Privately owner ATM's and like

We've had an audit where it was recommended that we review our convenience store customers, bars, etc to see if there's ACH activity that would indicate a privately owned ATM on the premises. I have no problem with that, we do have a couple of small stores that do have these ATM's on-site. What additional due diligence steps should I do? I've read the BSA exam manual on privately owned ATM's and ISO's etc but I'm still confused about this whole thing. Anyone have any insight?

PM me with your e-mail address and I'll send you our procedures.

Our institution recently had an exam and though the privately owned ATMs were identified and the accounts are being reviewed it wasn't part of the policy. It was considered in the enhanced due diligence section. Devsfan, I will me you with the my email for your procedures.

My question is, the BSA Manual indicates -- Reviewing corporate documentation, licenses, permits, contracts, or references, including the ATM transaction provider contract -- how far do you go with this and how does this affect the risk? Will they really give you this information?

Thanks

"My question is, the BSA Manual indicates -- Reviewing corporate documentation, licenses, permits, contracts, or references, including the ATM transaction provider contract -- how far do you go with this and how does this affect the risk? Will they really give you this information?"

We ask for all of that. If they do not give it to us, we close the account.

We request a copy of the agreement, try to do a site visit and then monitor the activity. This has passed regulatory muster so far.

We haven't seen anyone unwilling to provide copies of 3 months of ISO statements and a contract, where applicable. We rate them as higher risk if they have more than a handful of ATMs, and if the ATMs are located far away from our locations or our customer's locations, and if the ATMs are located in HIDTAs or other high-risk areas.

One customer thought to have one convenience store was discovered to be operating a dozen convenience stores, each with its own ATM, owned and operated by the customer. No problem with getting the documentation, though. The only one who was squirelly was one who suddenly had to change the name of his business (a year after opening his account) when we started asking questions about his ATM activity. I see some similar behavior with MSBs sometimes - you get them on the phone and ask about check-cashing, and all of the sudden, they don't know anything about check-cashing because they are in the process of selling the business to someone else from the same country.

On this topic, does anyone know anything about MetaBank in Storm Lake Iowa? Funds to a known private ATM account are being ACHed from here, and a search of ACHs reveal another customer receiving funds from/through the same bank, in patterns indicative of another potential, previously un-identified private ATM.

Is it possible that you could be seeing transactions relating to prepaid cards?

http://www.creditcardxpo.com/metabank-credit-cards.asp

Possible, I found that one too.

I would also like a copy of your ATM procedures. We just found out that we have 2 privately owned ATM's and we don't have any procedures nor are they included in our Risk assessment of products and services. What are the major concerns with privately owned ATM's? How do we know if an ISO is involved. I really appreciate the help.

Here is a link to the section of the BSA Manual that covers privately owned ATMs. It has some good information on the risks and mitigation of the risks.

Private ATMs

I've recently come across a privately owned ATM and am at a loss. Would you mind sharing your procedures with me as well?

Ditto - they would be helpful! Thanks

Same here, could I have a copy of the procedures?

Thanks

Pizza Queen,

Our policies follow along with Devsfan and Maytagman. A site visit is a definite along with copies of statements and contract. We did end up closing an account for a non-cooperative customer who we discovered had a private ATM in a casino (she never told us about this one) and did not want to provide documentation we requested. I would hesitate to offer services to a customer, as Maytagman said, whose ATMs are located far from their business locations.

I also just discovered that we have a long time cutomer (bar owner)that has an ATM. Recently they are requesting large amounts of cash (all $20's) We have not addressed this in our BSA Policy and was hoping that someone can offer some advice. Thanks

We have a few privately owned ATMs, that is, they purchase the machines and them set them out in all kinds of places: bars, hotel lobbies, malls, etc. they are rated (forever) high risk. Each month branch takes a total of cash outs and ACH ins. Should come close. If you see a major blip on one side but not the other that means some cash appeared and fell from the sky, and this would need an explanation. Also, a major blip in a non-blip time (for example, increased usage should be expected on holidays) that should prompt more questions. S&S had no problems with this. that being said, I hate these companies!

I assume that when you say branch monthly looks at cash out and ach transactions in - your customers have a seperate account for the ATM - Our customer has only one account and runs all transactions (Ex payroll,cash deposits) no ACH transaction - so not sure how I can monitor this - any suggestions?

The same with our customer. So it is hard to determine what is happening because of the ATM and what is the normal course of business.

I would like to reopen this discussion. Doesn't anyone consider this to be overreaching on the part of FinCEN? Why should banks, simply because they have a loan relationship or deposit relationship with an entity that has an ATM onsite be responsible for monitoring the activity of that ATM?! I can see it if we are supplying cash for the ATM, but just because an ATM is on their premises does NOT mean we have to play investigator and policeman on it. Let the feds pressure the states to require licensing and inspection of those ATMs. I swear, if we don't start saying "no" on occassion, we're all going to regret it.

I personally think that much of what we do in the investigative arena qualifies as "over reaching". But that is now our reality. Obviously, the primary goal of monitoring ATM operations is to ensure that they are not being used to launder ill gotten gains. We need to understand where the money being loaded into our customer's machine is coming from if it isn't coming from us. And is the money they are withdrawing from us really being used for ATM purposes. Pretty consistent with the other cash flow monitoring we are required to do. And actually it is a necessary piece of the cash flow puzzle for a multi-faceted, cash intensive business.

It's called job security and today I am thankful for that!

I agree with your conclusion, but will not put the fault at FinCEN's feet. They are a co-author of the Handbook, but each of the five families also participates in the development process.

