Executive Summary

On May 26, 1999, Senate Resolution No. 134, offered by Senator Doris C. Karpiel, was adopted by the Senate. The resolution requests the Office of Banks and Real Estate to study safety and security issues surrounding the use of automated teller machines ("ATMs") by consumers. In particular, Resolution No. 134 requests the Office of Banks and Real Estate to report on the relative merits of a particular ATM security devise, the reverse PIN safety system. Accordingly, this report does not address other related technology such as shared networks, point-of-sale terminals, or "smart" cards.

ATM use continues to grow at a staggering rate. These machines extend traditional banking hours by dispensing cash and making other transactions available 24 hours a day. Approximately 12 billion ATM transactions take place per year at thousands of ATMs.

Although there is no precise data on ATM crime, violent crime against ATM users is relatively rare. Over the decade of the 1990s, ATM crime has actually decreased from approximately one crime per one million ATM transactions to one crime per 3.5 million transactions. At the same time, the use of ATMs has significantly increased. Nevertheless, public perception of significant crime at ATMs exists. To deal with the crime that does occur, the General Assembly adopted the Automated Teller Machine Security Act in 1996 which deals with the main concerns of ATM safety and security - location, lighting, and landscaping. This legislation provides a safe harbor from legal liability to ATM operators with regard to security matters.

Technological advances have brought about proposals for additional ATM security measures. These include enclosed ATM structures, closed circuit television cameras, biometrics, alarm or "panic" buttons, and telephones at ATMs. The reverse PIN warning system is one of these security measures.

An analysis of the reverse PIN warning system is specifically requested by Resolution No. 134. The reverse PIN system attempts to utilize current technology to provide law enforcement with the immediate location and background information concerning a potential victim. However, a consumer may be under too much emotional stress to properly utilize the system, the system would be tremendously costly to implement both as to hardware and software requirements, quick response by police is not guaranteed, and no evidence exists that the reverse PIN system would actually reduce crime.

Recommendations

The Office of Banks and Real Estate recommends:

1. That the relevant law enforcement agencies gather statistical and other data concerning ATM crime. At present, it is difficult, if not impossible, to recommend additional safety measures for ATMs because of a lack of reliable data. Reports of ATM crime are usually included as part of larger categories such as theft or robbery.
2. That the financial services industry, the law enforcement community, consumer protection groups, and other interested parties study whether the reverse PIN system is suitable and desirable for use in this field.
3. That statutory proposals affecting ATM security be introduced as amendments to the ATM Security Act to maintain the comprehensive nature of the Act as to ATM security matters.

Section II.

Automated Teller Machine Security

A Brief History of Bank Security

Historically, banks have been targets for economic crimes. As the U.S. economy developed from a barter to a currency based system, financial institutions assumed a risk of loss proportionate to the increase in use of paper money. Exchange and storage of currency created a new area of concern for banks: security for these assets. Banks initiated security systems and continually adapted them to meet changing needs.

Bank security has largely been a matter of privately funded protective services [as opposed to public law enforcement] to safeguard life, property, and business interests against crime. Private security includes protective services and devices, and private resources necessary to investigate crime. The nation's first banks relied on an unsophisticated watchman service for nighttime protection or required the cashier to live on the bank premises for safety of the bank's assets. Today, the banking industry has available for its use a well-rounded contractual security system offering alarm, armored car, guard, and investigative protective services.

Expanded Use of Debit Cards

Since the introduction of the first automated teller machine ("ATM") debit cards in the early 1970s, significant electronic technological progress has occurred in the banking and financial industry. Consumer acceptance of electronic banking continues to drive many developments in the financial industry. The financial community continues to offer new electronic banking and money services to a population of households who are becoming more literate in electronic banking concepts. Government regulation also contributes to an increasing number of debit card users. For example, beginning in 1996 all federal government payments to people newly receiving salary or benefits and all payments to companies for new contracts with the federal government must be made electronically. Typically, many people not having a debit card who start receiving funds from the government electronically will become new debit card users. In addition to protecting currency and guarding against electronic fraud, there must be a continuous risk assessment of personal safety factors to ATM service employees and consumers who use ATMs by banks and ATM operators.

