Good Afternoon. I am reviewing my bank's private ATM owners. I have come across business that is receiving ATM settlements in the account at my bank but are not withdrawing any cash. They told the banker that they are withdrawing the cash at their main account which is at another bank. Does anyone have guidance on what to do with this? Can I make the business start withdrawing cash with my bank? Or move their ATM business to their other account? The BSA Exam Manual did not have much regarding this type of situation.

Thank you

There is no expansive regulatory guidance on privately owned ATMs that tells banks what to do. Without engaging myself in a long philosophical discussion I'll just offer the blanket observation that when a customer maintains accounts at more than one bank the best monitoring system in the world isn't worth a tinker's damn; you simply don't see all of the transactions. Your situation would only be an example.

Can I make the business start withdrawing cash with my bank? Or move their ATM business to their other account?

That would be the two options that I would lay on the table in front of the customer and say - you choose.

What if the business is filling the ATM with cash from their daily sales? You wouldn't see cash withdrawals for that either...

I suppose if he's admitting he's making the withdrawals at a different bank you could offer that as an option, but the other bank may have cheaper cash handling fees, or it's closer to the business thus being safer for the customer to transport cash.

If they want to engage in high risk activity, it doesn't matter what the lame reason they give for dealing with multiple banks.

My approach and advice has always been, if they want an account at the bank, then the bank either has the whole relationship or none of it.

* If you do not have the ATM's clearing account, you cannot "monitor" anything.

* If you do have the ATM's clearing account, yet the customer obtains cash from another bank, you cannot "monitor" anything.

* If you do have the ATM's clearing account when the customer installs the ATM and claims to feed it out of the till, for a brief period of time you could look back at the amount and composition of prior cash deposits and see whether or not the claim was feasible compared to the ATM withdrawals. After a while you could not even do that as the customer's cash position could change without your bank's being aware.

Banks eventually figured out that they did not have to serve as the de facto regulator for MSBs. It just doesn't seem to dawn on them that they are now performing the same service for private ATMs which most states don't even require be licensed.

If your bank is going to be held responsible for the customer's actions it will need to exercise an element of control over the customer's actions.

In a previous world where we banked check cashers, we had this scenario with one of our check cashers who had an ATM. They were getting cash from their local bank due to safety and logistic concerns but were processing transactions through us. As part of our due diligence, we required a copy of their other bank's statements for their account so we could conduct our monitoring and ensure we had the full picture. That was more than 5 years ago now. The customer was willing to do it to prove he was legitimate.

But they would drive out of their way to deposit checks??? Yup, that makes sense.

Your bank would have been more profitable and assumed less regulatory risk if you told the customer to move the ATM account to the bank where he got his cash...the compliance tail was wagging the banking dog throughout that reconciliation process.

We banked both check cashers and international MSBs and checks were deposited by RDC. It was extremely profitable and the extra EDD costs were covered by the client. Besides due to all of our robust CDD and EDD we had no examination issues with banking MSBs and using RDC.

It's very fortunate that your alma mater had a fee structure that made the practice rational. In the absence of that fee schedule, it would still not be a logical business decision.

If you're getting pushback from doing the right thing from Retail, look at these:

Ascertaining the sources of currency for the ATMs by reviewing copies of armored car contracts, lending arrangements, or any other documentation, as appropriate. (FFIEC BSA/AML Examination Manual, p. 249)

Admittedly, this is far more broad than what the examiners expect, particularly the phrase "any other documentation".

Appendix F lists the following as a red flag:

Sources of currency for the ATM cannot be identified or confirmed through withdrawals from account, armored car contracts, lending arrangements, or other appropriate documentation. (FFIEC BSA/AML Examination Manual - F-6).

The above more definitively suggests that there should be a process in place to identify or confirm currency sources - with the options of withdrawals, etc. The only problem is the continued vague inclusion of "appropriate documentation". This is where it comes down to risk appetite.

Personally, the first Bank I started doing AML had the ACH in -cash out requirement down pat back in 2007. The next one I worked at starting in 2008 had gotten a major comment back in 2007 for not tracking ATM cash. Lastly, I've heard from a lot of BSA/AML colleagues that they've gotten comments from examiners that expect the ACH in - cash out control. Some exceptions can be made - but the one you've mentioned doesn't seem worth making.