CIT operations with IBNS: A Farewell to Arms?
New approaches to CIT operations through the eyes of market participants and the Bank of Russia.
The risks of an attack on CIT operators become more and more urgent against the backdrop of a difficult economic situation. This forces banks to find new and effective approaches to increase the security of transportation of valuables and, of course, to protect the employees. As a result, some enterprises started to combine such innovative approaches like transportation of cash in security cases – when all the banknotes are neutralized by inking upon an attempt of their unauthorized opening – with the traditional security means. The latter include duty weapons and armored vehicles, which until recently have been mandatory for use.
The situation could be changed by the recent publicly discussed draft of the Regulation "On the Procedure for Conducting CIT Operations and Rules for Storage, Transportation and Encashment of Banknotes and Coins of the Bank of Russia in Credit Institutions in the Russian Federation." Among other issues this document provides a possibility not to apply some requirements, established for road transport, as well as for carrying duty weapons by CIT operators, in case special devices are used for transportation of cash upon the unauthorized opening of which the banknotes are neutralized. Yet, are CIT-operators themselves ready to give up the usual armor and weapons in favor of innovations? And what does the Bank of Russia think about this?
On the sidelines of the Third International Conference "Current Issues of Cash Circulation Development", held in Suzdal on June 19-22, 2017, PLUS Magazine offered market participants, including representatives of the mega-regulator, leading CIT companies and commercial banks, to share their vision of the situation by asking them the following questions:
- Do you consider the use of security cases with banknotes inking system as an alternative to the use of weapons and armored vehicles?
- How effective can such technologies be in terms of improving the security of the transported valuables, as well as the life and health of the CIT employees?
- What is your assessment of the prospects of this type of products in the industry of transportation of valuables globally and in individual countries, including Russia?
Georgy Luntovsky: "We can cancel both armored vehicles and weapons if we use security cases"
Georgy Luntovsky, First Deputy Chairman of the Bank of Russia
In Russia, cases with a banknotes inking system are already used by 11 banks, and we've got some usage statistics. So far, there have been no attacks on the CIT-operators transporting such devices. We studied the French experience in the introduction of such cases. A large-scale awareness-raising campaign was held there at the introduction stage, which aimed, among other things, criminals practicing attacks on CIT employees. An attempt was made to convince them that their actions became useless, since even if the case had been stolen, the cash from it could not be used. Finally, the number of attacks began to decline. Initially, criminals stole such cases and then threw them out together with the inked cash, after they made sure they could not use the loot. After a while there became fewer attacks on CIT-operators carrying such cases.
We hope that we will witness a similar trend in Russia during mass introduction of such cases, and we are also going to do explanatory work for the widest audience together with commercial banks to reach this aim. At the same time, we are going to create difficulties for criminals in terms of exchanging inked banknotes for solvent ones if they are stolen. In any case, we will accept such banknotes only from CIT-operators and from commercial banks that own this cash. We’re hoping for a positive effect because, I think, by using cases, we can cancel armored vehicles and weapons. This will help commercial banks to cut their expenditures and will reduce the risks of attacks in general.
Representatives of Sberbank of Russia
Sberbank is currently actively using high-tech passive safety devices in the work of CIT units, including security cases, which the bank has been exploiting since 2010.
It should be noted that the draft provision stipulating the use of special devices for cash transportation, the banknotes in which are inked with indelible security ink upon the illegal opening attempt, was developed by the Bank of Russia taking into account the analysis of the use of this technology by Sberbank.
In accordance with the Instruction of the Bank of Russia No. 2248-U of June 5, 2009, the institutions of the Bank of Russia accept for examination from credit organization banknotes of the Bank of Russia, inked with the security ink in the result of activation of special devices for packing cash. The exchange of the inked banknotes is made only if they have information about the security cases used by credit organization and characteristics of the security ink.
A credit organization must send samples of the security ink and technical documentation for the security cases and the security ink by at least 30 days before use to the Bank of Russia (Department of Cash Circulation of the Bank of Russia). The official website of the Bank of Russia contains information on security inks that are used in security cases by Russian credit institutions and which have been examined by the Bank of Russia. After examination of the security ink, which the banknotes are inked with, for its compliance with the submitted samples, the Bank of Russia replaces insolvent banknotes.
It should be noted that Sberbank goes beyond introduction of security cases in the CIT technological process – the bank also conducts pilot projects for cash transportation in special vehicles equipped with security cases racks, and even so called drop-safes, in case of unauthorized opening of which the banknotes are inked with the security ink. In addition, Sberbank has begun to develop a technology for transportation of cash using unmanned air drones.
