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How To Apply For A MSB Money Transmitter License

FAS CPA & Consultants

What Is A Money Service Business (MSB)?

A money service business (MSB) is an individual or organization that conducts business as:

⇒ A currency dealer or exchanger.

⇒ A check casher.

⇒ An issuer or seller of traveler’s checks, money orders, or other stored value.

 

When Is A MSB Considered To Be A Money Transmitter?

Any MSB that transmits money inside the US or abroad, on behalf of another person or persons¾if your business is paid to transfer money or monetary value¾ and exceeds $1,000 in transfers on the same day¾ if the transactions fall into the following categories:

⇒ Check Cashing

⇒ Currency Dealing or Exchange

⇒ Money Transfer Services for (any amount).

⇒ Traveler’s Checks

⇒ Money Orders

 

Put Differently

Most enterprises deal with money daily, albeit receiving money in exchange for goods or services or paying for items purchased.  Some enterprises make it their business to facilitate this movement of funds from party to party.  Money transmission operations are highly regulated on both state and federal levels.  Money transmitters need both federal and state licenses. The states even differ in their definition of a money transmitter, making licensing even more onerous.  A common thread is that all companies and individuals who transmit money via wire, fax, electronic transfer, or payment instrument are considered money transmitters and need a license.

 

Exceptions

Some states exempt some businesses from their licensing requirements. This includes companies in the digital currency space, including some Bitcoin Money transmitters.

 

How To Get A State License

 

The licensing process is onerous based on:

⇒ The type of money transmitter you are.

⇒ The number of states where you want to operate.

⇒ State-specific requirements you are required to meet.

 

You will need a license in every single state in which you want to operate

Each state, excluding Montana and South Carolina, has specific requirements you must meet before being licensed. The requirements differ from state to state, although there are some common threads including:

⇒ A certificate of good standing.

⇒ A minimum net worth requirement.

⇒ A statement of net worth.

 

It is one of the essential components of your application.  You have to provide your enterprise’s financial statements, including details about your enterprise’s assets, net worth, business cash flow, and liabilities. Some states require information about your private assets and liabilities. Ensure accuracy and make sure the date is well-organized before you submit it.   Your disclosure must include the same information for every significant shareholder and controlling persons involved in the business, including their assets, liabilities, net worth, and other business interests.

⇒ Application fee.

⇒ Completed background check.

 

The background check must include both your criminal and civil records.  You have to show that you are trustworthy to handle the money transmissions on behalf of your clients.

 

License fee

New money transmitters must pay their full license fee along with their licensing application and bond.  The fees range from a few hundred to several thousand dollars depending on the state’s requirements.

 

Security, typically as a surety bond

A security bond for money transmitters ensures that you are appropriately licensed in every state you do business in and that you will adhere to all the regulations in the money transmitter industry.  Failure to do so might result in a claim against your bond that is paid by your surety agency at the beginning.  You have to repay bond claims in full.

 

To get your money transmitter bond, you have to apply to a surety agency. This will require you to provide the details of your business and submit to a full credit check. A bad credit rating does not disqualify you, but it does increase the cost of the money transmitter bond’s initial cost.

 

Once approved, you have to pay your premium to place the bond.  Your bond information has to be disclosed to your state’s licensing organization (if required) to fulfill your initial licensing requirements. Your application must include your:

⇒ Business address.

⇒ Name of the Owner of the Business.

⇒ Social Security Number.

⇒ Tax Identification Number.

⇒ Detailed business plan.

 

Some states will require a detailed business plan as part of the application for a license.  Include where the business will locate, its purpose, how it will interact with and provide products and services to customers, and how it will be funded.  It will serve as a roadmap for the new enterprise.  Please provide all the required details about the operation and its financial health now and in the future.

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AML (Anti-Money Laundering Program) Compliance Policies

Strict anti-money laundering policies and procedures are prescribed for Money Transmitters.  FinCEN (The Financial Crimes Enforcement Network) requires money transmitters and MSBs to put anti-money laundering programs into place according to these principles:

⇒ The policy must be in writing.

⇒ It must include policies and procedures to assure compliance with AML laws.

⇒ It has to prevent money laundering and the financing of terrorism.

⇒ It must include controls, policies, and procedures to verify customers’ identities.

⇒ It must include reporting capabilities and record retention practices.

⇒ Compliance must be designated to a compliance manager.

⇒ The policies and procedures must be periodically updated to ensure ongoing compliance.

