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ATM Industry Analysis & Best Practices

Average ATM Loss


$18,835 $19,250

$13,500 $12,255 $11,640

$20,000 $18,000 $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0

5 Yr. Ave. - $15,000

2000

2001

2002
Source: American Special Risk, LLC

2003

2004

Average ATM Loss

2003 and 2004 affected by a few large losses excess $50,000+. While ATM replacement costs are decreasing, cash loads per ATM seem to be increasing. Average ATM load approx. $15,000 to $20,000. Common reason cited is cost of armored carrier replenishment. Average loss is close to maximum load ATMs getting hit after replenishment.
Source: American Special Risk, LLC

ATM Loss Frequency


0.77% 0.66% 0.60%

0.90%

0.80%

0.81%

0.70%

5 Yr. Ave. 0.65%


0.58%

0.60%

0.50%

0.40%

0.30%

0.20%

0.10% 2001 2002


Source: American Special Risk, LLC

0.00%

2000

2003

2004

ATM Loss Frequency

Average loss size is increasing, but frequency of loss seems to be decreasing. More careful underwriting of book/acceptance/declination of locations having a positive affect. 2000 2002 perhaps exaggerated due to smaller portfolio/less spread of risk. 1 portfolio in particular is increasing average. Estimate that industry average is currently closer to 0.30% to 0.40%.
Source: American Special Risk, LLC

Total Estimated $ Losses


$5,025,000 $4,500,000

$6,000,000

$5,000,000

$4,000,000 $2,880,000 $2,690,000

$3,000,000

$2,727,000

$2,000,000

$1,000,000 2000 2001 2002 2003 2004

$0

Source: American Special Risk, LLC

Total Estimated $ Losses

Assuming approximately 50,000 off-premise ATMs, estimated industry loss for ATMs and Cash is over $5,000,000 per year. ATM Physical Damage - 30% or $1,500,000. ATM Cash 70% or $3,500,000. ATM Removal 65% ATM B&E 35% Other 5% including fire, flood, hurricane, building collapse etc.
Source: American Special Risk, LLC

Losses By Location Type


% Total Placements 0.50% 7.00% 5.00% 1.00% 30.00% 0.50% 35.00% 5.00% 0.50% 2.50% 0.50% 2.00% 0.50% 0.50% 2.00% 7.50%
Source: American Special Risk, LLC

Location Type Apartment Bar/Tavern/Night Club Bingo/Gambling/Entertainment College/Education C-Store Department Store Gas Station/C-Store Grocery Store Health Care Hotel Liquor Store Mall Office Outdoor Festival/Park Restaurant Retail - Other

% Total $ Losses 0.47% 2.51% 5.85% 1.02% 9.53% 0.45% 22.42% 10.67% 0.23% 16.70% 0.80% 3.13% 0.47% 3.96% 5.83% 15.97%

Top 10 Loss Locations By %


Gas Station/C-Store Hotel Retail - Other Grocery Store C-Store Bingo/Gambling/Entertainment Restaurant Outdoor Festival/Park Mall Bar/Tavern/Night Club
Source: American Special Risk, LLC

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%

Top 10 Loss Locations By %


Gas Station/C-Store Hotel

23%

Retail - Other Grocery Store C-Store Bingo/Gamb/Ent.

17% 17%

Restaurant Outdoor Festival/Park Mall Bar/Tavern/Night Club

11%

Source: American Special Risk, LLC

Gas Station / C-Stores


22%

35%

65%
78%

% Total Placements

% Total Losses

Source: American Special Risk, LLC

Gas Station / C-Stores

Estimate that Gas Stations with Convenience Stores represent 35% of ATM placements and 22% of losses. While these locations produce the most losses, in relation to number of ATMs in this sector, incidents of theft generally good. Many locations 24 x 7. High traffic areas.
Source: American Special Risk, LLC

C-Stores / No Gas Station


10%

30%

70%
90%

% Total Placements

% Total Losses

Source: American Special Risk, LLC

C-Stores / No Gas Station

Estimate that stand-alone Convenience Stores represent 30% of ATM placements and 10% of losses. Again, while these locations produce a large number of losses, in relation to number of ATMs in this sector, incidents of theft generally good. Many locations 24 x 7. High traffic areas.
Source: American Special Risk, LLC

Bar/Tavern/Night Club
7%
3%

93%

97%

% Total Placements

% Total Losses

Source: American Special Risk, LLC

Bar/Tavern/Night Club

Estimate that this segment represents 7% of total placements and produces 3% of losses. Generally open long hours, particularly late evening when most losses occur. Security presence and alarm systems good.

