some countries. These laws vary betwee ...

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. In

England and Wales England and Wales () is one of the Law of the United Kingdom#Legal jurisdictions, three legal jurisdictions of the United Kingdom. It covers the constituent countries England and Wales and was formed by the Laws in Wales Acts 1535 and 1542. Th ...

, buying alcohol on behalf of a person under 18 is a

summary offence A summary offence or petty offence is a violation in some common law jurisdictions that can be proceeded against summarily, without the right to a jury trial and/or indictment (required for an indictable offence). Canada In Canada, summary offe ...

under section 149 of the Licensing Act 2003, punishable by an unlimited fine (level 5 on the

standard scale The standard scale is a system in Commonwealth of Nations, Commonwealth law whereby financial Criminal law, criminal penalties (Fine (penalty), fines) in legislation have maximum levels set against a standard scale. Then, when inflation makes it nec ...

). There is an exception for beer, wine or cider served to a 16 or 17 year old with a meal at a table.

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 individuals under 18 years of age in

. It was already an offence in Scotland.

Mortgage loans

The use of a straw person to obtain auto or mortgage loan funds is illegal if the funds are misused intentionally. In Canada, the

Bank of Montreal The Bank of Montreal (, ), abbreviated as BMO (pronounced ), is a Canadian multinational Investment banking, investment bank and financial services company. The bank was founded in Montreal, Quebec, in 1817 as Montreal Bank, making it Canada ...

sued hundreds of people, including

Conservative Party of Canada The Conservative Party of Canada (CPC; , ), sometimes referred to as the Tories, is a Government of Canada, federal List of political parties in Canada, political party in Canada. It was formed in 2003 by the merger of the two main Right-wing ...

MP Devinder Shory, for allegedly being involved in a mortgage fraud in which the bank lost $30 million. The bank alleged that straw buyers, in exchange for a cash payment, applied for mortgage loans in the

Calgary Calgary () is a major city in the Canadian province of Alberta. As of 2021, the city proper had a population of 1,306,784 and a metropolitan population of 1,481,806 making it the third-largest city and fifth-largest metropolitan area in C ...

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. 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.{{cite book, last=Bell, first=Alexis, title=Mortgage Fraud & the Illegal Property Flipping Scheme: A Case Study of ''United States v. Quintero-Lopez'', year=2010, url=http://www.alexiscbell.com/Mortgage_Fraud_Case_Study_eBook.php, url-status=usurped, archive-url=https://web.archive.org/web/20120328111013/http://www.alexiscbell.com/Mortgage_Fraud_Case_Study_eBook.php, archive-date=2012-03-28 Straw or nominee purchases of mortgage loans are legal when intent to defraud is not present.

References

Contract law