Interac Relationship
A face-to-face meeting was held on August 16th at the Interac offices between key members of the ATMIA Canadian Board and the Interac President and CEO, Senior Vice President, Strategic Policy and Programs, Vice President, Operations, and Director, Communications to discuss and agree on the need to have an exchange of high-level issues on a regular basis between ATMIA and Interac, including an open channel of communication. 

Next steps

• John H. Thomson, Director, Compliance and Enforcement, Interac Association will be contacting ATMIA members seeking more information and providing comments on the Association's Regulations and more specifically around: 
   
  
  • The Implementation process
    
  • Interpretation of the Regulations
    
  • Compliance and Enforcement issues with the Regulations. 
    
    
• ATMIA will coordinate a conference call with Mary Blair, Sr Manager Chip Implementation, Interac Association to discuss issues concerning the migration to chip and more specifically around:
  
  
  • implementation status of the off premise sector
    
  • needs to meet deadline
    
  • review of lifecycle strategies for devices globally for the future
    
• ATMIA will coordinate any education opportunities, cohesiveness in our messages,  and access to Cognito for Interac members
  
  

Canada’s New Government Launches Working Group on New Voluntary Code for Electronic Funds Transfers and Electronic Banking – ATMIA Canada has been accepted to participate in the development of a voluntary electronic funds transfer code.  The Government of Canada’s White Paper – 2006 Financial Institutions Legislation Review: Proposals for an Effective and Efficient Financial Services Framework – released in June 2006, indicated that the Government would encourage the adoption of a voluntary consumer protection regime to cover electronic transactions, building on the work undertaken to establish the code for debit cards.

A new code would be intended to build upon the current Debit Card Code and would encompass all forms of face-to-face and on-line asset-based (debit) transactions and electronic banking (including those using debit cards, stored value cards, on-line and telephone banking).   The new code would not govern credit card transactions as such transactions are already covered under federal and provincial legislation, as well as through existing industry codes.  However, stored value products offered by members of the various credit card associations would be included in the discussion.  Another item for consideration would be specific products such as closed-loop cards (e.g. some gift cards, payroll cards, etc).  Further, the development of a new code will be a working group effort that will focus on developing overriding principles for service providers, such as a commitment to providing consumers information in clear and concise language.

To facilitate discussions among participants across the country, the Government has developed a secure, web-based discussion forum through which participants can communicate.  All confirmed participants in the working group will receive:

1. A password and instructions for accessing the discussion forum;
   
2. A discussion paper outlining possible amendments to extend the scope of the Debit Card Code to a broader array of products, such as stored value cards, web banking, and telephone banking; and
   
3. A list of all the registered participating organizations. 

Working group members will make submissions on the document directly to the Department of Finance for posting on the secure web forum.  Submissions will be available for viewing by all members, and members will also have the ability to comment on submissions for a reasonable, fixed period of time.  We anticipate that the final code will be ready for industry adoption by late 2008.  Once adopted by industry, the code will be posted on the Financial Consumer Agency of Canada (FCAC) website.  The FCAC will monitor adherence to the Code by federally-regulated financial institutions, as it does for all financial voluntary codes of conduct and public commitments.

We will keep our members apprised of all steps along the way.  This will help us build relationships with the key officials within Finance responsible for electronic transactions, and could also be a good segue into what ATMIA Canada would like to do to help the government in regards to money laundering.  If you are interested in participating, please contact lana@atmia.com.

Meeting with the Department of Finance Update – TSA provided Finance with the information on the TVA show broadcast and investigative report on ATMs at 7pm this Friday night (September 21st).  ATMIA has provided all Canadian members general responses assuming there are questions that come from the media, clients, and/or government after the broadcast (see below). 

TSA contacted Finance on our behalf to continue our dialog in regards to AML regulations, and found out that right now, there is no imminent legislation pertaining to merchant loaded ATMs, and that they are looking at all options, including industry led solutions.  There is a need to get a group together to compile suggested industry led solutions. 

Finance would like to meet with ATMIA Canada again, and TSA and Lana are working together on developing a presentation to continue to help educate Finance on the off-premise industry, due to some ongoing confusion.  The draft presentation will be sent to the Canadian board for edits/additions and a second meeting with Finance (most likely in Ottawa) including someone from each sector of the industry (Petro Canada) from the merchant side, will be scheduled to continue the dialog and input.
 
Public Relations – ATMIA will be working with TSA to develop a story to communicate publicly, focused on all the positive things underway.  Examples of the latter would include working with the government to ensure white label machines are protected from criminal activity, participating in the Finance consultation on developing a voluntary code for electronic transactions, the pending Visa and MasterCard rules (framed as a positive in that they further enhance consumer protection).  
 