The historical precdent is MSBs. Initially, the FDIC's examination procedures made their supervised institutions the de facto regulatory agency for MSBs. They never anticipated the backlash; i.e. that banks would simply say "We're not doing that" and summarily close MSB accounts.

Retread acknowledges that "no documentation, no account" is a policy his bank is willing to enforce. As for me, I agree. I would follow every Mickey Mouse suggestion my regulator offers, but I'm passing every dime of the cost on to the customer; e.g. "If you provide financial services, whether it is cashing checks or offering an ATM, here's your fee schedule."

Is the question meant to ask if the ATM activity does not touch the institution, should there be any monitoring performed?

In my opinion, if we get the ACH credits OR see the cash withdrawals (preferably both, obviously), then most definitely we should be aware if the cash flow is not as it would be expected. The only way to know that is to investigate/monitor to make sure that it is.

I think if the ATM money is flowing completely through another institutions, aside from wondering why we don't have the entire relationship, it is still a piece of information I would want to know about. Knowing all services offered by one of our customers is vital information not only in BSA land, but in other areas of the institution also. I don't think I would give the account the same depth of review as the businesses that have ATMs that are serviced through an account here, however knowing that they have an ATM on the premises would give me enough cause to be aware of the activity in the relationship 'just in case'.

All this "job security" is going to send me to an early grave...where's the "plus" in that?

Dying employed has it's benefits. It beats dying unemployed and hungry.

You guys are just a wellspring of happiness today!

Back to the subject at hand... The customer "feeds" the ATM with cash withdrawn from the bank. The ISO credits the customer's account for the amounts dispensed.

Randy pointed out in a response in this forum a few days ago that the cash dispensing bank could review the ISO's credits to their customer's account as a source of verification. Maytagman, above, mentions getting copies of the statements from the ISO for the same purpose. Either resource, coupled with a review of the amount and cash composition of withdrawals for the same period should provide the dispensing bank with a reasonable, albeit imprecise, reconciliation Trees mentions above. However, it would certainly be easier and more timely if the dispensing bank was able to review its own accounts for receipt of the ACH credits.

Does the ATM owner have any say so about the account the ISO uses to provide reimbursement; i.e. would it be reasonable for the cash dispensing bank to require the reimbursements flow through the customer's business account at that institution or even a separate ATM account as a condition of continuing to do business with the ATM owner?

"would it be reasonable for the cash dispensing bank to require the reimbursements flow through the customer's business account at that institution or even a separate ATM account as a condition of continuing to do business with the ATM owner?"

I think it is more than reasonable. I have several clients that require this as a condition of providing them cash for their ATMs. Similar to how they treat their MSB customers. What it comes down to is the bank demands that they have the whole banking relationship (so that ins and outs can be monitored - although that is not directly communicated to the customer) or they send them down the street.

Does anyone have a sample letter they would be willing to share? I have recently found out we have several customers with an ATM on premises. I'd like to send out a letter requesting various information and would appreciate some ideas. thanks!

Fallgirl, PM me your Bank address and I'll send you the one we recently sent.

I'd like to have a copy of the procedures as well. Thanks.

A new twist just as an FYI. Apparently in my state, any ATM is considered a non-Bank ATM (electronic branch)and it's required that each ATM be registered with the Department of Banking! Not by the store owner, but rather by the ATM processor. Most major or national processors do not know about this requirement so now we have a bunch of customers who are violating state law. Just when I think I get all of my due diligence done, we now have to verify state licensing of these things. This is headed down the MSB road we all traveled a few years ago....GRRRR....

Pam - I don't think it's your customers who are violating Ch. 167B, it's the ATM deployer/processor. For what it's worth, you might simply notify the DOB of your concerns about unlicensed ATMs deployed by "ATMs R Us" or whoever and provide whatever location information you can pull together.

I recently came across this post and if you are still able to provide your procedures dealing with privately owned ATMS I would appreciate a copy. We have just recently seen growth in our area of private ATMs and are finding that some of our convencience store customers have put them in. We don't want to get caught red-faced.

I would also like a copy of the procedures.

On a side note, I just discovered that a customer who has multiple pharmacies with my FI has a privately owned ATM in one location. He confirmed to the branch manager that he is taking money from the register and using it to replenish the ATM. An "ATM/Lotto" account he maintains at my FI then receives ACH credits.

I have already been reviewing the relationship due to the cash deposit activity spread across the accounts he maintains with my bank. The branch manager also confirmed to me that there are no agreements or any documentation of any kind. Any advice on this issue?

That's pretty much what they all say.

Compare his "pre-ATM" deposits and withdrawals of currency to current levels. If he's feeding the ATM with cash received over the counter, his cash deposits should have dropped in an inverse correlation with the increase in ATM derived ACH credits to his account. In addition, find out what denominations his ATM dispenses and compare that to the denominations that make up his deposits. The ATM should be consuming the larger bills.

ACBbank

An "ATM/Lotto" account he maintains at my FI then receives ACH credits.

I recall that there was an regulation with NYS Lotto where the Lotto account could only have direct debits from Lotto. It has been a while since I have seen the reg. and my firewall would not let me check.

You may wish to check.

Are there any state licensing requirements for the privately owned ATM's (or owners)?

There can be. There are in Massachusetts, for example. This is a question you ought to re-post in your state's forum, assuming you're from the Lone Star State.

Thanks John. Will do.

I have just recently signed up for this forum. So far, it seems pretty informative. In line with this particular subject, I am also looking for advice or process/procedures for Privatly Owned ATM's. We recently opened an account for a convenience store specifically to fund their ATM.

Check out the bankers tools page, I shared a checklist that I use.

TBOBTH,

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