State money transmitter licensing laws are among the most significant acts in the United States for ensuring the safety and integrity of the payments system and providing critical protections to consumers and businesses that transfer or receive payments. 48 US states require payment providers to obtain them in order to keep or move money on behalf of residents (consumers and businesses) in those states.
Obtaining these permits necessitates a major expenditure of time, energy, and money. States will not approve all licensing applications, and licenses will be provided only to those businesses that can demonstrate they have the necessary management, monitoring, and controls in place to fulfill their money transmitter responsibilities.
THE APPLICATION FORMULA
Some applications will be denied due to the demanding nature of the procedure. Its purpose is to ensure the applicant’s safety, soundness, and solvency. The following information must be included with the application:
- Detailed multi-year business plan
- Audited Financial Statements of the applicant
- Personal financial records of all directors, principal officer, owner or 10% shareholders
- Third party criminal and civil background checks
- Fingerprints of Control Persons
- A robust anti-money laundering (AML) Program and other compliance policies
- List of all lawsuits or criminal complaints against any Control Person in the last fifteen years
The financial obligations, in addition to the transparency requirements, are significant. Each state requires licensed money transmitters to post surety bonds of at least $500,000, and the applicant must also meet the state’s minimum capitalization requirements.
State authorities demand the licensee to produce monthly, quarterly, and/or annual reports to determine its transaction volume and financial condition once it has been approved. In addition, the licensee is subjected to state audits and examinations, as well as regular license renewals.
While some businesses are registered as Money Services Businesses (MSBs) with the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) (which simply takes an easy online registration), not all MSBs have the needed state money transfer licenses indicated above. An MSB that engages in money transmission without first obtaining state money transmission licenses commits a federal offense.