Source: American Special Risk, LLC

Hotels
3%
17%

97%

83%

% Total Placements

% Total Losses

Source: American Special Risk, LLC

Hotels

Estimate that hotels make up approximately 3% of total placements, but account for 17% of losses. Cash loads larger. Losses generally occur well away from front desk i.e. near parking deck. Collusion with employees. Bolting/anchoring??
Source: American Special Risk, LLC

Grocery Stores
5%
11%

95%

89%

% Total Placements

% Total Losses

Source: American Special Risk, LLC

Grocery Stores

5% of total placements, but 11% of losses. Experience adversely affected by weather losses i.e. Hurricane Ivan and Frances. Not 24 x 7. ATMs near entrance. Generally large plate glass windows.

Source: American Special Risk, LLC

Retail - Other
8%
16%

92%

84%

% Total Placements

% Total Losses

Source: American Special Risk, LLC

Retail - Other

Retail Other encompasses a wide array of locations such as pharmacies, dry cleaners, tax offices etc. Estimate that this segment represents 7.50% of placements and 16% of losses. Not 24 x 7. Alarm and other security measures generally weak.
Source: American Special Risk, LLC

ATM Placement Physical Security Considerations

Site Selection

The following risk assessments should be made before placement of ATMs: Safety of all staff, ATM users, and the public; Crime history of area and site itself; Site conditions i.e. lighting, visibility, traffic etc.; ATM positioning within the premises; Existing security measures i.e. alarms, gates, bollards etc.
Source: American Special Risk, LLC

ATM Position

Away from store fronts/windows; Against well-built walls; Limit vehicle access; Highly visible and well-lit area that allows maximum surveillance by passing traffic, counter staff and other customers.

Source: American Special Risk, LLC

Anchorage

Securely fix ATM to concrete floor through its security container by a minimum of four resin anchor bolts (12mm diameter/min. depth 150mm); Bolt ATM to a steel base plate that is bolted through the floor joists if floor is not concrete; Consider specialty bolts; Security collars and/or anti-lasso devices should also be used, particularly with larger cash loads and more loss prone placements.
Source: American Special Risk, LLC

Premise Alarm Systems

Premises should have alarm system, but standard systems generally inadequate. Heres what to look for:

System monitored by UL Approved Central Station Monitoring Company System approved by UL Secondary signal back-up i.e. cellular or radio Local police response
Source: American Special Risk, LLC

Premise Alarm Systems

Too often, alarm systems fail to prevent thefts for the following reasons:

Phone lines cut: no secondary transmission & line not being monitored Alarm system doesnt cover ATM Employee forgot to activate system Police response/smash & grab. Weak bolting means ATM gone in less than 10 minutes and police not on scene.
Source: American Special Risk, LLC

Closed Circuit TV

Premises should be protected by CCTV with camera viewing ATM - but NOT ATM keypad! CCTV must be linked to recording equipment. Seems obvious, but often not the case.

Source: American Special Risk, LLC

Premise Protection

Bollards; Vehicle-arresting systems; High rise curbing; Street Furniture i.e. raised planters, garbage bins, lamp posts etc.; Metal roller shutters and security gates.
Source: American Special Risk, LLC

Additional Security Measures


Source: American Special Risk, LLC

Alarm ATMs Tracking Systems Ink Staining/Bank Note Degradation Smoke Systems Security Guards ATM Signage

