Like many people, I take cash for granted. It's available when I need it, I can buy just about anything with it, and I can use it to pay anyone, anywhere. For me, the easiest way to get cash is at an ATM, and I take these machines for granted, too. They're everywhere: at all types of retail stores and shops, mall kiosks, standalone places all down the street, and banks.
Some recent Take On Payments posts focused on the importance of cash in times of crisis and the needs of people who are cash reliant and those who live in rural areas. In this latter post, we referred to a barrier some independent ATM deployers, or IADs, have faced. The barrier was rooted in banks sometimes closing existing IAD accounts or not allowing IADs to bank with them in the first place. This post picks up that thread, this time with some good news for the industry.
But first, what would make some banks reluctant to do business with IADs? Banks must comply with the Federal Financial Institutions Examination Council's (FFIEC) Bank Secrecy Act/Anti-Money Laundering (BSA/AML) rules. A previous edition of the BSA/AML Examination Manual used language indicating that ATM operators could be a fraud and money-laundering risk. But without a bank account, IADs can't operate. A sudden closure of an account causes business disruption at best, ultimate failure at worst. This was a real problem for the IAD providers who found themselves without an account and the people in communities that rely on cash but don't have access to a nearby ATM.
Late last year, thanks to efforts from ATM industry groups, the FFIEC, in consultation with the Financial Crimes Enforcement Network, recognized the efficiency of the controls that are in place for ATM transaction settlement and cash replenishment. Accordingly, the FFIEC revised the section in its manual
on "Independent Automated Teller Machine (ATM) Owners or Operators" in a way that should help banks view ATM operator accounts more positively. It states that:
- financial institutions are "neither prohibited nor discouraged from providing banking services to independent ATM owner or operator customers..."
- an operator that maintains a separate cash settlement account with the bank for its ATMs presents a lower risk of money laundering, terrorist financing, or other illicit financial activity "because the bank knows the source of funds and can compare the volume of cash usage to EFT settlements to identify suspicious activity."
With access to cash remaining an important financial need nationwide and with a change in language that could help some IADs be more successful in running their businesses, perhaps more independent operators will contribute to serving populations nationwide. What do you think?
By Scarlett Heinbuch, a payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed