With a number of cities and states well along in their implementation of new automated teller machine security regulations, the veracity Lao-tzu's words is about to be put to a rigorous modern-day test.

California and New York City lead the way in establishing laws to thwart robberies of ATM customers.

Other areas of the country - Florida, New Jersey, and Philadelphia, for example - are now following with legislative efforts of their own.

Observers expect new regulations in these regions by the end of the first quarter. But even before these efforts had begun, the issue of legislating minimum ATM security standards had already gained national prominence, thanks in large part to a still-raging battle over the implementation of New York's law.

Industry Reacts with Fear

Widely recognized as the most severe ATM security legislation in the nation, the New York law sent ripples of fear through the banking industry and spawned the recent spate of similar laws.

Yet despite an increasing willingness by lawmakers to dictate the best way to ensure ATM customers' safety, the incidence of ATM robberies appears to be rising.

Note, that was "appears" to be rising, not "is" rising. No national agency specifically tracks ATM crimes, so no one knows for sure what the trends are in this area.

However, with the controversies surrounding legislative bodies' rights to mandate security measures such as full-motion video cameras, individual ATM incidents are getting a lot more play in the media.

Robberies that once would have been classified as petty crimes are now newsworthy events that invite coverage, not only by local newspapers, but also by major television networks and even the national news wires.

A recent report by United Press International, for example, chronicled three cases of criminal abduction in New York in which the victims were sexually abused and forced to turn over their ATM cards.

After detailing the incidents and listing the criminal histories of the suspects, the article pointed out that the surveillance camera at the site of the attempted ATM robbery was broken.

Demand for Surveillance

Queens District Attorney Richard Brown termed the bank's failure to repair the camera "unconscionable," and suggested that New York banks bear responsibility for curtailing the roughly 375 ATM crimes that occur in that city each year.

"The rash of ATM robberies that have been occurring lately in the city will only be stopped if the banking industry recognizes its obligation to install functioning surveillance cameras at every ATM facility," he said.

Experts said the increased appearance of reports like these creates an impression that ATM robberies are becoming a more popular pastime for career muggers.

"The national statistics suggest that the incidence of ATM-related crimes is very low, but if you read the papers, you'd think exactly the opposite is true," said John Byrne, senior counsel at the American Bankers Association in Washington.

There is evidence to support claims that media coverage of the ATM crimes features an element of sensationalism.

24-Hour Stores Harder Hit

Mr. Byrne points to Federal Bureau of Investigation figures that show about 10,000 bank robberies in 1991. Even if 50% of those were ATM-related incidents, the number of ATM crimes still would be far below the average number of crimes at other 24-hour businesses.

For example, FBI figures show there were about 36,000 convenience-store robberies last year, Mr. Byrne said.

While bankers say there is no acceptable level of ATM crime, they believe robberies of ATM customers are still relatively uncommon events.

And they bristle at being singled out for security measures while other industries continue to do business without being saddled with such a responsibility.

According to figures from the NYCE network and the New York Police Department, there was about one ATM-related crime for every 2.5 million ATM transactions during 1991.

Likened to Airplane Crashes

To place the statistics in an anecdotal context, one banker compared ATM crimes to airplane crashes.

Both are attention-grabbing, he said, but not particularly common.

Whether the NYCE and FBI 1991 statistics are still accurate or not, the fact remains that the public believes that ATM crime is on the rise.

This perception has a number of implications for bankers.

The first and most obvious issue is that safety concerns threaten to reduce the usage of bank machines.

A study by Carmody & Bloom Inc., Woodcliff Lake, N.J., found that customers tend to veer away from what they perceive to be unsafe ATM vestibules.

As any electronic banking executive knows, transaction volume is integral to ATM profitability.

And while the need for cash often overrides consumers' vague fears, it is clear that creating a safe-feeling atmosphere is in bankers' best interests.

"It is as important for customers to feel safe as it is for them to be safe," said Liam Carmody, president of Carmody & Bloom, a consulting firm that specializes in electronic funds transfer strategies. "You can throw around all the numbers you want, but studies show that threats to safety - whether real or imagined - can curtail transaction volume."

Beyond affecting transaction volume, though, the public perception that ATM crime is on the rise can also act as a catalyst for legislated ATM security requirements.

Since ATM security is already a hot issue in the press, many politicians see the introduction of new ATM legislation as an opportunity to take a high-profile stand on protecting the rights of their constituents.

As the battle over the New York law demonstrated, once a piece of legislation is introduced, it is very hard to stop - even if the arguments against it are reasonable ones.

The private comments of one of the sponsors of the New York City law illustrates this point: "I had some misgivings about [the bill] ... but, to be frank, a vote against something like that is political suicide."

Although ATM security legislation is still a relatively young topic, there is already a body of evidence that suggests the political and economic problems outlined can be avoided.

Compromise in Chicago

In 1989, following a well-publicized ATM-related robbery that ended in the murder of a young woman named Dana Feitler, the city of Chicago began moving toward increasing the security requirements and limiting the hours of ATMs within city limits.

However, such legislation never reached the books, mainly because the area banks and a Chicago-based ATM network, Cash Station, worked out a compromise that rendered mandated measures unnecessary.

It's clear that ATM security legislation may be inevitable in some cases. However, financial institutions and regional ATM networks are learning from the the positive experiences in Chicago.

For example, financial institutions in Florida have huddled with legislators in an effort to create a law that both sides can live with. The fruits of their labors should be apparent in January.

"You can be proactive or reactive about this, but the issue is not going to just go away," said Thomas Bennion, president and chief executive officer of Florida's Honor network.

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