We don't have customers with private ATMs so i'm learning my Due Diligence.....just recently we had a customer who purchased an existing business. that business had an ATM so the new owner took it over. they are funding it by writing a check for cash and asking for 20s. they do not have an account with us set up for just ATM transactions. am I missing something? what else do I need to do?

I would designate the customer as high risk. Find out who they are contracted to process through. Anticipated ATM activity, fees charged. It isn't necessary for them to have a separate account but it does come in handy when trying to review if the ATM settlement activity aligns with the cash/change orders.

I had this situation and I had the account officer/branch manager contact the customer and tell them that a separate ATM account would need to be set up at our bank exclusively for all ATM transactions. It was a "free" account and the customer didn't seem to mind.

they are on the HR list.
in an earlier attempt to gather information all they were willing to provide was that they purchased it from the previous owner, didn't want to provide any more info as it wasn't being funded - at the time - by us. They did not open any account for the ATM funding.
the owner of this business is another business and they have a bank owned, from us, ATM at that location. they now come in to cash a check to refill the ATM.

now what

The exam manual is a good place to start for this one:

https://bsaaml.ffiec.gov/manual/RisksAssociatedWithMoneyLaunderingAndTerroristFinancing/14

Review the risks and mitigation sections and determine what you need to do to be comfortable that they aren't laundering money, then document it. The first thing examiners usually look at - so the first question you should be confident of - is how they're replenishing the ATM. In your case, do the checks he's cashing equal the ACH credits he's receiving from the ISO, after deducting a reasonable ATM surcharge? These credits represent the ATM withdrawals. If the credits are more than the replenishment checks, they are putting additional cash into the machine, and you need to know that that isn't illicit.

Every bank has it's own risk tolerance, but if the owner is uncooperative about supplying whatever information you request, the customer probably isn't worth keeping. POATMs garner a ton of scrutiny and demand clear due diligence. It may be that they're running the cash through you because their old bank didn't like it. Send them on to the next bank if they're uncooperative.

In your case, do the checks he's cashing equal the ACH credits he's receiving from the ISO, after deducting a reasonable ATM surcharge? These credits represent the ATM withdrawals. If the credits are more than the replenishment checks, they are putting additional cash into the machine, and you need to know that that isn't illicit.

this is the problem where do you see this ?

I confused. Are you talking about them refilling their own ATM or your ATM? If they have a private ATM and you do not have the account in which the ATM activity is deposited - then you only have half a story and there is no way to tell what is going on. Most banks require all or nothing. The customer either runs both sides of the ATM transactions through the bank - or you do not bank and support their ATM activity.

ok so we only seem to be filling the ATM - they bring in a $4,000 check for cash and get 20s. we don't have any other business with them regarding their ATM - NOT our ATM.
however,
the company that actually bought the business, who already has accounts with us and our bank's ATM at their premises, now has this relationship with us. who knows if they will eventually want our bank's ATM at this new location after what lease or ownership time expires. regardless I have spoken with our auditors and realize we are still looking at the risk level of this relationship and the presence of the ATM, but I do believe management will not want to "rock this boat" given previous history so we'll continue to monitor and document.

I have a lot more questions now. I'm going to summarize to make sure I have this all correct.

You have an existing customer that has 1 location which currently maintains its operating relationship with you; including, a bank owned (your bank) on site. This customer purchased another location and it came with a non-banked owned ATM of which they assumed responsibility. If all this is accurate here is how I would move forward:

1) Not wanting to provide baseline due diligence for such a high risk customer type is a huge red flag. I would consider exiting based on this and this alone.
2) Do you have documentation the lease/ISO agreements have been updated to transfer responsibility to your customer. This is non-negotiable. "Sub-letting" a private ATM goes beyond my risk tolerance.
3) Are the ACH settlements being deposited into an account at your FI? If no, hard stop, as stated before, you are unable to mitigate the risk of an ATM without seeing both sides of the transaction.

Also - to address the question regarding verifying the funds aren't from illicit sources. You are correct - this needs to be done. Which is why it is important to know how much cash the ATM holds, how much it is being used and the ability to review the business operations as a whole (including the ACH settlements from the ATM) and not only the cashed ATM check. A lot of businesses will recycle cash from their business into the ATM. You need to understand the revenue being generated by the business to ensure they would actually be able to support this. Site visits are big - is the location busy when you visit. Does the volume match?

*The opinions here are mine and are not those of my employer.

I appreciate all the feedback. will take this information to management and document their response.