The bottom line would be to show ATMIA Canada and its members taking initiative to raise the operating standards of the white label industry to further enhance consumer protection.  It will show ATMIA being proactive to address any threats – real or perceived – to the industry.  On top of this would be the messages about improving consumer choice and convenience in the marketplace.  The long-term goal would be to build consumer loyalty.
 
We may also help raise the profile of senior management of ATMIA Canada and its “model” members. 
 
TVA show broadcast and investigative report on ATMs last Friday.  As suspected, it was quite sensationalistic and portrayed the industry in a negative light – http://tva.canoe.com/.  This will be in French.
 
The initial interview was on basic information about the state of the ATM industry and the nature of the regulations.  However, the key question which was:
 
Q:  “Would you be surprised if I told you I asked 10 suppliers in Quebec if I could buy ATMs from them even though I had a criminal record and seven of them said yes?” 
 
A:  Our spokesperson stated, “yes I would be surprised, because to do that without doing a background check would contravene regulations, as well as they may not have been successful in deploying terminals through these people - the rules would catch up with them before they actually got the ATMs attached.”
 
As an aside, after the interview it was found out that the offence they said they had was a DUI, not a financial crime.
 
Here is a summary:

• The white label story was the lead item in the intro and on the show, with the introductory comment that anyone can buy a white label and organized crime is profiting.
  
• The story really played up the fact that white labels are not tied to a financial institution.  That was introduced at the start and frequently repeated.
  
• Pointed out that anyone can own/operate a white label.
  
• Suggested lots of people are deliberately closing their eyes to the criminal element involved in the industry.
  
• The piece started with a consumer who had money stolen from her after she had withdrawn from a white label.  When she inquired she found out that several out people had had their cards skimmed at this location.
  
• The RCMP was then quoted saying it is riskier to use a white label than a bank ATM.  The officer said there are fewer controls and the criminal element can get in.  The officer then said white labels can also be used to launder money.
  
• This is when the reporter focused on the 10 dealers he approach, 7 of whom offered to sell him an ATM.  It actually gets worse.  One dealer said there are ways to get around the criminal check, after the reporter specifically said he had a record and did not want it examined.  One who refused to sell did provide advice on how to get around the criminal check.  Worst of all, one dealer gave an explanation of how to launder money through a white label ATM.
  
• The reporter pointed out that 7 of 10 were willing to violate the Interac rules and sell.
  
• The RCMP officer was then quoted again and pointed out that white labels can get their money from anywhere and can also be used to dispense counterfeit.  
  
• The reporter then interviewed Pierre Duguay at the Bank of Canada.  He was asked whether he was bothered by the fact that 7 in 10 offered to sell a white label to someone who admitted a criminal record.  Duguay said it merited examination.
  
• The reporter then pointed out that the RCMP can do nothing because there is no law.
  
• Interac was interviewed and downplayed the story, pointing out that no one was hooked up to the network.  These were all just conversations.
  
• The RCMP was then back saying there are no controls.
  
• The reporter then said he asked for an interview with the Minister of Finance, but was declined.
  
• Mike was finally quoted at this point, saying the industry prefers self-control, but adding that no system is perfect. That is all they showed.
  
• The piece ended with the customer interviewed at the beginning saying she had lost confidence in white labels and would not use them again.
  

That ended the first segment.  After the commercial break the reporter then focused on fees:

• Pointed out that you pay more for a white label than a bank ATM.
  
• The reporter then asked people how much they thought they were paying per transaction.  Most said $1.50, which is what you are usually asked when making a withdrawal.
  Options Consommateurs, a vocal consumer agency in Quebec, then pointed out that you also pay fees to your own financial institution and to Interac.  The reporter suggested these fees amount to $3.50 to $8.50.
  
• Interac was interviewed and said fees are the responsibility of the financial institutions, not Interac
  
• Options Consommateurs recommended only using your own banks ATM.
  
• Mike was quoted here and pointed out that the fees are disclosed and you have the option of accepting them.
  
• The reporter then brought up the ATM fee debate from last winter. The Canadian Bankers Association was quoted saying the government should not get into regulating fees.  
  
• It was then pointed out that white labels have exploded to become 2/3 of the machines in Canada.
  
• The reporter then interviewed a young woman who took out $20 but did not receive the money.  It took her several calls to try to track down someone who could help her.  Mike pointed out then that you need to contact your own financial institution when that happens and they have the means to reclaim your money.
  
