We have a customer who always uses a foreign ATM to withdrawal from her account (she lives out of town). She is disputing her ATM withdrawal stating that she didn't receive her money. Our card department started the investigation and sent in the dispute and gave provisional credit. The information that came back to us was that the foreign ATM dispensed the cash and the ATM balanced.

Are we required to eat this money or can we close the dispute and simply say that the investigation indicated the money was dispensed and the ATM balanced?

You could or weigh the customer relationship and reputational risk against the amount of the claim.

The burden of proof is on the bank. But if the owner/servicer says there was no dispense error and the ATM balanced, that weighs heavily in the banks favor and you absolutely do not have to pay the claim. Did the person count or scroll the bills such that a camera saw it? Is there anything supporting the customers claim other than the claim? If not, established accounting, control and security procedures are in your favor.