Reverse ATM Technology: A tool for Criminals

Every now and then, new technologies emerge with the aim of making our lives easy and smarter. These technologies, not only provide us with convenience, but also reduces the cost of doing things/ business. One thing that COVID-19 taught us was how to rely on technology to do things smartly at a reduced cost. One of such technologies that emerged during the COVID -19 era was Reverse ATM. Reverse ATM is a very recent innovation in the banking industry and not many examples of this kiosk can be found publicly. During global health crisis (COVID-19 pandemic), the use of paper money became a huge hazard in most parts of the world because of how many hands it exchanges and how many surfaces it touches. A lot of business establishments stopped accepting physical currency notes altogether in favor of contactless payments through cards and/ or mobile wallets.

This article is aimed to throw light on what Reverse ATM is, the features and advantages, how vulnerable it is to money launderers and how to manage the vulnerability risks.

Reverse ATMs are also known as Cash-to-Card kiosks. Such ATMs take cash and dispense physical or digital prepaid cards. It works by allowing customers to insert cash into the machine in exchange for a prepaid plastic card. The only difference between the processes involve with this ATM and the regular ATM is instead of withdrawing cash, the machine dispenses a stored-value card. To use a reverse ATM, a customer inserts cash into the machine and selects the desired amount. The machine then issues a prepaid card, which can be used for purchases at the venue where the kiosk is located or at any other retailer that accepts the card brand. While some of these machines may charge a small fee to purchase the card, most do not. The cards are usually reloadable and can be used for multiple purchases until the balance is exhausted. When a customer uses the card, the merchant pays an interchange fee to Visa or Mastercard, just like they would with any other card under those brands. Some of the cards that are issued by the reverse ATM carry "dormancy fees," if the card isn't used for more than three months and it may be hard to use up the card balance if only a small amount is left.

The reverse ATM provide customers with convenience as customers can quickly and easily convert their cash to electronic currency. The technology also provide safety. As we know, handling cash can be dangerous, as it increases the risk of theft and robbery. Reverse ATMs help reduce the amount of cash on hand at a business, making it a safer place for employees and customers. Reverse ATM can help enhance the government drive of digitalization. Another benefit of reverse ATM is cost savings. Cash management can be a significant expense for businesses, with problems such as theft, processing fees, and constant runs to the bank. By using cash-to-card kiosks, businesses can reduce these costs. As opposed to opening a new bank account and waiting weeks for your debit card to be isssued, reverse ATMs issue an active prepaid debit card instantly; no spending hours at a branch with an account manager, no waiting weeks for a debit card to be issued, no calling a helpline to activate your newly issued card. The reverse ATM can be another revenue stream for the merchants as they can defray the cost of obtaining and installing the ATM by running advertisement on the screens of the ATMs. Also, the interchange fees charged by Visa and Mastercard when a customer uses the card can generate revenue for the merchant. With the huge chunk of the world’s population still unbanked, the reverse ATM helps to reach out to them by offering them cards for their payment transactions.

Tourism can be boasted by this technology. Often, travelers carry a lot of cash with them to exchange with the local currency of their holiday destination, but with a reverse ATM they can simply issue an active VISA or MasterCard that works anywhere in the world. Tourism sites or destinations can install this ATM for patrons to exchange their cash for cards to ease in their payment transactions.

The above features and advantages make the reverse ATMs attractive to criminals who want to further wash their dirty money.

The lack of proper Know You Customer (KYC) procedures in place when converting cash to card enables criminals to feed the ATMs with their dirty money in exchange for cards which could be used anywhere in the world.

The reverse ATM could be vulnerable to money laundering processes since the source of funds being deposited into the machine is not ascertained and verified. Criminals can easily convert their dirty money into cards.

One way to ensure that vulnerabilities in the reverse ATM to money laundering activities is minimized, is to introduce eKYC dongles on the machines since the cards produced by this technology are close loop cards. With open loop and semi closed loop cards, proper KYC is mandatory required.

Another way to mitigate the risk associated with the reverse ATMs is to place limits on the amount of money that customer can load the card with. Also the number of cards an individual can have should be determined so that criminals don’t use their associates to obtain more than two cards. Where the customer want an enhancement on the card limit, he or she should be directed to a financial institution to open an account.

The reverse ATM is a good innovation in the banking industry, which with proper regulations on the use and identification of customers, could help reach out to the unbanked population and aid in the cashless society we all dream of.

Would you mind doing me a favor? Share this article with someone so that the awareness of money laundering and terrorist financing could be spread to avoid being used as a conduit by criminals.

If you require further information on this article, please contact Richieson @ [email protected] .