If you own ATMs or sponsor entities that do, you are at risk for losses from fraudulent activity.
Read more to find out about ASR’s Sponsorship Liability Insurance Program.
In the U.S., all entities that wish to have transactions processed through the card networks must be sponsored by a financial institution that is an approved network member. For example, an ISO that owns a fleet of Automated Teller Machines and Point of Sale terminals must be approved and sponsored by a sponsoring financial institution in order to have transactions processed through the Visa network. The network requires that the sponsor banks perform a high degree of due diligence on the sponsored entities and they hold the sponsor banks strictly liable for any breach of the network rules.
The main concern of the sponsor banks involves their sponsorship of an entity that deploys a terminal that is used to facilitate a fraudulent transaction. Most fraudulent card activity involves some type of “skimming” device attached to an ATM/POS terminal that is used to capture card data. The individuals perpetrating this crime also obtain PIN numbers, and then reproduce the fraudulent cards and make illegal transactions withdrawing funds from the victim’s bank account. Historically, card fraud has largely been limited to bank-owned ATMs with the ensuing loss falling almost entirely on the bank or card issuer; however, with the growth of independently deployed ATMs, non bank-owned ATM and POS devices are being used as the point of compromise to capture card data. The potential therefore exists for legal action to be brought against the sponsor bank and/or its sponsored entities alleging failure to perform adequate due diligence in allowing a terminal into the network, causing them to be in breach of network rules.
- Insurance for claims made by 3rd parties (typically an issuing bank) resulting directly from a fraudulent electronic fund transfer/sponsored transaction.
- Defense/Claims expense coverage included.
- Network Fines and Penalties coverage.
- Coverage is customized to meet the unique requirements of each business. Pricing is typically a percentage of total number of sponsored transactions. SFI’s risk management and underwriting procedures, in addition to insurance limits and deductibles, are used to tailor each policy.
- Security – program is insured by leading insurers with “A” financial security ratings from both A.M. Best and Standard & Poor’s.
- All financial institutions that sponsor ATM or POS card transactions.
- Sponsored entities such as Independent Sales Organizations and card processors.
- Card Networks.
- Miscellaneous entities that have liability for fraudulent card transactions.
Those interested in learning more about this innovative program should contact American Special Risk.