Automated Teller Machines

ATMs extend traditional banking hours by dispensing cash and making other transactions available 24 hours a day. At the beginning of 1974, there were only 1,656 operating ATMs nationwide. Today, online debit cardholders initiate approximately 12 billion ATM transactions per year at thousands of ATMs.

As electronic debit card transaction volumes continue to increase with the installation of more ATMs, banks must adopt special security considerations for the ATM environment. On-premises ATMs (those typically located in bank lobbies) provide the most suitable working environment for the consumer. The trend towards installation of free standing machines in shopping malls, in free standing kiosks in parking lots, supermarkets, and office buildings obviously presents a whole new array of security problems for ATM operators.

Security Considerations for Debit Card Installations

Currently, major law enforcement agencies do not regularly keep track of ATM crime. Most assaults related to ATM usage are included in larger general categories for assault, battery and the like. Special studies conducted from time to time have shown a relatively low rate of ATM crime. Although there is no precise data as to the extent of violent crime perpetrated against the users of ATMs and night depositories, assaults on bank customers who use these facilities occurs infrequently. It is estimated that currently about one in every 3.5 million ATM transactions result in a robbery of the customer. This is less than the estimated one in every million transactions occurring in 1989. While crime at or near ATMs may not be on the rise, public fear of ATM-related theft is increasing.

ATM crime is a street crime conducted at an ATM. Most ATM robberies occur at night between 8:00 p.m. and midnight. Most robbery victims are women, are alone when robbed. Most claim they never saw the robber coming. The typical ATM robber is 25 years of age, works alone, and usually positions himself nearby waiting for a victim to approach and withdraw cash.

Extensive research by the American Bankers Association has shown that of all steps that can be taken to improve customer security, careful attention to the "three Ls," location, lighting, and landscaping, produce the best results.

Location Guidelines

The location of ATMs is the single most important issue relative to customer safety. In determining the placement of new ATMs, the following guidelines are recommended:

• Design the site so that customers using the machine have high visibility of their surroundings.
• Design vestibules so as not to limit visibility of customers while using the ATM, evaluate the following: use of convex mirrors and minimal use of solid walls and blinds.
• Place ATMs near well-lighted parking areas.
• Place ATMs where they will have "drive-by" visibility from all nearby parking lots, walkways, and main thoroughfares.
• Prepare a crime profile of the area around the ATM.

Lighting Guidelines

The following are suggestions for lighting levels needed to achieve effective customer safety. Lighting intensity is measured in footcandles ("F.C."), or candlefeet.

• Within a 5-foot radius of the ATM, maintain a 10 F.C. minimum, measured at 36 inches above ground.
• Within 50 feet of the ATM, including the nearest available parking location, maintain a 2 F.C. minimum, measured at 36 inches above ground.

Landscaping Guidelines

• Plant slow-growing shrubbery that needs trimming less frequently.
• Trim shrubbery to a maximum of 24 inches above ground level. Trees should be "branch free" below the 6 foot level.
• Monitor the growth of shrubbery on a regular schedule.
• Assess the placement of other objects that could block vision (e.g., walls, benches, and dumpsters).

In addition to the "three Ls," education is one of the best ways to deter ATM crime. Surveillance cameras and other devices can lead to a false sense of security among consumers. Customers will avoid crime if they only use ATMs at certain times and locations. Not using ATMs in poorly lit locations at night alone will deter crime.

Section III.

Reverse PIN Warning Safety System

 Most customers obtain ATM service by inserting a card into a machine and entering a personal identification number, commonly referred to as a "PIN." The reverse PIN warning safety system is one product that claims to offer added security to customers in the event of a robbery while using their ATM. Zi Cubed, Inc. (www.zicubedatm.com) markets the SafetyPIN ATM security system, a reverse PIN safety system. On March 24, 1998, a patent was issued for this product.