Transaction Flow Risk Assessment


Correspondent
Funds Wired
Fu nd To s Tr /Fr ans p o AC m Vauorted lt

Bank

ISO Requests Funds

ATM
Funds Transported To/From ATM

AC Vault

Funds Returned Via ACH

Approval? Approved

Ca Pr rdho oce lde sso r R r A equ pp rov est & al

Cardholders Bank

Processor

Cardholders Acct. Debited Source: American Special Risk, LLC

Transaction Flow Risk Assessment


Bank To Correspondent Bank
Correspondent
Funds Wired

Bank

ISO Requests Funds

Movement Unauthorized caller Funds sent incorrect bank/account CB insolvency/theft

Risk

Risk MGM Strategy Bank authorized caller list Fund transfer procedures Due diligence on CB per Reg F

Bank requests draw down from Bank VC account

Bank sends funds to CB

Bank funds at CB

Source: American Special Risk, LLC

Transaction Flow Risk Assessment


Armored Carrier
Risk a) b) a) b) Robbery/theft Misrouting of VC Robbery/Theft a) b) Wrong amount picked-up Robbery/Theft a) b) Risk MGM Strategy Bank reconcilement of AC vault/ATMs AC insurance + Bank TCI policy Bank reconcilement of AC vault/ATMs AC insurance + Bank TCI policy

Movement

AC picks up cash at CB

AC prepares cash at vault

AC transports VC

AC insurance + Bank TCI policy


Fu n

Correspondent

ds T To rans Va por ult ted

AC

ATM

Funds Transported To ATM

AC Vault Source: American Special Risk, LLC

Transaction Flow Risk Assessment


Automated Teller Machine
Risk a) b)
ATM

Movement Malfunction Robbery/Theft b) a)

Risk MGM Strategy Bank reconcile ATMs/VC Agree?? Bank ATM policy

VC in ATM

Source: American Special Risk, LLC

Transaction Flow Risk Assessment


Processor
Movement Withdrawn funds returned to Bank via ACH Incorrect settlement Risk RM Strategy Bank reconcile CBs & ATMs

Bank

ATM Processor E&O, Crime, Fidelity??

Funds Returned Via ACH

Approval? Approved

Ca Pr rdho oce lde sso r R r A equ pp rov est & al

Cardholders Bank

Processor

Cardholders Acct. Debited Source: American Special Risk, LLC

Transaction Flow Risk Assessment


Armored Carrier
Risk a) b) c) Robbery/theft a) b) Misrouting of VC Robbery/Theft a) b) Misloaded ATM Misrouted residual Robbery/Theft Risk MGM Strategy a) & b) Bank reconcile AC vault/ATMs c) AC insurance + Bank TCI policy AC insurance + Bank TCI policy Bank reconcile AC vault/ATMs AC insurance + Bank TCI policy

Movement

AC removes residual cash and reloads ATM

AC transports VC to vault

AC prepares cash at vault for redeposit to CB

Correspondent

Fu nd To s Tr /Fr an om spo Va rted u lt

AC

ATM

Funds Transported From ATM

AC Vault Source: American Special Risk, LLC

Transaction Flow Risk Assessment


Armored Carrier (Continued)
Risk RM Strategy

Movement

AC transports VC to CB

a)
b) Robbery/Theft

VC deposited incorrect bank/account

a) b)

Bank reconcile AC vault/ATMs AC insurance + Bank TCI policy

Correspondent

Fu nd To s Tr /Fr an om spo Va rted u lt

AC

Source: American Special Risk, LLC

Transaction Flow Risk Assessment


Correspondent Bank To Bank
Correspondent
Funds Wired

Bank

Movement Unauthorized caller

Risk

RM Strategy Bank authorized caller list and PIN verification (CB)

Bank directs CB to wire residual cash

Source: American Special Risk, LLC

Transaction Flow Risk Assessment


Correspondent Processor Cardholders Bank

Internal Risk MGM Strategies/Procedures

Bank VC Insurance Program


Transit Contingent Interest ATM VC
ATM

Internal Risk MGM AC Vault AC Strategies/Procedures Contracts + Insurance Source: American Special Risk, LLC

212 South Tryon Street, Suite 1780 Charlotte, North Carolina 28281 Telephone: 704-358-0447 Facsimile: 704-358-0977 E-mail: mcoons@asrisk.com Web Site: www.asrisk.com