rom network-security breaches and card-skimming to ATM burglary, the industry is taking steps to critically address ATM-related crimes. In May in New York, the ATM Industry Association (ATMIA) and Palm Desert National Bank hosted a workshop dedicated to the subject.

May 11 marked the first of an expected series of ATM Risk Management workshops that will bring law-enforcement agencies, including the Secret Service, industry leaders and representatives from U.S. financial institutions and ISOs to discuss ATM-crime trends.

The Federal Bureau of Investigation, the New York Police Department and the New York State Police also are participating. Specifically, the workshop touched on crime deterrents and methods the industry can use to improve working relationships with regulatory agencies and law enforcement.

One crime of focus: retail ATM burglary, which includes smash-and-grabs (also known as "ram raids" in Australia and the United Kingdom). Smash-and-grabs involve damaging or removing an ATM in order to access its vault.

Skimming is widely considered by sources to be the industry's No. 1 ATM-related crime, but cash losses associated with ATM burglaries far exceed skimming, said Jim Tingey, Palm Desert National Bank's Vice President of Administration.

"These criminals receive minimal sentences for the incidents, because of a limited understanding relating to the scope of the overall problem that exists today between law enforcement and the various courts and prosecutors' offices," he said. "We're trying to help them understand ATM crimes and the help we need to prevent them."

For more than a year, law enforcement agencies and a handful of ATM companies have been tracking ATM-crime events. Mark Coons, President and Chief Executive of American Special Risk, a Charlotte, N.C.-based ATM insurer, said attacks on ATMs have jumped about 25% over the last two to three years.

He said in Greater New York from fall 2004 to fall 2005 the number of attacks was alarming. "We started looking at the current problem in [tri-state] New York in April of 2005," Coons said. "By August or September of 2005, it became evident that we had a serious problem.

"This is an isolated area right now, but we see similar trends in the U.K. and Australia. Our concern is that this type of crime will migrate beyond New York. We expect it to go out to other major cities. We see it rising."

In the United Kingdom, ram raids are a big problem. From 2003 to 2004, ATM crimes, including break-ins and theft attempts, jumped 29%, according to London's Metropolitan Police Flying Squad. Cash loss alone from those attacks is estimated to be about œ6 million (U.S. $11 million).

Coons said fewer ATM attacks plague the United States, but the numbers are still serious. He estimated that physical ATM attacks cost the U.S. ATM industry about $4.5 million annually. (For some perspective: ATM vault-cash and hardware losses associated with Hurricane Katrina cost the industry about $3 million.)

"Smash-and-grabs seem to have pockets, where you have crime rings that hit different areas," he said. "We've seen an increase in the last couple of months in Tennessee, for instance. It comes and goes."

But some of the crimes could be prevented with a little common sense, said Kevin Sullivan, a financial crimes investigator for the New York State Police.

"If you put an ATM in a bad location, chances are you're opening yourself up to a smash-and-grab attack," he said. "It's not a big surprise."

Sullivan, who in February spoke at ATMIA Conference East in Orlando, Fla., about tricks criminals use to launder money through ATMs, was slated to speak in New York. Sullivan said the industry faces a challenge to balance the need for more regulations with business opportunities.

Bigger issues

Sullivan said due diligence and background checks on off-premise ATM operators and owners, such as the checks now required by Visa U.S.A., will weed out some criminals but not all.

The industry sees the need for more information, and ISOs across the board are working toward compliance. But meeting Visa's new operator rules for merchant ATMs is expensive and time-consuming, most ISOs agree.

Mike Keller, General Counsel for Houston-based Cardtronics Inc., told ATMmarketplace in November that his company expected to invest $120,000 in 2006 to comply with Visa's revised agreement rules.

"I know that ATMIA wants to get guidance from the regulators," Sullivan said. "They want to help the industry do the right thing by making a preemptive strike. And it's clear that some things in the industry are going to have change."

Jerry Silva, a Senior Analyst with Needham, Mass.-based consultancy TowerGroup, was criticized last month for telling American Banker that ATMs in convenience stores are "unregulated" and risky. He told ATMmarketplace last week that the industry needs more regulation.

"Basically, my quote was about regulation," he said. "My statement had to do with trust in convenience-store ATMs. The more the ownership of those ATMs is regulated, the better it will be for the industry. The ISOs have more ATMs at this point than the banks, and there is no federal regulation about who governs these machines."

Finding solutions

More regulation will likely be difficult for the industry to accept, but it may be necessary and critical to improving controls and reducing losses, Palm Desert National Bank's Tingey said.

The bank, which provides and manages nearly $1 billion in vault cash for more than 15,000 ATMs and kiosks in the United States, also has been closely tracking ATM-crime trends. Beyond smash-and-grabs, Tingey said, skimming and phishing are ongoing concerns, too.

Even though 90% of card-skimming takes place at the POS, Tingey said, the ATM industry is affected when consumer accounts are drained at the ATM.

"The collaborative efforts of all participants - the regulatory agencies, the ISOs, the financial institutions and the law-enforcement community - are needed," he said.

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