We see a great prospect for the development of passive means of protection for special vehicles and CIT operators when working on the routes.
In our opinion, the devices that make transportation of bank valuables more secure, are really promising, this is an actively developing field of activity. Yet, in Russia, high-tech devices as a passive protection didn't find mass application yet. There are not enough companies that can compete with foreign manufacturers. Currently Sberbank is working with Russian companies that could start up production of security cases. We believe that this can reduce the cost of this equipment, and, as you know, demand creates its own supply.
Elena Melanich, Chairman of the Expert Council of the Cash Currency Circulation Association, Candidate of Law, RF Government Prize winner
In my opinion, the view that the use of security cases with simultaneous withdrawal from the use of weapons will lead to an increased risk to the life and health of the CIT employees themselves, because criminals may not be aware of the consequences of using such technologies for banknotes, does not take into account the important issue. In this field "casual" attacks are quite rare. Usually a crime of this kind is thoroughly prepared, the situation is analyzed, so criminals know what they are going to face. Accordingly, in assessing the chances for success, it is likely that a decision will be made to cancel this type of crime.
Nadezhda Malukh, Alfa-Bank Cash Circulation Director
"This topic is now quite relevant in terms of CIT operations and we are now actively testing it in Alfa-Bank.
Security cases have been widely used in Europe for quite long. There is certain experience and results on this equipment use, which we are analyzing. As a matter of fact, attacking a CIT-employee using a security case don't bring criminals any result, since upon opening all the banknotes become useless. This reduces risks in the CIT process and optimizes costs.
In the short term, it is most likely that hybrid variants will be introduced in the CIT process. The choice of the model will be determined by the specifics of the services, based on their economic feasibility and the level of risks. Re-equipment and introduction of new technologies require investments. So far, there are not so many suppliers that have already proven themselves in our market and can offer reasonable prices for such equipment. I hope that the situation will change in our favor.
CIT operations are a fairly conservative sphere, but we as a bank that is always looking for new innovative solutions, strive to develop faster than the market in this field."
Representatives of Svyaz-Bank
It is impossible to deprive CIT-operators of armed guard for at least three reasons.
First, you cannot solely rely on special equipment, there is no guarantee that its technical capabilities are perfect, and in an emergency situation it won't fail, which will play into the hands of intruders.
Secondly, the issue of CIT operations outsourcing or owning CIT operations lies in the economic field and is handled differently by different banks.
Third, the transfer of functions to accredited companies will not fundamentally improve the security situation, yet, in fact, it will increase costs. It is also worth remembering that the lack of an alternative is a prerequisite for the development of corruption or monopoly.
Nadezhda Malukh: "In the short term, it is most likely that hybrid variants will be introduced in the CIT process."
After approval of the draft Regulation "On the Procedure for Conducting Cash Operations and Rules for the Storage, Transport and Encashment of Bank of Russia Notes and Coins in Credit Institutions in the Russian Federation, the bank plans to widely use security cases for the provision of the CIT services.
The bank is starting tests of security cases, the results of which will make it possible to conclude on the effectiveness of the technology and its real prospects.
Alexey Kvashnin, Regional Sales Manager, StrongPoint Cash Security
Speaking about the need to use banknote inking systems for CIT-operations (IBNS, or Intelligent banknote neutralisation system), I would like to emphasize a very important point: despite the fact that this technology is being promoted today by a number of companies using different approaches, they all aim to protect themselves. Personally, I prefer to focus on the protection of people's lives, and then speak of the protection of valuables. And I think this is the most correct approach.
I have repeatedly pointed out at specialized forums and conferences that we do not simply take banknotes and ink them with the help of intellectual and technologically sophisticated devices. We are addressing a bigger challenge: Sergei in Tula, Mykola in Odessa, Sebastien in Marseille, Mathias in Munich, Linda and Helena in Stockholm, Björn in Trondheim should return home after work to their relatives alive and well. And only in the framework of this principled approach other numerous advantages of using IBNS technologies will be manifested. Including those of economic and/or optimization nature.
I will illustrate this statement with a concrete example.
February 2006, Sweden. The Law "On Labor Protection" has been published in an updated version. "... According to Art. 7 Section 7 the State Administration of Labor Protection has prohibited any transportation of valuables from the point of obtaining valuables to the point of valuables delivery without using a system that brings valuables to an insolvent state since August 30, 2006. The ban has not been extended to coins transportation. "Since then, i.e. since 2006, no (!) CIT-employees have been injured in Sweden.
Now let's discuss the specific benefits of using IBNS technology. Here we need to start not with the analysis of possible risks or the cost of this technology versus the cost of armed guards and armor. In addition to the evaluative approach of the potential user (and in Russia we are talking about bank CIT units and CIT companies), the state approach should be taken into account first of all. It is possible to implement this technology in the operational process only in accordance with the legislative regulations.
