I think the Raspberry is taking the role of the "financial institution", not the modem. The writeup seems to indicate they have an actual modem on both sides, but I couldn't find out how they are connected.

You don't really need an actual phone line, but you would have to add a dialtone, and simulate the ringing. If you controlled both sides, you could disable dial tone detection, and just "answer" whenever you please, and wire the two modems. But they don't seem to have modified the ATM, just changed some settings. So that's out, and we do have some sort of phone line. But simulating a line would be a project into itself and, if they went through such lengths, I would expect that to be noteworthy enough to be mentioned.

That, and given their unfamiliarity with modems, makes me think they actually have a phone line and are really dialing.