For a fresh start, we’ll be discussing the first thing you need to know about a money transmitter: what it is.
It is the transmission of money either in the US or abroad on behalf of another person or persons. Your business receives money and then transfers that monetary value.
Money transmitters are going under rapid change as a part of the money services business industry. The technological boom has changed and transformed the money service industry more so now than in the previous decades. Money is dealt with on a daily basis there. Some companies handle money itself as well. Crypto-currency has evolved the laws affiliated with this alternative form of payment.
Because of this emergence, the money transmission industry is facing charges in regulation. There has been a rapid movement of stricter legislation, and transmitters need to be licensed in order to function throughout the United States. The prevalence of money laundering needs transmitters to file a surety bond, in which operators in 49 of the 50 states need to obtain a license from the state licensing authority. Unfortunately, the definition of money transmitters is not uniform. The licensing process that applies to all transmitters differs from one state to another.
The initiative of creating more similar processes of licensing has already been taken by many industries, but the mutual argument shares many similar elements and requirements. A bond is really important when the bond amount differs between states. Except for Montana, other states require money transmitters to file a surety bond.
If you want to know more about the process regarding the money transmitter license application, keep reading this article to get more details and information!
Who needs a Money Transmitter License?
Money transmission differs from state to state, making it difficult for the specifications for a particular business model. Organizations or individuals who transfer money by fax or another installment instrument could be viewed as a money transmitter and that also requires holding a permit as one.
Be that as it may, a few states excluded certain companies from requiring a cash transmitter permit, incorporating certain companies working in the computerized currency space.
What qualifies as a money transmitter?
Any individual who finishes more than $1,000 in traction in the equivalent day may qualify as a cash transmitter if those exchanges fall into the accompanying classes:
- Cash testing
- Cash dealing or exchanging
- Money transmission services
- Traveler’s check
- Money Order
These transactions require a license to transfer money lawfully under companies and organizations. Money transmitters for crypto businesses have been showing a rapid influx these days. Certain steps need to be followed to ensure they are in compliance with state and federal laws.
Register with FinCEN as an MSB
To obtain a license in your respective state, you must be registered with FinCEN. You’ll get approved after completing the entire registration process, and then a number will be issued to you which you’ll have to present in order to apply for a license.
Finish State Licensing needs
You’ll be asked to finish various forms and submit particular documents as part of the licensing process. Completing company form MU1 and individual form MU2 is a must in case you’re applying through the NMLS. The required documents, generally, are but not limited to:
- Financial statements
- Intensive business plan
- Company formation documents
- Authority documents
- AML/BSA policies
- Chart of management and organization
- Set of replies to a set of questions
- Conducting business document sample
- Permissible investment list
- Fingerprints and/or credit reports for persons in positions of control
- Money transmitter surety bond
- Compliance with minimum net worth needs
Fee Payment and Application Submission
Submit your completed application forms and assemble the additional documents you need to your respective licensing authority e.g. NMLS. You’ll also be asked to pay a few fees, such as, application fee, licensing fee, etc, which will change from state to state and is in the range of several hundred and to a thousand dollars. Obtain your money transmitter license by finishing all the steps properly.
Problems Faced by the Money Transmitter Industry
Amongst the 50 states, 49 need money transmitters to obtain a surety bond with a final goal of getting their approved licenses. Requirements for federal registration with FinCEN and state requirements go hand in hand. Moreover, in every state money transmission occurs, money transmitters have to be licensed as well. This effectively shows that it’s really costly to license money transmitters. For instance, if a money transmitter is based in California and at the same time is engaged in money transmission in 35 other states, it’s imperative to be bonded in every one of those 35 states, as well as California.
175,000 U.S Dollars is the initial licensing expense for money transmitters in all 50 states according to the latest research and in some, it even exceeds this number. In addition, renewal costs just crossing 135,000 U.S Dollars add up to the huge cost and thus, a completely inefficient set of rules and policies. So far, FinCEN hasn’t formulated a structured list of requirements for licensing money transmitters, but it’s hoped to be done soon; otherwise, costs and confusion will even pollute the entire process even further.
Who’s qualified for being a money transmitter is another frequently asked question. Regular advancements in technology have pushed the MSB industry to adjust its regulations. In 2014 FinCEN declared that payment processors (leveraging purchases between merchants and consumers) and bitcoin exchanges (linking sellers and buyers) are money transmitters under U.S law. There are only a handful of restrictions to the MSB definition, so this is a headache for some. With the constant evolution of technology, let’s see which businesses are involved in the MSB category and gradually adjust to the seemingly complex license registration.
If you own a business, you will need to be knowledgable of several rules and regulations of money transmission on both a state and a federal level to operate it properly.
This guide will facilitate the entire money transmitter licensing procedure. What it is to be a money transmitter and what the intricate rules are in this process all are here for you.