How the Reverse PIN System Works

ATM card issuers typically issue one PIN to a customer. Under the Zi Cubed system, customers are assigned an emergency second PIN which is usually the reverse of their original number. For example, if 1234 were an individual's PIN, then the emergency PIN would be 4321. If the PIN were 2442, then the emergency could be 4224. If the emergency PIN is entered, presumably during a robbery, the ATM processing main computer sends a distress message to the local police department. In addition to the location of the ATM, police could find out who the customer was with information taken from the customer's bank account records. Police could also access a description of the customer from the Secretary of State's Drivers' Services Division. By the time police reach the ATM they would know who the customer is, what s/he looks like, and where s/he lives.

The reverse PIN system has not been sold to any financial institution yet. Marketing efforts have centered around customers' fear of ATM crime and on ATM operators' fear of litigation for failure to take sufficient safety precautions.

Analysis

A 1993 special study by the Chicago Police Department shows that 47 ATM crimes were committed that year in Chicago, the jurisdiction with the largest number and concentration of ATMs in the Illinois. The trend of ATM crime has declined. However, public perception appears to be that ATM crime occurs more frequently. Adoption of the Zi Cube system may alleviate some customers' fear of crime, whether real or perceived.

The deterrent affect of having such a system in place is another touted feature of the system. However, deterrence does not prevent crime in progress. More importantly, the law enforcement community does not generally encourage resistance or confrontation to thwart theft or robbery. The risk of physical harm to the customer is greatly increased should they resist. When coupled with the fact that ATMs generally limit withdrawals to approximately $200.00, engaging a criminal in an altercation or otherwise offering resistance over such an amount does not appear to be prudent.

Protection from lawsuits is another claim of the Zi Cube system. The distributor claims that merely installing this system will help rebut lawsuits alleging that ATM operators are negligent in providing safety to customers. While this argument may possess some merit in other states, this argument is not as compelling in Illinois. Traditional legal defenses and safe harbor provisions contained in the Illinois ATM Security Act available to ATM operators will likely reduce litigation in this area. See, Section V - ATMs and the Law.

Finally, human behavior must be taken into account. Being surprised by the threat of bodily harm is extremely stressful. Severe stress such as this impairs the thought process. Under these conditions, it is difficult enough for many people to remember their correct PIN number. It may be asking too much of a consumer to try to remember a second emergency PIN. Criminals will undoubtedly be among the first to know of a reverse PIN system and how it works. Any delays or glitches incurred by a victim during an ATM crime could cause the criminal to physically harm the victim.

Computer Interface Barriers

Computer interface problems are estimated to be significant and costly in implementing the reverse PIN system at this time. First, are the limitations inherent in the use of PIN numbers. The system would double the amount of PINs used per person.

Second, conversion to this system requires a significant commitment in resources to writing new computer software programs that recognize the reverse PIN and then make multiple complex decisions. Currently, ATMs communicate with banks and make what are termed "binary" (i.e., simple "yes/no") decisions concerning the account and transaction information. Under the reverse PIN system, the main computer must: (a) determine and communicate with the police station closest to the ATM; (b) the computer must communicate with the bank account of the cardholder and obtain account information that is usually confidential and protected (this process is more complicated if the ATM is not from the accountholder's bank); and, (c) the main computer must then also communicate with the Secretary of State's office for driver license information.

Third, most law enforcement agencies do not have the computer capacity to provide the necessary real time communication with an ATM. Many police 911 units respond only to voice communication, although some are now taking calls via the internet. In addition, there is no assurance of immediate response by police agencies. This may result from the huge number of calls handled in urban areas to the geographic separation that occurs in rural locations.

Fourth, the cost to reconfigure the ATM system, including shared ATM networks, can be quite high. There are over 5,000 ATMs under regulation by the Office of Banks and Real Estate. The physical reconfigurations needed to make changes to machines have been estimated at $1,500.00 to the thousands of dollars each. The minimum impact is estimated to be at least $7,500,000.00. This does not include the software programming costs. This estimate does not include the additional costs associated with thousands of ATMs in Illinois that are not regulated by the Office of Banks and Real Estate. Too be fully functional, the Zi Cube system would have to have communication capabilities with financial institutions worldwide in order obtain customer account information. The system would likewise have to communicate with driver license agencies or similar authorities worldwide to obtain descriptive information about the victim.

