Chemical
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Knowing Your Customer/Suspicious Orders Reporting
Question: What constitutes a
Suspicious Order and how can Suspicious Orders be easily recognized?
Answer: The DEA has frequently been
asked for guidance on what constitutes a suspicious order. The
Suspicious Orders Task Force (SOTF) met in 1997 to make recommendations
to industry on recognizing suspicious orders. The following guidelines,
contained in the Chemical Handlers Manual, are intended to assist
chemical manufacturers, distributors, wholesalers and retailers to be
alert to suspicious orders involving listed chemicals. Consistent
application of these guidelines will help industry assist DEA in
preventing the diversion of legitimate chemical products to illegal drug
manufacturing and use. The guidelines are intended to apply to all
aspects of commercial chemical manufacturing and distribution. It is
important that the guidelines are applied to the totality of any
particular circumstances. No individual indicator listed below is
independently a suggestion that a given order is suspicious and/or
reportable to DEA. Questions concerning potentially suspicious orders
should be directed to the local DEA office.
"Know
Your Customer Policy" Explained
Suspicious
Orders Criteria for Retailers, Distributors, and Wholesalers
"Know Your Customer" Policy
It is fundamental for sound operations
that handlers take reasonable measures to identify their customers,
understand the normal and expected transactions typically conducted by
those customers, and, consequently, identify those transactions
conducted by their customers that are suspicious in nature.
Some states have restrictions on distribution
practices that are more stringent than the federal rules. The extent of
compliance with state law is taken into consideration when civil,
administrative, or criminal actions are under consideration.
It is required that any regulated person verify
that a customer for List I products possesses a valid DEA registration
or is exempted from that requirement.
The granting of a DEA registration signals only a
proper application, the establishment of the required records system,
and the required security system at the time of the on-site inspection
by DEA. The registration is not a confirmation of proper ongoing
business practices and does not relieve the chemical handler of the
responsibility to evaluate such transaction.
Suspicious Orders Task Force
PubLaw 104-237 Title V, § 504, Oct 3, 1996
The entire report can be viewed on the Diversion
Control internet site: www.deadiversion.usdoj.gov
Choose "Publications," then "program
reports"
The law, 21
U.S.C. § 830(b)(1)(A), requires that each regulated person shall
report to the Attorney General any regulated transaction involving an
extraordinary quantity of a listed chemical, an uncommon method of payment
or delivery, or any other circumstance that the regulated person believes
may indicate that the listed chemical will be used in violation of the
law. While the CSA requires reporting of suspicious orders, the manner in
which industry addresses the requirement determines its effectiveness.
Representatives of government and the chemical
industry worked together in 1998 in the Suspicious Orders Task Force to
develop voluntary guidelines for recognizing suspicious orders. The Task
Force guidelines, entitled "Suspicious Orders Identification
Criteria," were endorsed by the Attorney General and widely accepted
by industry. The criteria, which are for voluntary use, are specific for
each segment of the chemical distribution industry: Importers &
Manufacturers; Wholesale Distributors; and Retail Distributors. Task Force
guidelines appear in the appendices.
The Task Force recommended that manufacturers of
retail over-the-counter drug products containing List I chemicals utilize
"ordinary over-the-counter" packaging as defined in the MCA and
that products packaged differently be prepared and distributed only for
prescription use as defined by the Food, Drug and Cosmetic Act. The
industry has widely accepted this recommendation. Industry has distributed
the guidelines and incorporated them into employee training programs.
Suspicious
Orders Identification Criteria
Each regulated entity is most familiar with its
customers and circumstances surrounding the orders it processes. The
chemical industry must use its best judgment in identifying suspicious
orders. The following criteria are provided in order to assist the
industry in identifying suspicious orders.
All Levels / All
Chemicals (* indicates that
criterion may not apply to all retail settings)
- New customer or unfamiliar representative or
established customer who begins ordering listed chemicals.*
- Customers who don't seem to know industry practice
or who fail to provide reasons for an order at variance with accepted
legitimate industry practice.
- Customer whose communications are not prepared or
conducted in a professional business manner.*
- Customer who provides evasive responses to any
questions or is unable to supply information as to whether chemicals are
for domestic use or for export.
- Customer who has difficulty pronouncing chemical
names.
- New customers who don't seem to know Federal or
state government regulations.*
- Customer whose stated use of listed chemicals is
incompatible with destination country's commercial activities or
consignee's line of business.*
- Customers who want predominantly or only regulated
chemicals.
- Customers who want multiple regulated or
surveillance list (see Appendix G for Special Surveillance List) products,
particularly if in contrast to customary use and practice.
- Customer who is vague or resists providing
information about firm's address, telephone number, and reason for seeking
that chemical.*
- Customer who provides false or suspicious addresses,
telephone numbers or references.
- Customer who is vague or will not furnish references
for credit purposes.*
- Customer who refuses or is reluctant to establish a
credit account or provide purchase order information.*
- Customer who prefers to pay by cashiers check,
postal money order, etc.
- Customer who desires to pay cash.*
- Customer who wants to pick up the chemicals outside
of normal practice in the supplier's experience.
- Customer with little or no business background
available.*
- An established customer who deviates from previous
orders or ordering methods.
- Customers who want airfreight or express delivery.
- Customers who want chemicals shipped to a PO Box or
an address other than usual business address. (e.g., residence address)
- Customer using a freight forwarder as ultimate
consignee.