Traditionally, CIT operations are considered to be a rather dangerous type of banking activity. Therefore, there are still some countries where the transportation of valuables can be carried out exclusively by armored vehicles and armed guards. In practice such an approach must be reliable and safe. Yet, every year we see the news headlines or on-the-spot reports with exactly the same comments like "an attack is committed, employees are hurt and valuables are stolen" ... How can we continue talking about the reliability and safety of the traditional approach in such conditions?
Recent world trends show considerable flexibility with regard to changes in historical requirements for transportation of valuables. An increasing number of national regulators allow use of IBNS solutions in addition to the use of special vehicles and armed guards. The position of the European Central Bank is an example of this.
Studies by the European industry organization EURICPA1 show a 61% increase in the use of IBNS in the European Union as a whole and an 86% increase in the Eurozone countries between 2008 and 2015.
And, of course, there are countries where valuables are allowed to be transported only on the condition that in the operational process the equipment including IBNS solutions is used. I have already spoken about the Swedish experience. Belgian legislators have adopted a similar approach with regard to the transportation of valuables.
It is no secret that launching any innovations in the CIT process is, to put it mildly, quite difficult. For the permissive or mandatory implementation of IBNS solutions, it is necessary to follow a number of important conditions, of which we distinguish the following three.
A. Kvashnin: I prefer to focus on the protection of people's lives, and then speak of the protection of valuables.
First, IBNS decisions should be permissible for use at the legislative level. The development of the national legislation is essential. Regulatory documents should prescribe a mechanism to protect valuables when transporting, processing them in ATM and other self-service devices in cases where devices with IBNS solutions are used. Description of the possibilities of using the technology in the retail and entertainment industries to create a safe environment for customers, guests, in other words, for ordinary citizens.
At the same time, the signs of insolvency of inked banknotes are described, as well as the mechanism for their exchange in the Central Bank. Legislation also describes the procedure for registering devices and components. The regulator, together with the market participants, carries out an information campaign to inform banks, retailers and population about the inked banknotes.
Secondly, it is necessary to regulate the process of certification of IBNS solutions by the regulator. At this stage, a certification mechanism should be established. Certification may (or, most likely, must) become mandatory for different types of IBNS solutions. The need for large-scale testing of equipment and components should be considered. This will not only protect the market from new-made low-quality products (roughly, cardboard boxes with serial numbers and labels), but will also give professional market participants an opportunity to select knowingly effective equipment while saving their resources for screening out crafty options.
Thirdly, the regulator shall exercise supervisory functions within the framework of the IBNS application, development of methods for analyzing incoming banknotes for exchange and their identification. It is necessary to work closely with law enforcement authorities, since identification of banknotes with traces of security ink can means, among other things, that these banknotes have been stolen. This is a crime that may be beyond the scope of the Central Bank's activity.
Resting on the development of the situation in Russia, it is necessary to refer to the normative instruments currently in force.
The main documents of such a kind were and are the Law of the Bank of Russia No. 318-E "About Weapons", and some so-called Sub-Laws. Recently, draft changes have been announced which could provide some alternatives to the CIT-operators. The talk is also about a possible abandoning armed guards and cancelling armored vehicles, provided that the IBNS solutions are used.
A. Kvashnin: "The very possibility of gaining a profit from crime is excluded, which makes it meaningless!"
In this case it is the service provider who makes the final choice, of course, provided that certain internal and external criteria are met. Here we already can evaluate and compare security and economics aspects.
As for the economic impact of the introduction of IBNS decisions, there is no need to consider any specific examples, since operation of such solutions in Russia since 2009 has shown their economic viability. While on the early stages the use of IBNS technology was the domain of market leaders, innovators and pioneers, now such decisions, even without taking into account the coming legislative changes (the possibility of cancelling weapons and armored vehicles), can have a tangible positive economic effect on the ordinary players of the CIT-operations market. As professional players in this market, we witness confirmation of this state of affairs in the feedbacks from our customers and partners who as the saying runs "vote with their feet."
To sum it up, I would like to return to the original thesis. The possibility of banknotes neutralizing (inking in our case) creates conditions for safe work of the CIT employees and significantly reduces potential risks of dangerous situations for the society as a whole. In addition, the very possibility of gaining a profit from the crime is excluded, which makes it meaningless.
We suggest never leaving anything to the attackers!
And only in the light of the above we can talk about the possible technological risks, high cost of solutions, distrust to new technologies, etc.
Journal: PLUS Journal 6 (241) 2017
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