In conclusion, significant barriers exist in the application of the reverse PIN system at this time. In addition, there appears to be no conclusive data or other information that shows that the reverse PIN system would serve to decrease ATM crime any more effectively than other security measures, if at all. Nevertheless, should individual ATM operators and networks conclude that the reverse PIN system provides benefits that justify the significant costs associated with it, they may adopt such a system. Such reasons may include market competition, consumer demand, experiences with lawsuits, or improved technology.

Section IV.

Prior Studies

ATM use continues to grow at a staggering rate. At the same time, crime rates have dropped from an estimated one in one million transactions in the early 1990s to one in 3.5 million transactions in 1999. The late 1980s and early 1990s saw a growth in the amount and perception of ATM crime. As a result, in 1990 and 1993, the City Council of Chicago conducted extensive studies as ordinances dealing with ATM security were considered. The ordinance adopted was superseded by the Illinois ATM Security Act. See, Section V - ATMs and the Law. Many of the findings and recommendations of these studies, however, are still considered relevant today by persons involved in the field of ATM security. Accordingly, a summary of these studies is included here.

1990 City of Chicago ATM Security Advisory Committee Report

The ATM Security Advisory Committee highlighted six conclusions:

1. No widespread incidence of robbery or assault at ATMs exist.

2. Financial institutions have responsibly provided for consumer safety in terms of guards, restricted access and/or combinations of these.
3. Current ATM users are generally satisfied with current safety provisions at ATMs.
4. There is room for improvement in communications between the Chicago Police Department and financial institutions with respect to identifying ATM crime trends and preventing ATM crime.
5. No additional technological enhancements are available and practical to enhance ATM security (911 applications were explored, but were deemed inappropriate because they were only available for voice communications and no proof existed that they could prevent crime).
6. It would be inappropriate to mandate uniform ATM standards since all sites are different.

 The Committee made four recommendations:

1. track ATM trends
2. enhance communications
3. cooperatively determine incremental crime prevention strategies, including:
4. The Chicago Police Department should appoint a liaison for ATM issues (initially the Deputy Chief of the Administrative Section of the Detective Division).
5. The Chicago Police Department should collect, analyze, summarize, and make available all data on incidents of ATM crime to determine trends and assist in future prevention of ATM crime and apprehension of perpetrators of ATM crimes.
6. The Chicago Police Department should receive and review through the wall 24 hour access ATM building permits obtained from the Dept. of Buildings and, when appropriate, advise the deploying financial institution of security concerns.
7. The Chicago Police Department should develop training programs on ATM security for police personnel and community groups.

2. All Chicago financial institutions should be given an ATM security checklist that encompasses issues that need to be considered regarding safety (e.g., lighting, cameras, crime frequency in area, hours of availability, etc.).
3. The Chicago Police Department and financial institutions should meet semi-annually to review ATM security, stay abreast of emerging security technology and evaluate their practical applications for ATMs.
4. Consumer education brochures should be circulated to all Chicago area financial institutions.

1993 City of Chicago ATM Security Advisory Committee Report

The ATM Security Advisory Committee highlighted seven conclusions:

1. ATM crime had not increased in recent years.
2. Most financial institutions had provided responsibly for consumer safety at ATMs through use of guards, cameras, and/or restricted access devices.
3. Consumers were generally satisfied with current ATM safety provisions and did not perceive that ATM safety had deteriorated over the three previous years. They feel that they are responsible for taking steps to ensure their own personal safety at ATMs and would object to the mandatory closure of all ATMs at night.
4. Communication between the law enforcement community and financial institutions seems to be effective although there is not now a formal vehicle for this communications.
5. There were no technological enhancements that, if mandated, would materially help to prevent ATM crimes from occurring or help law enforcement officials intervene during crimes in progress. In fact, many technological enhancements aimed at intervention (e.g. panic buttons) would likely just result in the movement of crime to different locations where victims are more susceptible.
6. Mandating the deployment of ATMs in all police and fire stations would not be appropriate for various logistical reasons.
7. It would be inappropriate to mandate uniform safety standards for all ATMs since there is a wide diversity in types and locations of ATMs. Nevertheless, certain minimum standards would be appropriate for ATMs that are either exposed to the street or located in an unmanned structure, the sole purpose of which is to enclose the ATM.

