Article

'Am I my cardholder's keeper?'

Should ATM providers answer for the poor judgment of end users? A federal case in Oregon could hold the answer.

April 8, 2015 by Suzanne Cluckey — Owner, Suzanne Cluckey Communications

There's an interesting criminal proceeding now underway in the state of Oregon, and its outcome potentially could have adverse implications for the ATM industry.

Here are the rather seedy facts in the case, as reported by Oregon Live:

Lawrence George Owen, the 73-year-old owner of eight strip clubs, a couple of X-rated video stores and a "gentlemen's entertainment" restaurant in Portland was arrested on Feb. 23 by federal marshals after a nine-year investigation and charged with using facilities of interstate commerce in the promotion of prostitution, which was carried on in rooms reserved for "private shows" by the dancers at his clubs.

Those "facilities of interstate commerce"? The ATMs he'd had installed at the businesses.

"Most of the dancers, manager co-conspirators and bartenders stated that customers who wanted a private show involving prostitution routinely withdrew cash from the ATMs in operation at the businesses," OL said IRS special agent Maranda L. Cole wrote in an arrest warrant affidavit. "This means the ATMs were interstate facilities that were used to promote and facilitate prostitution."

 

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So apparently, the feds may presume that an ATM located within (or within close proximity to) any legally operated business where illegal transactions might occur is part of a conspiracy to use facilities of interstate commerce for promoting [your crime here].

It's as old as The People vs. Al Capone: If you want to reel in a crook on federal charges, call in the IRS. Then follow the money until you hook him. But in Capone, there was no question who the criminal was.

Given that it took nearly a decade to issue an indictment against Owens case, it does seem that authorities must've been casting about for something weightier than local pimping charges to throw at the guy.

In Oregon, pandering is a class C felony that carries a maximum five-year sentence. But bring into play the Mann Act, a federal statute that criminalizes the use of interstate commerce in prostitution, and the sentence can ratchet up to 20 years.

So now the ATM industry has one more thing to worry about. As Oregon-based IAD Jesse Stiltner put it in an email to ATM Marketplace:

If this case is upheld in court, a precedent will be set that allows any business owner with an ATM, as well as the ATM operator, vault cash provider, and processor to be held liable for the use of the cash that is removed from an ATM by a third party.

Since it could be construed that, because they placed the ATM, or facilitated the processing of a transaction that was later used in an illegal activity, they were conspirators in the use of interstate commerce to promote illegal activity.

If you cannot ... guarantee that the cash from your ATM is not being used for illegal activities, everyone associated with the transaction that resulted in the use of cash in an illegal activity can be held liable.

So ... if I'm the owner of an ATM in a bar, am I responsible if a patron pounds down beers using cash from my machine and then gets in his car and kills a pedestrian? What if I'm the operator of the ATM at a corner bodega known to be popular with crack dealers? Is it safe to assume that I must know how the cash from my machine is being used?If that seems like a stretch, here's one that's actually confronting operators in some states:

What if a marijuana dispensary opens up next to the Denver Laundromat where I've located an ATM — and cash suddenly begins to fly out of it into the hands of people who aren't doing a stitch of laundry, but seem to be hitting my vending machines pretty hard?

The Oregon case works on the presumption that ATM operators and service providers know how cash from machines is being used, and should somehow keep the holder of that cash from using it to perpetrate a crime.

Judging by reader comments on several websites that reported the strip-club story (see box), sensible people would agree that it's is one foot over the line by the feds. This in addition to the foot they already stuck over it with Operation Chokehold, whose administrators have been accused of using the program to squash certain businesses that are legal but politically unpopular.

Deployers are already subject to anti-money laundering and know-your-customer regulations. How much further can we go toward criminalizing the provisioning of cash to people who evidently have more money than brains or scruples?

photo: istock

About Suzanne Cluckey

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Suzanne’s editorial career has spanned three decades and encompassed all B2B and B2C communications formats. Her award-winning work has appeared in trade and consumer media in the United States and internationally.