The Treasury’s Financial Crimes Enforcement Network (FinCEN) said so issued his statement provide “clarity” to banks on how to apply a risk-based approach to conducting customer due diligence on independent owners or operators of automated teller machines (ATMs) in accordance with the requirements set out in FinCEN 2016 Customer Due Diligence (CDD) Rule.

“Some owners and operators of independent ATMs have reported difficulties obtaining and maintaining access to banking services, which undermines the important financial services they provide, including to people in underserved markets,” the report said. FinCEN in its press release.

Independent ATMs, often called White label ATM, are machines owned and operated by non-banking entities. Traditionally, banks viewed servicing these machine operators as a high-risk activity, largely due to the possibility of these machines being loaded with money generated from illicit activities, making them potential tools for money laundering.

“FinCEN reminds banks that not all independent ATM owners or operators present the same level of risk of money laundering or terrorist financing (ML/FT), or other illicit financial activities, and that not all self-employed ATM owners or operators automatically pose a higher risk,” the treasury office said.

Banks that “reasonably manage and mitigate the risks associated with unique customer relationship characteristics are not prohibited or discouraged from providing banking services to self-employed customers who own or operate ATMs,” FinCEN added.

Risk factors

Financial crime risk for independent ATM owners or operators may vary depending on the facts and circumstances specific to the customer relationship, such as volume of transactions, location of ATMs, and source of funds to replenish ATMs, FinCEN said. For example, ATM owners or operators who fund their ATMs exclusively with cash withdrawn from their account at a bank may be relatively low risk “because the bank knows the source of the funds and can compare the volume of use of the cash to electronic funds transfer settlements to identify suspicious activity,” FinCEN said.

“Conversely, independent ATM owners or operators who replenish ATMs from other or unknown cash sources may present potentially higher ML/FT risks, as the source of cash may be difficult for the bank to verify. “, FinCEN noted.

Although the CDD rule does not specifically require its collection, FinCEN said the following customer information could be useful for banks to access risk:

• organizational structure, including key leaders and management;
• information about the ATM owner’s or operator’s operating policies, procedures, and internal controls;
• Provisions, Contracts and Responsibilities for ATM Foreign Exchange Services (g.vault services, third-party providers and self-service);
• information regarding the source of funds if the bank account is not used to replenish the ATM. (Sources of cash may include proceeds from the owner’s primary retail business, proceeds from a loan or revolving line of credit, or cash from an account held at another bank );
• the location where the Independent ATM Owner or Operator Customer is organized and maintains its facilities, including locations of owned or operated ATMs;
• description of expected and actual ATM activity levels, including currency transactions; and
• information to better understand whether ATM operations are generally incidental to other retail operations or the primary business of the Independent Customer who owns or operates the ATM.

“FinCEN continues to encourage banks to manage customer relationships and mitigate risk based on those customer relationships rather than denying banking services to entire classes of customers,” the Treasury office said.

In November 2014, FinCEN issued a similar statement urging banks to consider providing services to money services businesses, fearing that these entities have been greatly reduced and unable to obtain account relationships due to perceived money laundering risks.

In some cases, bank examiners have hampered the risk reduction of entire sectors by informing the institutions they supervise of the increased risk posed. Bankers have long called on FinCEN and regulators to ensure that examiners are uniformly trained so that they do not make personal judgments about the risk posed by certain types of customers.

The 2020 Anti-Money Laundering Act made such training mandatory.

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