Ky. Firm Leads Shift to Electronic ATM Locks

Just as some hotels have replaced metal door keys with reprogrammable key cards, some automated teller machine deployers have begun replacing mechanical locks with computerized ones that change combinations every time the back door is opened.

The world's largest maker of electronic locks, Mas-Hamilton Group, says it can solve one of the biggest security problems for ATM deployers: insider theft.

In the ATM industry, as many as 40 people -- repairmen, bank employees, armored car employees transporting cash -- may have access to a given machine. An armored car company alone may have eight or 10 employees assigned to a particular terminal, so no one person is repeatedly seen opening the safe. Even when there are staff changes at the companies that service ATMs, the machine owner does not necessarily change the combination of a conventional lock.

"If one of those guys quits or gets fired, he can stop back for a little extra bonus on his way out the door," said John D. Brown, vice president of marketing and sales for Mas-Hamilton.

Mas-Hamilton started out largely as a research group in 1990 and made its first locks for the government. It says its locks are on Air Force One, in the White House, and on Trident submarines. The company says it is the only lock maker whose products meet federal government specifications for safes holding classified information.

The Lexington, Ky., company, which has shipped 500,000 electronic locks since 1992, entered the ATM lock market in 1995.

It competes with manufacturers of mechanical locks that have entered the electronic lock market, such as La Gard of Torrance, Calif., and Sargent & Greenleaf of Nicholasville, Ky.

Mas-Hamilton -- named for founder Jimmy Hamilton and lead researcher Mas Hironaka -- says it ships about 4,000 ATM locks each month. Its products are used in an estimated 70,000 ATMs in the United States and 30,000 abroad.

The company says the risks of conventional locks -- which may be used for long periods before being changed -- may be even greater than those associated with year-2000 conversions.

"This is cash money that's just going to be gone," said Howard Dame, director of marketing for Mas-Hamilton. "It's not going to be misplaced because the computer can't figure out where the dot goes."

Unlike conventional locks, the Mas-Hamilton ATM lock relies on computer-generated, one-time combinations and electronic key technology

Mas-Hamilton's Cencon System 2000 relies on a $3,750 software package that runs on a standard personal computer. The electronic lock itself -- which is powered by the user turning a small wheel back and forth -- sells for about $550.

Each time a safe must be opened, field employees must call their dispatch center to retrieve a six-digit code. That code must be used in combination with an electronic key, or SmartKey, to open the door.

After closing the lock, the field employee retrieves a "closing seal" from the lock display and must call it in to the dispatch center. This assures that the lock is closed securely and prevents a new combination from being dispatched prematurely. The lock has a memory chip that keeps an audit trail of all closings and openings.

Mas-Hamilton's customers include the ATM manufacturers NCR Corp. and Diebold Inc. and the armored car company Brink's Inc., which repairs and replenishes ATMs.

NCR of Dayton, Ohio, said it uses a Mas-Hamilton lock on ATMs for which it has a service contract. "If our service personnel or our staff are going to be touching the cash in any way, then we always include the Mas-Hamilton lock," said Rob Evans, NCR director of marketing.

Changing the combinations on mechanical locks is "expensive and cumbersome," Mr. Evans said. "Having a Mas-Hamilton product is just such a cost savings for banks."

Moreover, electronic locks slow down potential thieves, Mr. Evans said. But "if you wanted to get into anything badly enough, you could do it, given enough money and enough time."

Though the switch to electronic locks seems to be gaining momentum, Mas-Hamilton says at least two-thirds of the country's ATMs still rely on conventional combination locks, which are based on a technology dating back to the Civil War era. That leaves an estimated $6.5 billion vulnerable to internal theft at any one time, the company says.

"The lock industry seems to be one of the last ones to come around and take advantage of technology," Mr. Brown said.

Mas-Hamilton said it has developed an advanced lock-picking technology that could pose a new threat to ATMs with mechanical locks. Mas-Hamilton's Locktec Tools subsidiary, formed in July, markets what it says is a fast, non-invasive alternative to opening a mechanical lock.

Locktec's product, SoftDrill, is a package of hardware and software meant to be used in the event that a combination is lost, misplaced, or forgotten. Locktec intends to sell it to qualified locksmith distributors only, but it can clearly be dangerous in the wrong hands.

Products such as SoftDrill are "potentially compounding the risk in the banking community," said Mr. Brown, who wears a second hat as president of Locktec.

Mr. Dame, who is also the vice president of sales and marketing for Locktec, said that without SoftDrill, a locksmith faced with a lost combination has three options: physically drilling it open, spending up to 30 hours waiting for a computerized autodialer to try every possible combination, or safecracking by listening for clicks.

Much like an expert locksmith, SoftDrill relies on an electronic transducer microphone to listen to the wheels and other parts of the lock, Mr. Dame said. It uses algorithms to make a profile of the lock's wheels, thus deducing the combination.

But SoftDrill is usually much faster than a human, taking 30 minutes or less, Mr. Dame said. SoftDrill costs $7,000 -- more than twice as much as an autodialer -- but Locktec says customers will appreciate the time it saves.

Though SoftDrill seems to work at cross-purposes with Mas-Hamilton's main security business, company executives say it will work beautifully as a marketing tool for electronic locks. Since most of the estimated 20 million safes in the country are still protected by mechanical locks, "we have a long way to go before SoftDrill is out of business," Mr. Brown said.

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