 

License Examination Requirements

New applicants have to pass specific examination and investigation requirements, depending on the state where the application is made.

 

Investigation at Application

The state may require an investigation as soon as the application is received to verify and review the businesses’ financial responsibility, experience in the industry, the applicant’s character, and the enterprise’s potential officers and directors.

 

Annual Departmental Examination

Money Transmitter license holders’ business and business owners may be reinvestigated annually.

 

All of the above must be submitted with your money transmitter license application to the state’s licensing organization.

 

Cost Of A Money Transmitter License

 

Application Fee

⇒ It will vary from state to state. The total cost will vary from a few hundred dollars to a few thousand dollars.

 

Annual License Fee

⇒ Money transmitters have to pay yearly license renewal fees, which are generally less expensive than the initial license fees and range between $50 and $1,000.

 

Investigation Fee

⇒ The cost of the investigation upon application and an examination after receiving a license can be offset to the money transmitter and typically range between $50 and $1,000.

 

Minimum Net Worth

Money transmitter licenses are regulated at the state level, and it varies much.  In Alabama, the net worth requirement is a mere $5,000, while Arizona requires a net worth of $100,000 for the primary location plus an additional $50,000 for every other site. High volume money transmitters will need to add $500,000 in net worth.

 

Security

States require security from money transmitters to protect customers and the state from bad business practices, and this also varies from state to state.  In California, the surety bond must be at least $250,000 while Colorado demands at least $1,000,000 and depending on the licensee’s financial standards, more can be required.

 

Most money transmitters will go for a surety bond than securities on deposit, although not all agencies will deal with money transmitters since it is a risky business.  It is vital to determine the best available bond for your business.

 

Federal Law

MSBs are not only regulated under state law. They also need to comply with federal law, including registration with FinCEN (Financial Crimes Enforcement Network), a department of the US Treasury.  Registration is a fast and straightforward process that can be completed online and renewed every two years, and in rare cases, re-registration is required.

 

A person that is an MSB only because he serves as an agent of another MSB does not have to register.

 

FinCEN Registration

It is the responsibility of the owner or controlling person of the MSB to register with FinCEN.  Registration requires the completion and undersigning of FinCEN Form 107, Registration of Money Service Business, and has to be filed within 180-days after the MSB has been established.  The MSB has to retain a copy of filed FinCEN Form 107 and all supporting documents at a US site for five years.  Civil and criminal penalties can be imposed if the registration requirements are violated.

 

Every MSB must develop and implement AML Compliance plans to prevent individuals from using the MSB for money laundering or terrorist financing.  AML Programs must be written and has to take inherent risks into account.

 

Written AML Compliance Plan

The written document should include:

⇒ The name of the person appointed to ensure daily compliance with the BSA

⇒ Include well-designed policies, procedures, and internal controls to enable compliance with the BSA

⇒ Provide Education and training to relevant personnel

⇒ Provide for independent audits to monitor and maintain appropriate procedures

⇒ Know your customer (KYC): MSBs must verify their customers’ identity for specific activities and transactions in compliance with the Money Laundering Control Act of 1986, including the following:

⇒ Establish and verify the client or account holder’s identity, and in certain instances, the same for the non-account holder (beneficiary).

⇒ Establish the customer relationship and continuously monitor the customer’s business activities’ nature regarding specific risks¾to determine that the customer’s capital source is legal and the business activities meet the requirements.

⇒ Assess risks associated with AML and terrorist financing for this customer.

⇒ Provide for a US MSB Cash report:

⇒ Every cash transaction or series of cash transactions requires submitting a CTR (cash transaction report) within 15-days if:

⇒ Payments and withdrawals exceed $10,000.

⇒ Is performed by the same customer or his agent.

⇒ Is completed on the same trading day

⇒ Multiple transactions must be considered the same if performed by the same customer or its agent on the same date or by one or more branches or agents of the same US MSB and if the total amount withdrawn or paid in cash exceeds $10,000.

⇒ Should provide for a US license suspicious activity report (SAR) to be submitted within 30-days after the suspicious transaction is discovered:

⇒ An MSB must report suspicious activity if the value of the transaction or transaction model exceeds $2,000.

⇒ If the issuer reviews the record of redemption of notes of $5,000 or more.

 

Documents Required For A MSB License Application

⇒ Basic US company information including the company tax number

⇒ Detailed personal information of shareholders and directors of the US company:

⇒ Scanned passport.

⇒ Personal phone numbers.

