The following is an excerpt from ATM Compliance Handbook 2013, recently published by ATMmarketplace.com.
Over the past year, being in the business became a bigger challenge than ever for owners and operators of America's 400,000 ATMs. New ADA rules took effect in March, requiring deployers to spend huge amounts to bring machines up to the new standards.
Additionally, MasterCard followed in Visa's footsteps and released its own roadmap to EMV implementation, with the chief difference that MasterCard's included a liability shift deadline for Maestro transactions. The industry is now wrestling with the decision of whether to further invest in its estates to add EMV capability.
And for ATM operators in the States and around the globe, common concerns persisted: Indonesia sustained its largest-ever skimming fraud; in the first half of 2012 South Africa experienced a string of 18 ATM bombings in a single province. Australia and some European nations have been similarly plagued.
The list of regulations and requirements for ATM owners is long and growing:
Americans with Disabilities Act. This year new regulations gained the force of law in the first major overhaul to the Americans with Disabilities Act since 1990, when President George H.W. Bush signed the act into law. As of the March 15, 2012 deadline, many deployers were still trying to bring their fleets into compliance. And those who are not there yet are feeling the urgency; within a few weeks of the deadlines, the first noncompliance lawsuits were filed, underscoring the consequences of delay.
Surcharge-fee disclosure. Under the Electronic Fund Transfer Act of 1978, U.S. ATM operators are required to display a physical notice at every ATM advising users about potential surcharge fees. For the very basic cash machines of that era, the law made sense. But decades after the law's enactment, ATMs can now convey this information on screen, rendering the placard redundant. And spurious lawsuits abound over missing placards — some removed by the plaintiffs themselves. Thanks to extensive lobbying by affected industries, the U.S. Congress has been spurred to stem frivolous litigation. As of this writing, the House has unanimously passed its version of the bill and the Senate is preparing its own version.
EMV/Chip-and-PIN. Visa, MasterCard and American Express all have issued roadmaps for EMV migration in the United States. However, only MasterCard has announced an EMV compliance deadline for ATMs — and that applies only to transactions using Maestro, the multinational debit card network owned by MasterCard. On April 15, 2013, liability for fraudulent Maestro transactions will shift to acquiring networks. As these transactions represent only a miniscule percentage of ATM transactions in the U.S., industry members are finding it difficult to justify the costs for an EMV upgrade.
Anti-money laundering. The flow of funds from illegal activities globally amounts to billions of dollars a year, as criminals disperse illegal gains among countries and bank accounts in an effort to make the funds appear legitimate. In the United States, anti-money-laundering rules currently apply only to FIs and designated money services businesses. However, automated deposit ATMs and mobile-to-machine transfers represent an increasing burden on ATM owners and operators to ensure their machines are not being used for money-laundering purposes. In Canada, the Money-Services Business Act requires ATM operators, owners and lessees to pay licensing and insurance fees to prevent money-laundering activities.
Currency design. To make U.S. banknote denominations distinguishable for the seeing impaired, the U.S. Bureau of Engraving and Printing is changing the design of the nation's currency. The challenge for ATM operators lies in accommodating the changes to the installed base of more than 400,000 machines.
Office of Foreign Assets Control. OFAC, an office of the U.S. Department of the Treasury, administers and enforces the U.S. government's sanctions programs. Depending on the particular restriction at issue, OFAC regulations can restrict exports and imports to blocked entities or countries, the provision or purchase of services, financial transactions with blocked countries or entities and travel. Financial transactions involving sanctioned parties may be blocked or rejected.
Durbin Amendment. This section of the Dodd-Frank Wall Street Reform and Consumer Protection Act governs interchange fees that may be charged on debit card transactions at the point of sale. The law does not directly affect ATM transactions. However, as of July 21, 2012, debit and general-purpose prepaid cards are no longer exempt if the cardholder may be charged either an overdraft fee or a fee for the first withdrawal each month from ATMs in the issuer's designated ATM network. And in April 2012, another tenet took effect, requiring that merchants have the choice of at least two networks for transaction processing.
Insurance. From an insurance perspective, ATM operators face a wide range of risks, from acts of God to acts of unscrupulous employees. Companies an independent ATM deployer (IAD) does business with will want to see proof, in the form of insurance certificates, that both the ATM and the cash are adequately protected against these kinds of risk. A comprehensive insurance program can help manage those risks and ensure compliance with requirements.
One issue that could arise in the future is the Consumer Financial Protection Bureau. To date, the CFPB has not had a direct impact on the ATM industry. However, the agency did introduce language into the Senate version of the fee placard legislation, complicating the writing of the bill. And in the past year, it has extended its reach into new market segments, including credit reporting and prepaid cards. A high-profile security breach, large-scale fraud or consumer lobbying all have the potential to push the ATM industry into the CFPB's sights.
To keep deployers informed about regulatory issues and obligations, we have put together this handbook. We wanted to capture the most important regulations and related challenges that ATM operators currently face and highlight those that are on the horizon.