The Committee recommended that the City Council consider adoption of an ordinance that would mandate certain minimum safety provisions for financial institutions.

1. Adopt procedures for evaluating safety at ATMs which are exposed to the street or located in a building, the sole purpose of which is to enclose the ATM. The procedures should consider:

• lighting
• visual obstructions in the areas around the ATMs
• incidence of crime in the vicinity of the ATM as reflected in the records of local law enforcement agencies and the institution's own internal records

1. Comply with minimum lighting standards at all outdoor ATMs and all ATMs located in structures, the sole purpose of which is to house the ATM.
2. Distribute ATM safety precaution information to each of their cardholders.
3. Furnish, upon request by the City Council, information regarding an institution's compliance with the provisions of the ATM security ordinance and information on ATM crime incidents at specific ATM deployed by the financial institution.

ATMs and the Law

Liability for ATM-related Assaults

Among banks' and other ATM operators' unpredictable costs are those associated with litigating civil suits alleging injuries resulting from ATM operations. Those costs largely result from unanticipated problems that have arisen in the legal context of ATM operations. Generally speaking, money spent on compliance and safety could be money well spent. In litigation, the fact that an ATM operator took the steps needed to install an ATM properly and to light and maintain it cannot be ignored.

Historic Sources of Liability

The common law provides the historic basis for ATM case law. The common law suggests that where a duty of care exists, and there is a failure to observe the duty of care, and this proximately causes injury, the conclusion is that the entity that failed in its duty was negligent. A finding of negligence suffices for the imposition of damages to compensate the injured party. When a business invites people onto its premises, it can avoid liability to its invitees (its customers) if it prevents reasonably foreseeable harms. In Illinois, the inviter's liability for injuries sustained by a customer rests on the inviter having superior or particular knowledge of the danger. Therefore, generalized knowledge of crime in an area does not usually create any special duty on the owner of the premises. This rule constitutes a powerful defense for ATM operators in lawsuits filed which simply allege that an operator placed an ATM in a high crime area.

Current Application

In reviewing the law involving ATMs and civil liability, one fact comes immediately to mind --- state law dominates this area of banking law. ATM liability law is unusually unaffected by the Congress, the federal agencies, and the federal judiciary. Illinois courts have been reluctant to depart from the application of traditional common law principles to ATM liability cases. Instead, the courts have held that ATM security is a public policy matter best dealt with by the legislature. In 1996, the General Assembly created a statutory framework to address ATM security by enacting the Automated Teller Machine Security Act. Among other things, this legislation affects the standard of care required of ATM operators by providing a safe harbor provision.

Overview of the ATM Security Act

The Automated Teller Machine Security Act, 205 ILCS 695/1, et seq., in effect since July 19, 1996, provides that the regulation of customer safety at ATMs located in the State of Illinois is the exclusive function of the State. Likewise, the regulation and licensing of ATM operators, issuers of access devices, or persons who control an access area or defined parking area are exclusive powers and functions of the State. The stated intent of the General Assembly is to enhance the safety of ATM consumers without discouraging the placement of ATMs at locations convenient to consumers' homes and work places.

The Act provides for minimum ATM safety requirements as follows:

1. Section 10 of the Act requires adequate lighting for ATMs, any defined parking area, access area, and the exterior of enclosed ATMs.
2. Section 15 of the Act requires notices to customers of basic safety precautions.
3. Section 20 of the Act provides procedures for evaluating the safety of ATMs regarding: (a) compliance with Section 10 lighting requirements; (b) the presence of landscaping, vegetation, or other obstructions in the area of the ATM, the access area, and the defined parking area; and, (c) the incidence of crimes of violence in the immediate neighborhood of the ATM.
4. Section 35 of the Act, a "safe harbor" provision, provides for a standard of care in that substantial compliance with the Act constitutes prima facie evidence that adequate and reasonable measures for the safety of customers have been provided.
5. Section 40 of the Act provides for a statewide safety standard by including customer safety as an exclusive power and function of the State and thereby denying and limiting home rule powers, under Section 6(h) of Article VII of the Illinois Constitution, in the area of ATM customer safety