Money Transmitter Business Licensing

Money transmitter businesses need to be licensed to provide services. Licensing is regulated at the state and federal levels. Money transmitter license requirements vary by state and by the services offered.

Transmitter businesses are engaged in receiving money or some form of monetary value to send elsewhere. Money is transferable through several channels. The most common include wire, fax, and electronic transfer. Money transmitter businesses conduct operations in multiple capacities: as a currency dealer or exchanger, a check cashier, or an issuer or seller of money orders or other stored value.

Any individual or business that completes more than $1,000 in transactions in the same 24-hour period may qualify as a money transmitter if the transactions fall into certain categories. Those categories include the following:

• Check cashing
• Currency dealing or exchanging
• Money transfer services in any amount
• Traveler’s checks
• Money orders

While money transmitter businesses are sometimes called money service businesses (MSB), not all service companies have transmitter capabilities. Acting as a transmitter requires transferring money within the United States or abroad on behalf of another person or persons.

States differ on the definition of a money transmitter, so it can seem like a bit of a challenge to know if your specific business model requires a money transmitter license or not. In most instances, however, anyone who receives money and transmits it to another location likely needs a license. If you’re uncertain about your business’s needs, the finance license experts from Harbor Compliance can help.

Money Transmitter License Process

There is considerable variability in money transmitter requirements from state to state. However, common elements include:

• A license application
• Fees
• A business plan
• Maintenance on permissible investment
• Minimum net worth (via financial statements)
• Background checks
• Surety bonds or other forms of security

If you qualify as a money transmitter and are looking to obtain a license, there are several documents you will need to gather to complete the application process. Requirements are different in each state, but you will likely need a detailed business plan, financial statements, and a background check. You will also need to appoint a registered agent to receive notice of lawsuit and other legal or government notices.

A business plan serves as a roadmap that includes details about a new company’s operation and financial health. Depending on the state in which you are registering, you may be required to provide a business plan. Commonly requested information includes where the business will be located, its purpose, how it will interact with clients and provide services, and how it will be funded.

Financial statements are one of the most important components of applying for a money transmitter license. To obtain licensure, businesses need to include documentation regarding assets, net worth, business cash flow, and liabilities. Additional information is required if any shareholders or control persons are involved in the business.

Background checks are conducted to ensure those applying for a money transmitter business license are trustworthy enough to handle the transmission process for clients. Most background checks evaluate civil and criminal histories. The owner, as well as any officers or directors, may need to submit a background check.

Forty-nine of the 50 states require surety bonds. Montana is the only state that has yet to create a surety bond requirement. Surety bonds are three-way contracts between the principal business, the surety, and the state requiring the bond. The surety financially guarantees the state that the money transmitter business will act in accordance with the terms established by the bond.

In addition to the documentation, many states require new applicants for money transmitter licenses to go through an investigation. A fee could be involved depending on the state requirements. The state investigates the business to verify its financial responsibility, experience in the finance industry, and the character of the applicant and the officers or directors of the company.

Maintenance and Renewal

There are a number of steps businesses need to take to ensure they continue to comply with state laws after receiving a money transmitter license. Most states require an annual license renewal that costs between $250 to $1,000.

Many states conduct annual examinations of businesses that hold money transmitter licenses. The process is similar to the initial investigation. It reviews business operations, financial standing, and character.

Keeping on track with your business’s license renewals can be complicated, especially as a growing company. At Harbor Compliance, our managed annual reporting and registered agent services ensure accurate due date tracking and on-time filing. This way, your business will continue to be compliant with state and local requirements, and you will have the time you need to continue working and expanding your clientele.

If you are looking to outsource your maintenance and renewal duties, Harbor Compliance can help. We are available to review your business status, ensure you are in good standing in the state you operate and explain what steps you need to take in order to ensure you remain compliant with state and federal regulations.

Federal Requirements

In addition to state requirements, money transmitter businesses are also bound by federal law. Companies must register with the Financial Crimes Enforcement Network (FinCEN) of the US Department of Treasury. FinCEN is responsible for regulating businesses in the finance and payments industry.

Registration is completed online using the BSA E-Filing System for initial registration and renewal. Exceptions to the registration process include sole agents, the United States Postal Service, and government agencies. Renewal is required every two years. Re-registration is necessary for certain circumstances, including a change of ownership, the transfer of voting power or equity interest, or an increase in the number of agents.

Registration is the responsibility of the owner or controlling person of the business. The required form, Registration of Money Services Business FinCEN Form 107, must be completed, signed, and filed within 180 days after the date on which the company is established. A copy of the filed registration form needs to be retained at a location in the United States for at least five years.

State Licensing Requirements for Money Transmitter Businesses

As mentioned, money transmitter rules and regulations vary drastically across the United States. To properly apply for and maintain a license, it is imperative to stay on top of your requirements.

Click on the link below to view licensing information in your state.