Many times, it destroys the money completely in the process, but as it seems, usually enough remains that the practice continues.
Well, it's not their money they're destroying...
The most effective measure taken to discourage the practice was to pack bags of dyes inside the ATM cassetes, so that the money is stained and rendered unusable. If you try to deposit stained money, it'll be confiscated on the spot.
Hmm... they can take the stained money, but neither deposit or spend it.....
They're probably going to leave behind stained money, as it is of no use to them. The bank, on the other hand, of course will re-deposit their own stained money....
But what if they would find out that there is MORE stained money found in the debris than there was inside?
Sounds to me like either a source for lulz or a way to wash (somehow literally) dirty money. (with a little inside help of course)