⇒ Residential address.

⇒ Shareholders’ US SSN.

⇒ Address of US office

⇒ Bank account information:

⇒ Account opened date.

⇒ Account number.

⇒ Bank account branch address.

⇒ Contact details of the compliance officer

⇒ Details of the branches, if any.

⇒ A monthly list of all the transaction totals that exceeded $100,000 for financial services issued by the MSB for the past 12-months.

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Florida

Money transmitter applications must be submitted to the Office of Financial Regulation.

 

Applications should include audited financial statements and detailed information about the enterprise’s owners and shareholders, details of the business’s activities, and a background check.  An investigation is required on application.  The license fee is $350.

 

Applicants must have a minimum net worth of $100,000 and a surety bond of $50,000.

 

A money transmitter license under Part II allows the holder to:

⇒ Transmit currency, monetary value, or payment instruments.

⇒ By wire, facsimile, electronic transfer, courier, and the internet.

⇒ OR through bill payment services or other businesses that facilitate such transfers.

⇒ Within the US or to or from locations outside the US.

 

A licensee under Part II is allowed to engage in the activities authorized under Part III without the imposition of additional licensing fees.

 

Money transmitters must maintain a federal registration as a Money Services Business (MSB) and comply with federal recordkeeping and reporting requirements.

 

Under Chapter 560, Florida Statutes require the submission of notices to the office under Chapter 560.126, and in terms of Rule 69V-560, Florida Administrative Code – Money transmitters., Filings to maintain, amend, and renew the license are completed via Online Services.  The following filings are required:

⇒ Quarterly reports, within 45-days after the end of every calendar year.

⇒ Annual Audited Financial Statements within 120-days after the end of the fiscal year.

⇒ Security Device Calculation Form no later than January 31st of each year.

⇒ Documentation of Increase in Collateral Device when applicable.

⇒ Licensees must maintain net worth even if the audited financial report is submitted by the licensee’s name or parent company.

 

List Of Forms

⇒ OFR-560-01 – Application to Register as a Money Services Business.

⇒ OFR-560-02 – Location Notification Form.

⇒ OFR-560-03 – Declaration of Intent to Engage in Deferred Presentment Transactions.

⇒ OFR-560-04 – Money Services Business Quarterly Report Form.

⇒ OFR-560-05 – Pledge Agreement.

⇒ OFR-560-06 – Money Services Business Surety Bond Form.

⇒ OFR-560-07 – Security Device Calculation Form.

⇒ OFR-560-09 – Disciplinary Guidelines for Money Service Businesses.

 

Application For License As Money Transmitter By State

 

Alabama

Apply To

⇒ Alabama Securities Commission.

Info & Requirements

⇒ Detailed information about the owner, every member of the business, its directors, and applicants must submit to an investigation.

Net Worth & Surety Bond

A net worth of $5,000 and a surety bond of $10,000.

Applications fee

$250

 

Alaska

Apply To

⇒ Alaska Department of Commerce, Community, and Economic Development: Banking and Securities.

Info & Requirements

⇒ Information about the personal and financial details of the owner and shareholders.  Applicants must submit to an investigation on application.

Net Worth & Surety Bond

The minimum net worth is $25,000, and the surety bond is $25,000.

Applications fee

$500

 

Arizona

Apply To

⇒ The Department of Financial Institutions.

Info & Requirements

⇒ Information about the business structure, the owner’s personal and financial background, and its business activities.  An investigation is required.

Net Worth & Surety Bond

Net worth=$100,000 and surety bond=$25,000 depending on number of locations.

Applications fee

$1500

 

Arkansas

Apply To

⇒ Arkansas Securities Department.

Info & Requirements

⇒ Information about business location,  activities, owners, and shareholders  plus an examination of the business.

Net Worth & Surety Bond

Net worth=$250,000 and surety bond=$50,000.

Applications fee

$1500

 

California

Apply To

⇒ California Department of Business Oversight.

Info & Requirements

⇒ Personal and business financial documents, background information for the owner and shareholders, detailed information about the enterprise’s operations, and an examination of the company.

Net Worth & Surety Bond

Net worth=varies depending on the volume of the business, and surety bond=$250,000.

Applications fee

$5000

 

Colorado

Apply To

⇒ Department of Regulatory Agencies.

Info & Requirements

⇒ Name of the applicant and business, criminal and civil background information, a description of the business activities and detailed financial information, and an examination of the business by the state.

