ATM business-friendly banks might be difficult to find. It doesn’t matter if you’re new to the ATM business or have been in the business for a while. This is because ATM businesses are often viewed as “high-risk” accounts. Due to the amount of cash ATM businesses handle, this makes them prime money-laundering businesses, a liability banks try to avoid at all costs.
Efforts have been made to change federal regulations in an attempt to protect independent ATM owners and their customers. But some businesses are still struggling. So, why is it so hard to find a bank that will work with you? What can you do to get your business up and running?
Operation Choke Point
In 2013, there was an investigation launched known as Operation Choke Point. This investigation looked closely into banks’ dealings with “high-risk” companies. High-risk companies are those that are more likely to be involved in illegal activity. In the case of ATM businesses, this concern stems from the amount of cash ATM businesses handle regularly.
This investigation resulted in the closure of a number of ATM businesses—even lawful ones. Without access to the banking system, these businesses were unable to operate. The investigation ended in 2017, but high-risk account closures continue with or without valid reason.
To help protect legitimate ATM companies that continue to be denied the basic business banking services necessary for them to operate, the National ATM Council (NAC) lobbied for a year to help effect change. Last year, the NAC succeeded.
On April 1, 2021, the Office of the Comptroller of the Currency (OCC) adopted a new federal regulation designed to provide fair access to banking services by large national banks and other financial institutions. Unfortunately, there are some ATM owners who report that it still is not any easier to find an ATM business-friendly bank.
Potential Risks to Banks
During Operation Choke Point, prosecutors targeted banks rather than individual businesses. Banks are held responsible for servicing companies that conduct unlawful business practices and are therefore liable to federal penalties.
According to a 2019 Cash Settlement Account Closure Survey conducted by the ATM Industry Association (ATMIA), the three banks responsible for the most ATM cash settlement account closures were Bank of America, Wells Fargo, and JP Morgan Chase. Regional banks, community banks, and credit unions were responsible for 20% of closures or less.
Large national banks are preferred by independent ATM owners for their convenient locations and extensive service offerings. However, these banks are less likely than smaller banks to work with ATM businesses. Because of their size and reputation, national banks are subjected to more scrutiny. This makes it more costly for them to service ATM business accounts.
The potential for audits, compliance reviews, investigations, and regulation changes make servicing high-risk businesses risky and costly. Not to mention federal penalties banks face if they happen to service a company that does engage in money-laundering activity or fraud.
It can also be costly to meet the cash demands of ATM businesses. Depending on the needs of their clients, banks might have to order extra cash in addition to their regular supply. Plus the cost and hassle of drop off arrangements.
Sixty-four percent of respondents to the ATMIA survey reported that they had an account closed without being provided with a reason. Reasons that were provided include account deemed money services business (MSB), inability to support cash needs, compliance burdens, and money laundering and Bank Secrecy Act (BSA) concerns.
Banks are for-profit organizations. Because of the potential risks and costs, the only way ATM business accounts benefit banks is if they bring in more money than it costs to manage them.
Threats to Independent ATM Owners
ATM businesses cannot operate without first being sponsored by a bank. This allows the business to become a member of the financial networks through which ATM transactions are conducted.
Furthermore, ATM owners need at least one account in order to receive deposits from transactions made on their machines. Also known as a settlement account, this is where the funds come from for reloading the ATMs with cash. Sometimes, ATM business owners opt for a second account. This account receives the surcharge commissions deposits, thus separating replenishment funds from income.
Without access to these financial services, ATM owners cannot operate their businesses. Only 12% of respondents to the ATMIA survey could say that they had never had an account closed. Twenty-seven percent had experienced one account closure, and 14% had experienced more than 5. Regardless of fleet size, each independent ATM owner’s chance of having an account closed (with or without reason) is quite high.
Some ATM business owners whose accounts haven’t been closed have faced other threats. They have been forced to shut down, relocate, pay hefty fees to remain in business, or make costly arrangements outside of financial institutions. There are minimum account balance fees, fees for excessive ACH deposits, fees for regular cash pickups….
There are even instances of banks charging store owners a monthly fee for adding an ATM machine to their stores. And some banks that will work with ATM businesses require armored vaulting service which is costly in and of itself.
Threats to the Underbanked
It is common for independent ATM owners to place their machines in areas without convenient access to bank branches. ATMs in these areas are also vital to the underbanked members of the community.
In rural, low-income areas, the cost of the surcharge fee is more reasonable than the cost of gas. In other areas, there are large populations of customers without vehicles at all. For these people, ATMs are the only way to access their paychecks and government assistance.
Independent ATMs account for almost 60% of all the ATMs deployed in America. They are almost exclusively responsible for providing convenient access to cash to low-income communities, inner-city neighborhoods, and rural areas. Without entrepreneurial ATMs, the underbanked would lose access to life-sustaining funds. These independent ATMs are, therefore, essential businesses that must remain operational.
How to Find ATM Business-Friendly Banks
When looking for a bank to work with, it’s important to be up-front about your business model and needs. It is also reasonable for you to expect a bank to be up-front with you about their fee structures, policies, and requirements.
It’s best to start with an institution with which you already have a relationship. Banks are for-profit organizations, so they won’t turn away a valued customer that brings in money. Therefore, it’s a good idea to consider purchasing a number of products in addition to the necessary business accounts.
For example, you could have personal and business checking accounts, start a savings account, open a personal and business credit card, or refinance a loan if applicable. Regardless of the risk of your ATM business, a bank is not likely to turn away a customer with multiple products because that is how they make money.
It’s also important to remember that national banks are less likely to assume the risk of an ATM business account than regional, local, private banks are. Even if you are able to get in with a national bank, your chances of having your accounts closed are higher.
You shouldn’t have to worry about your account being deemed an MSB. ATM businesses are not MSBs; FinCEN/FDIC do not define them as such. Since it has been reported that a common reason behind account closures is for MSBs, it’s important to address this fact with a banker when setting up your accounts.
Finally, you do have the option to work independently from a bank. The alternative is to use the services of a vaulting service. This comes with its own costs, but it might be worth it to know your account won’t spontaneously be closed and your business interrupted.
How to Find and Choose the Right Bank
For more information about how to find and choose the right bank, check out the resources available to you in our Member’s Area. Here, you can learn from industry professionals with years of experience how to set up an ATM business bank account with an ATM business-friendly bank.