• Options Consommateurs was then back pointing out there are no laws or regulations to help consumers in this situation.
  
• The consumer was quoted at the end saying she would not use a white label again.
  
• The piece ended by pointing out that the U.S. has a law governing electronic transactions, but Canada does not.
  

It is important to note that no specific evidence was cited to prove that criminals are involved in the white label industry.  That being said, the piece certainly left that impression.  The comments of the RCMP and Bank of Canada were not helpful either.

Next steps:

• TSA will leave a message for the person in the Minister of Finance’s office to let him know what is going on and to contact them if this becomes a concern.  They have dealt with this guy before and he is quite helpful.
  
• TSA will check all the weekend media for any follow-up or any political response.  
  
• TSA will call Lynne (Finance) on Monday and get her reaction.  We will need to move quickly to set up a next meeting with Finance.  
  
• We should definitely move forward with the PR plan, focusing of building consumer confidence in white labels and showcasing the good players in the industry.
  

ATMIA provided the following general responses, prior to broadcast, assuming questions would come from the media, clients, and/or government after the broadcast. 

Questions & Answers

1. Who owns white-label ATMs?
   A white label ATM can be described as an ATM that does not carry a bank brand, logo or markings. Any private or publicly traded company, including a Bank can own a white-label ATM. The predominant number of white-label ATMs are owned and operated by non-bank entities which are sometimes called Independent Sales Organizations (ISOs). Many are owned by retailers.
   
   
2. How does an ISO connect a white-label ATM to the Interac Network?
   Before an ISO can connect an ATM to the network, they must first establish an ATM processing agreement with an Interac Acquiring Member or be one themselves and agree to comply with all Interac Rules and Regulations governing the operation of an ATM. The Acquiring Member must also follow very specific Interac Due Diligence rules before an actual ATM can be connected to the Network.
   
   
3. What type of Due Diligence does Interac Require?
   Interac Due Diligence requires the completion of “know your customer” rules including background and criminal background checks on any ATM “Business Partner” which has a contractual interest in the operation of an ATM.  These Due Diligence procedures are designed by Interac to protect cardholders and ensure the security of the brand and the network. Only certified devices are allowed to be attached. Certification includes the formal verification that device meets the high security standards required by Interac.
   
   
4. Once connected, are there any rules governing the ongoing operations of a white-label ATMs?
   Interac has Operating and Security Regulations that all Acquiring Members must follow.  These rules and regulations are quite broad and govern everything from ATM branding, to screen messaging (.i.e. surcharging notification), to receipt messaging (.i.e. display name of Interac Acquiring Member), to security of transaction processing (encryption standards), to defining the certification process that must be applied against each ATM make and model before it can be connected to the Interac Network. Of course all transactions and operational events must be logged and be available for inquiry.
   
   
5. Are there and gaps or differences with Interac Regulations as they pertain to “white-label” ATMs in comparison to Bank ATMs?
   White-label ATM owners and operators are not aware of any gaps or differences in the Interac Regulatory framework as it relates to the operation of a white-label ATM in comparison to a Bank ATM.
   
   
6. Are you participating in discussions with the government and law enforcement?
   Yes the white-label ATM owners and operators are represented by Interac Acquiring Members as well as the Canadian arm of ATMIA and are actively involved in discussions with government and law enforcement officials.
   
   New threats arise constantly and we work with Interac and other card associations to adapt the rules to address those threats. We have been working with Interac on issues that have recently been raised in the media and in government. In that process we are focusing on ways Interac can ensure the consistency and strengthen the enforcement of the current rules as well as whether there are reasons to add new regulations.
   
   

New Democratic Party Critic Shuffle - The New Democratic Party (NDP) shuffled their opposition critics.  Their lead MP on finance and financial service issues is now Thomas Mulcair, who was elected as a star candidate in a by-election earlier this month.

TSA views this as a major development.  The NDP has long led the charge in Parliament calling for ATM fees to be reigned in.  Judging from their positioning in recent days I believe that the issue of bank profits and fees in the financial service sector will be a major theme for the NDP in the Fall, either in Parliament or as part of an election campaign.

Having Mulcair as their spokesperson on the file increases the likelihood that it will get media attention, which in turn increases the pressure on the Conservative Government to respond.

TSA will monitor this situation closely.  TSA also expects the Liberals to shuffle their critics shortly and they will apprise us of when that happens.

Disclosure:  This information is copyrighted by ATMIA.  ATMIA Members are entitled to this information as part of their membership however is restricted from forwarding this information in any manner without prior written consent from ATMIA.