Net Worth & Surety Bond

Net worth=$50,000 and a surety bond of $250,000.

Applications fee

$7500

 

Connecticut

Apply To

⇒ Department of Banking Applicants.

Info & Requirements

⇒ Details of the business owners, location and financial information, and a background check plus an investigation upon application.

Net Worth & Surety Bond

Net worth=$500,000 and surety bond=$300,000.

Applications fee

$2500

 

Delaware

Apply To

⇒ State Bank Commissioner.

Info & Requirements

⇒ The name, address, and business incorporation information, detailed information about the business owners, and an investigation upon application.

Net Worth & Surety Bond

Net worth=$100,000 and surety bond=$25,000.

Applications fee

$230

 

District Of Columbia

Apply To

⇒ Department of Insurance, Securities and Banking.

Info & Requirements

⇒ Location of the business, its activities, and personal and financial information about the owners. Also, criminal and civil background details and an investigation upon application.

Net Worth & Surety Bond

Net worth=$100,000 and surety bond=$50,000.

Applications fee

$500

 

Florida

Apply To

⇒ Office of Financial Regulation.

Info & Requirements

⇒ Audited financial statements and detailed information about owners and shareholders and details about the activities of the business. A background check is required as well as an investigation upon application.

Net Worth & Surety Bond

Minimum net worth=$100,000 and surety bond=$50,000.

Applications fee

$375

 

Georgia

Apply To

⇒ Department of Banking and Finance.

Info & Requirements

⇒ The business’s location and activities, financial documentation, and details of the owners and directors. An investigation is required at application.

Net Worth & Surety Bond

No net worth requirement and a surety bond of $50,000.

Applications fee

$2,000 PLUS an investigation fee of $2,250.

 

Hawaii

Apply To

⇒ The Department of Commerce and Consumer Affairs: Financial Institutions.

Info & Requirements

⇒ Details about the enterprise’s owners, location and incorporation, business and personal financials, and background check. Also, an investigation upon application.

Net Worth & Surety Bond

Net worth=$1,000 and a surety bond of $1,000.

Applications fee

$2,000

 

Idaho

Apply To

⇒ The Department of Finance.

Info & Requirements

⇒ Details about the business, its owners, its financials, and the locations where the activities will take place.  An investigation is required upon application.

Net Worth & Surety Bond

Minimum net worth=$50,000 and surety bond=$10,000.

Applications fee

$100

 

Illinois

Apply To

⇒ Illinois Department of Financial and Professional Regulation.

Info & Requirements

⇒ Details of the business, its owner, activities, and financials, and an examination upon application.

Net Worth & Surety Bond

Minimum net worth=$35,000 and a surety bond=$100,000.

Applications fee

$100

 

Indiana

Apply To

⇒ Indiana Department of Financial Institutions.

Info & Requirements

⇒ Details of the owner and director, including a background check, financial information, address, and business location, PLUS an investigation upon application.

Net Worth & Surety Bond

Minimum net worth=$100,000 and surety bond=between $10,000 and $300,000.

Applications fee

$1000

 

Iowa

Apply To

⇒ The Division of Banking.

Info & Requirements

⇒ Details about the business owner, shareholders, directors, a criminal and civil background check, the business’s location, and its activities PLUS an investigation upon application.

Net Worth & Surety Bond

Minimum net worth=$100,000 and surety bond=$50,000.

Applications fee

$1000

 

Kansas

Apply To

⇒ Office of the State Bank Commissioner.

Info & Requirements

⇒ Details about the business and its owner, and an examination by the Commissioner.

Net Worth & Surety Bond

Minimum net worth=$250,000 and a surety bond=$200,000.

Applications fee

Will be determined by the Commissioner.

 

Kentucky

Apply To

⇒ Department of Financial Institutions.

Info & Requirements

⇒ Details about the business and its owners include audited financial statements, background checks, the company’s location, and an investigation upon application.

Net Worth & Surety Bond

Minimum net worth=$500,000 and surety bond=$500,000

Applications fee

$500

 

Readers should note that this article is only intended to convey general information on these issues and that FAS CPA & Consultants (FAS) in no way intends for the contents of this article to be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services.  This article cannot serve as a substitute for such professional services or advice.  Any decision or action that may affect the reader’s business should not rely solely on the contents of this article, but should rather be consulted on with a qualified professional adviser. FAS shall not be responsible for any loss sustained by any person who relies on this presentation.  This article is subject to change at any time and for any reason.

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