An “Abandoned” Program Still Haunts ATM Operators – ATMatom

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Operation Choke Point (OCP) is shorthand for the nationwide program initiated by the Department of Justice (DOJ) under the Obama Administration and implemented by the Federal Deposit Insurance Corporation (FDIC) and related banking agencies designed to shut down and deny bank accounts to businesses the DOJ determined at high risk for criminal activity – specifically money laundering. The program resulted in an onslaught of account closures and denials for many legitimate businesses nationwide. Non-bank ATM providers were hit especially hard – often facing account termination with little to no notice coupled with continued rejections for new account applications.

“While Operation Choke Point was well-intentioned,” said David Tente, U.S. Executive Director for the ATM Industry Association (ATMIA), “no government agent or agency should be allowed to pick winners and losers based on misconstrued reputational perceptions, rather than hard facts.”

In 2015, it appeared the end was in sight. Lobbying efforts with Congressional Representatives brought the plight of the ATM industry to sympathetic ears and moves were made to directly address the DOJ and FDIC involvement with OCP. Officially, OCP was halted and financial institution (FI) regulators were directed to pull back on the program – halting the pressure on banks and credit unions. The ATM industry thought it would be able to breathe a sigh of relief.

Except Bank Account Closures Have Not Stopped

Despite being officially abandoned, both ATMIA and The National ATM Council, Inc. (NAC) continue to report receiving copies of closure letters from throughout the industry. In fact, account closures for ATM providers seem to have hit a worrisome level in 2017, with several large financial institutions displaying increased efforts to purge independent ATM operator accounts from their portfolio. Businesses are provided with zero to 90 days’ notice of their account closure and, in some cases, funds have been frozen or otherwise made unavailable to the company.

“What has really brought this to the crisis sate in recent weeks,” said NAC Executive Director Bruce Renard, “is a coordinated national initiative by a nationally known bank to shut off these accounts across the board. This particular bank had served as somewhat of a haven for our industry when other financial institutions had cancelled ATM company accounts. Having them now join the others with a vengeance has resulted in the top banks all now effectively unavailable to our industry – an industry whose very ‘product’ is cash.”

Where the continued pressure to eliminate ATM operator accounts is coming from is questionable. But it could be that the regulators never really stopped pushing the OCP directive.

“I recently attended a seminar, and on the schedule of speakers was a presentation by a managing partner of a leading law firm who primarily represents financial institutions,” said Jack Milford Ford of JMFord Law Office and co-chair of the ATMIA Governmental Relations Committee. “During the presentation, the attorney referred to ‘Choke Point’ and mentioned that, although the applicable federal agencies have since been told this program has formally been terminated, financial institution clients continue to experience the enforcement through continual federal bank examinations and audits under the umbrella of enforcement of the Bank Secrecy Act (BSA).”

No matter the cause, account closures continue to threaten independent ATM deployers and, indirectly, the citizens and communities they serve throughout the U.S.

So, What is Being Done?

The associations representing the U.S. ATM industry are bringing this issue to the attention of representatives in Congress.

“All copies of account closure letters are being forwarded to Representative Blaine Luetkemeyer (R-MO),” said Tente. “In addition, Rep. Luetkemeyer re-introduced legislation on May 25 that would curb Operation Choke Point. ATMIA continues to support this measure and believes it will go a long way toward putting an end to IAD account closures. We are very optimistic President Trump will sign it into law.”

According to a press releases from Luetkemeyer’s office, H.R.2706 (The Financial Institution Customer Protection Act), will restore the balance between financial institutions and regulators and protect private industry from the organized bureaucratic intimidation that originated under the Obama Administration.

Luetkemeyer’s bill would dictate that agencies such as the FDIC and the Office of the Comptroller of the Currency, among others, could not request or order a financial institution to terminate a banking relationship unless the regulator has material reason, according to the press release. Any account termination requests or orders would be required to be made in writing and rely on information other than reputational risk. In addition, the legislation strikes the word “affecting” in the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), replacing it with “by” or “against.” This is to ensure that the Department of Justice’s once broad interpretation of the law is limited and the original intent of the statute is restored.

“NAC has been working individually with those many NAC members – new and old – who are experiencing this problem,” said Renard. “These efforts have been largely successful to date – but the situation has worsened significantly.”

Prior to the latest spike in ATM account closures, NAC developed a set of industry guidelines with the goal of providing financial institutions with the ongoing information they would require to meet regulation requirements. The guidelines, reviewed by top bank regulators and bank organizations in D.C. required pristine, stand-alone accounts for ATM vault cash, along with accompanying reporting/certification requirements to make it safe and easy for banks to track and trace funding of the ATM vault cash account. Despite positive responses from banks and regulators, the guidelines have not been able to stem the recent rising tide of account closures and denials.

NAC is also working with key members of Congress to press the banks to halt the account closures. In support of these efforts, the association is in Washington this week with U.S. ATM operators and suppliers meetings with members and staffers of the House Finance and Senate Banking Committees.

In addition to their efforts with Congress, ATMIA also put out a white paper, Operation Choke Point: An ATM Industry Update, last year that included tips for IADs on what to do if they receive an account closure letter and on how to work with their bank to keep their account open. Plus ATMIA recently sent a letter to President Donald Trump introduced itself as the global representative of the ATM industry and identified issues, including OCP, in great need of attention.

While immediate relief does not seem in sight, lobbying efforts and communication with Congressional Members is creating real opportunities for the ATM industry to work toward a reasonable resolution to the ongoing problems OCP set in motion. ATM operators receiving closure and/or denial letters from their financial institutions should reach out directly to their industry associations to report the issue and work with their industry representatives to attempt a resolution.

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