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Do Your Due Diligence: A Checklist for Banking Independent ATM Owners.

Not all independently-owned ATMs pose the same level of risk for money laundering, funding terrorism, or other illicit financial activities, said FinCEN in a June 22nd statement. This statement was designed to help financial institutions that bank independent ATM owners and operators assess the risk profiles of this highly diverse group of businesses.

In 2021, an updated version of the FFIEC (Federal Financial Institutions Examination Council) manual was published and the section regarding independently-owned ATMs, revised. RiskScout helped redline the section of the manual on independent ATMs that FFIEC ultimately included.

In its June statement, FinCEN clarified that it was not discouraging financial institutions from working with independent ATM owners and operators. In fact, wrote FinCEN: “… banks that operate in compliance with applicable Bank Secrecy Act/anti-money laundering (BSA/AML) requirements and reasonably manage and mitigate risks related to the unique characteristics of customer relationships are neither prohibited nor discouraged from providing banking services to independent ATM owner or operator customers….”

FinCEN also concluded by encouraging “banks to manage customer relationships and mitigate risks based on those customer relationships rather than declining to provide banking services to entire categories of customers.”

A Due Diligence Checklist

RiskScout helps a number of community banks and credit unions with independent ATM owners and operators among their customer base perform the necessary due diligence to make this often higher-risk group easier to bank.

Because RiskScout has worked so closely with the regulators, we are able to help financial institutions meet their goals for due diligence in this area.

And while FinCEN’s CDD (customer due diligence) rule does not specifically require the following information be collected, FinCEN does underscore that the following information can help a financial institution determine the money laundering and terrorist financing risk profile for an independent ATM owner or operator:

  • What is the operator or owner’s organizational structure, including key principals and management?

  • What are the internal policies, procedures, and internal controls of the ATM owner or operator?

  • What ATM currency servicing arrangements, contracts, and responsibilities are in place? This runs the gamut from cash vault services to third-party providers or self-service.

  • If a bank account is not used to replenish the ATM, what source of funds is used instead? As possible answers, FinCEN lists “proceeds generated by the core retail business of the owner, proceeds from a loan or revolving credit line, or cash originating from an account maintained at another bank.” Each has its own ramifications for risk.

  • Where is the independent ATM owner or operator located? What are the locations of the ATMs that he or she operates?

  • What are the expected levels of activity at the ATM? And what are the actual levels? Currency transactions should be included in these answers.

  • Is the operation of the ATM ancillary to other retail operations? Or is it the primary business of the independent ATM owner or operator?

In the end, answers to these questions should provide a robust starting point for creating a risk profile of independent ATM owners or operators among your business customers.

Finally, RiskScout has the industry knowledge and firsthand experience to help community banks and credit unions interpret the answers to FinCEN’s questions and to make appropriate decisions about a particular customer’s risk profile, going forward. RiskScout’s robust ongoing compliance features allows you to onboard, verify and manage ongoing compliance requirements for all higher-risk industries and individuals, including independently owned ATMs.

Contact RiskScout here to find out more.

Read FinCEN’s June 22nd statement here.


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