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Digital currency ATMs facilitating crime, need regulation: New Jersey watchdog

New Jersey watchdog has recommended the quick implementation of regulation to govern digital currency ATMs in the state. In a new report, the New Jersey State Commission (NJSC) of Investigation revealed that state and federal laws have yet to address the sector. This has led to a disregard for anti-money laundering requirements and facilitation of fraud.

The report was a culmination of five years of investigations into the sector by the NJSC. In that time, it had subpoenaed 30 companies which together operate over 300 digital currency kiosks in the state. The watchdog found several instances in which criminals used the ATM machines for “financial scams and questionable transactions.”

The report stated, “Not only did the Commission discover wide variability in the precautions operators take—or fail to take—to safeguard against fraud, the inquiry also found inconsistencies among the various companies in how the businesses function, the type of information they collect from customers and the purchase limits for users.”

Among its key findings was that many of the ATMs allowed transactions to occur anonymously. At least 75% allowed customers to transact after only getting their cellphone number. Over half the businesses allowed up to $900 in transactions without any form of identification, the report revealed. Just a quarter of the ATMs required identification before purchase.

Digital currency ATMs were also found to have questionable compliance. A third of the 300 ATMs hadn’t registered with the state regulator. In a sworn testimony before the watchdog, one operator admitted to being aware of the registration requirements but ignoring them nonetheless. Noel Harvey, the operator of 7 ATMs in New Jersey, further admitted to being aware of scammers using his ATMs.

The NJSC identified several scams that had used ATMS to target victims. In one, the victims were duped to pay for vehicles on eBay with BTC. These vehicles didn’t exist and the scammers would cut off communication as soon as they received the BTC. Victims in New Jersey reportedly parted with over $600,000 in the scam.

The watchdog proposed new laws that would finally bring ATMs under the purview of the state regulator. First, all ATM operators must register and obtain a license to operate in New Jersey. Any ATM that operates without the license would have to pay a $500 per day fine. They must also retain records of accounts, including transactions for six years, just like banks. All ATMS must also require government-issued identification before a customer can make any transaction.


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