On June 22, 2022, FinCEN issued a statement to provide clarity to banks on how to apply a risk-based approach to conducting customer due diligence (CDD) on independent Automated Teller Machine (ATM) owners or operators, consistent with the requirements set out in FinCEN’s 2016 CDD Rule. Some independent ATM owners and operators have reported difficulty in obtaining and maintaining access to banking services, which jeopardizes the important financial services they provide, including to persons in underserved markets.
In its statement, FinCEN reminds banks that not all independent ATM owner or operator customers pose the same level of money laundering, terrorist financing, or other illicit financial activity risk, and not all independent ATM owner or operator customers are automatically higher risk. The regulations require banks to apply a risk-based approach to CDD in developing the risk profiles of their customers. Specifically, banks must adopt appropriate risk-based procedures for conducting CDD that, among other purposes, enable banks to 1) understand the nature and purpose of customer relationships for the purpose of developing a customer risk profile, and 2) conduct ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information. FinCEN also clarifies that the CDD Rule does not require banks to conduct additional due diligence or to implement due diligence processes unique to independent ATM owner or operator customers.
FinCEN also emphasizes that the ML/TF risk for independent ATM owners or operators can vary depending on the facts and circumstances specific to the customer relationship. Independent ATM owners or operators that fund their ATM replenishment solely with cash withdrawn from their account at a bank may pose a relatively lower ML/TF risk as compared to those that replenish ATMs from other or unknown cash sources as the source of cash can be difficult for the bank to verify. As guide for banks, FinCEN listed the following customer information which may be useful in making determinations on the ML/TF risk profile of independent ATM owner or operator customers:
Organizational structure, including key principals and management;
Information pertaining to the operating policies, procedures, and internal controls of the ATM owner or operator;
ATM currency servicing arrangements, contracts, and responsibilities;
Information regarding the source of funds if the bank account is not used to replenish the ATM;
Location where the independent ATM owner or operator customer is organized, and where they maintain their places of business;
Description of expected and actual ATM activity levels, including currency transactions; and
Information to better understand whether ATM operations are generally ancillary to other retail operations or the primary business of the independent ATM owner or operator customer.
FinCEN’s full statement can be found here.