Monday, November 14, 2016

Using ATMs to do currency tracking

                                   Photo: "ProjectManhattan", From Wikimedia, 
          Published under Creative Commons Attribution-Share Alike 4.0license.

This post is a sequel to the one at I will assume that the reader has read that post before reading this one.

Most ATMs do not keep track of who was issued which currency note. Here I will argue that this can be done with suitable software modifications. Let me make one question at the outset. Limits set for withdrawals and deposits using ATMs do not permit large transactions. So, why bother about ATM transactions? The answer is that not including ATMs in surveillance could create loopholes that would be quickly exploited. For instance, that a fair amount of “black money” is likely to be “white-washed” by using paid intermediaries to deposit smaller amounts (say, Rs 40,000 each) into their own bank accounts. These will be withdrawn later and given back to the holders of black money. So, ATM transactions should also be covered by currency tracking. How can this be done?

Currency notes are loaded into ATMs in multiple trays. New currency notes being delivered to banks can be in tray-sized stacks with contiguous serial numbers. Old notes to be loaded into ATM trays can be counted by modified currency counting machines (CCMs) so that modified ATM software can keep track of what high denomination notes were issued to which customer. Most computations and data storage can be done on centralized servers on a network that drives the ATMs. This will require that each ATM reports to a central server before a transaction how many high denomination notes are remaining in each tray loaded into it. They should also report how many high denomination notes are issued to which customer from which tray, every time a withdrawal takes place. The ATM need not handle the serial numbers at all, as they will be stored on the server. So, if an ATM has reported that its Tray No 3 has 630 notes left, and that it is now issuing 20 notes from that tray to the customer carrying out the transaction, the server can find out the 20 serial numbers of the notes issued, from its own files. Deposits through ATMs can be reported easily, as bank staff have to count notes in such deposits anyway; they can use a modified CCM.

Do we need to modify ATM hardware to do currency tracking? No. There seems to be no reason to do that.

So, we conclude that it is not very difficult track currency notes being handled by an ATM. Software changes necessary do not have to be done nationwide in a few weeks. The changes being made do not change the primary functions of an ATM; they only add a few additional functions.

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