- Customer who requests unusual methods of delivery or
routes of shipment.
- Customer who provides unusual shipping, labeling, or
packaging instructions.
- Customer who requests the use of intermediate
consignees whose location or business is incompatible with the purported
end user's nature of business or location.
- Above threshold hydrochloride gas or iodine sales to
a non-commercial customer.
Distributor
(Non-retail) of Regulated OTC Products
- Customers who don't want to tell you what area they
will resell into.
- Customers who don't want to tell you in what volumes
they will resell.
- Customers who refuse to tell you who their customers
are.
- Customers who don't have limits on resales.
- Customers who push to buy more than your sales
limit.
- Customers who repeatedly buy your sales limit at the
shortest interval you set.
- Customers who don't know customers' limits on
individual resales.
- Customers who resell to non-traditional outlets for
regulated OTC products, e.g., hair salons, head shops, drug paraphernalia
stores, liquor stores, record stores, video shops, auto parts stores.
- Customers who resell large volumes into the
"independent convenience store" market.
- Any customer who asks for large bottle sizes, 60
count or higher.
- Customers who buy only the largest size available.
- Customers that don't sell other pharmaceutical
products or appear to sell those other products in token amounts.
- Any customer that resells multiple cases that flow
through to individual retail outlets.
- New customers who want to sell regulated OTC
products into California,
Arizona, Nevada, Oregon, Utah, Washington, New
Mexico, Texas, Kansas, Missouri, Arkansas.
- Any customer who wants to sell to an outlet
relocated from California, Missouri, or Kansas to any of the states
identified in the prior sentence.
- Any customer who wants to export, particularly to
Mexico, Canada, or Southeast Asia.
- Customers who will not provide you with evidence of
registration with DEA.
(Or having applied by the following deadlines: Nov
13, 1995 for single entity ephedrine; July 12, 1997 for ephedrine
combination products; Dec 3, 1997 for pseudoephedrine and
phenylpropanolamine products.)
- Customers who will not provide you with evidence of
applicable state registrations/licenses.
- Customers who sell mail order and who don't report
sales to DEA monthly.
(Note they must also be registered.)
Nominal retail customers who sell above the Federal,
"Retail," 9 Gm individual sale limits [Editor’s Note: The Task
Force’s original 24 gram limits were superseded by the 9 gram limit
established by the Methamphetamine Anti-Proliferation Act of 2000 on
October 17, 2001]
Wholesale Drug
Distribution Indicators
- Individual pharmacies that intend to export.
- Individual pharmacies or chains that won't set a
voluntary limit for individual sales at some fraction of the Federal limit
to qualify as a retail outlet.
- Pharmacies that stock large shelf volumes in stores
that have repeated thefts or other sales problems.
Factors Which May Suggest a
Suspicious Transaction
Retail Level - Regulated Products and/or
Combination Purchases
OTC customers who ask for more
than the transaction limit in effect.
Customers who are part of a group, each of whom buys
the transaction limit.
Customers who buy the transaction limit on the same
day and/or repeatedly within a few days.
Customers who buy only the largest size available at
the transaction limit.
Customers who buy other methamphetamine processing
products at the same time as the regulated products (alcohol, Coleman
fuel, acetone, road flares, drain cleaners, iodine, muriatic acid, rock
salt, starting fluid (ether), dry gas (alcohol), coffee filters, large
amounts of matches, etc.)
Customers who indicate they will resell or export.
Iodine customers who don't have a legitimate reason
for the purchase or who don't have an articulate reason for the volume
requested.
Customers who purchase iodine crystals or pellets
with any other item from the surveillance list.
Customers who want to pay cash when other forms of
payment would be customary.
There may be a legitimate explanation for a purchase
that represents one or more of these factors. The list is presented as a
guide to instruct retailers and their employees as to which transactions
may be suspicious.
Suspicious Order Reporting System
for Use in Automated Tracking Systems
Terms & Definitions
This voluntary formula is for use by distributors to
wholesale and retail levels. The formula calculates the quantity which, if
exceeded in one month, constitutes an order which may be considered
excessive or suspicious and therefore require reporting to DEA.
1) Add purchase quantities for the last 12 months
for all customers within same Distribution Center and for customer type
(Hospital, Pharmacy or Other) for any List I chemical containing item
stocked by the Distribution Center.
2) Add Customer months for every record used in
above total. (Months within the last 12 that customer purchases of the
item were not zero.)
3) Divide total quantity purchases by the total
customer months.
4) Then multiply by the factor below to give the
maximum amount that the customer can order per month before showing up on
the suspicious order report.
Note: Factor equals 3 for C-II and C-III
Controlled Substances Containing List I Chemicals and 8 for C-III-IV-V
Controlled Substances and non-Controlled OTC products containing List I
chemical items.
5) At the end of each month, a report will be
transmitted to DEA (separate reports for List I Chemicals and Schedule
II-V Controlled Substances) of all purchases of List I Chemicals and/or
C-II-V Controlled Substances and List I containing OTC items by any
customer whose purchase quantities exceed the parameters (above) any (2)
consecutive months or in three (3) of any moving six (6) month period.
Using a computer to manage and report on high volume
transaction business activities with extremely short order cycle times
(receipt to delivery) is the only viable, cost effective methodology for
the reporting of orders which may be considered excessive or suspicious.
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