How to Start a Money Transfer Agency

How to Start a Money Transfer Agency

Money transfer agencies allow you to accept money from a client and transfer it to an institution or individual somewhere else in the world. They make money by accepting a fee or portion of the transferred amount as payment for the service. Money transfer agencies range from massive companies like Western Union and Ria Financial Services to storefront businesses. If you want to know how to start a money transfer agency, here are the steps you need to follow.

The Steps for Starting a Money Transfer Agency

First, you must meet your state’s minimum requirements for starting a money transfer agency. Surety bonds, background checks, and a minimum net worth are among the common requirements. You must receive a money transfer license and pay all related application fees.

Locate, fill out and submit a “Registration of Money Services” application to the Department of Treasury. The form, FinCEN Form 107, should be sent to the Financial Crimes Enforcement Network. This form must be filed within six months of establishing the business.

You need to know the rules and restrictions associated with money transfers. For example, the United States prohibits financial transfers to several nations, and the Consumer Financial Protection Bureau has strict guidelines on the disclosure of wire transfer fees. Per the CFPB’s latest rules, consumers have the right to cancel the transaction within thirty minutes. The Consumer Financial Protection Bureau also sets restrictions on the fees money transfer agencies in the U.S. can charge, though states may have additional rules. Once all of the applications are approved and licenses awarded, you are legally allowed to open your storefront business or turn on your money transfer website.

How to Earn Even More from a Money Transfer Business

Consider how you could make additional money providing services to your clients, since the high fees that sustained many money transfer agencies have been curtailed by law, and money transfer companies face competition from services like PayPal and banking apps. One common practice is selling phone cards supporting international calls in the money transfer office, while others sell prepaid debit cards that allow the “unbanked” to pay for items without relying on cash.

Money transfer websites may host ads for international travel or other services preferred by expats and immigrants sending money back home.

Many money transfer agencies provide check cashing services as another way to make money, though that requires a whole other set of financial approvals and authorizations. If you maintain a money transfer website, your site’s information security is paramount. If you run a money transfer agency and accept cash, physical security and appropriate insurance are necessary.

You should also compile a list of organizations that will be ineligible for receiving funds through your service. Many non-profit organizations use money transfer services to accept donations. You might decide to not accept these types of transfers altogether or decide to block non-profit organizations you feel are unethical or not in good standing with the government. A quick search on a site like Tax Exempt World will give you all the background information you need on a particular organization.

If you are going to start a money transfer agency, you need to meet your jurisdiction’s minimum requirements like criminal background checks, financial reserves, and bonds. You have to fill out forms with the U.S. federal government and open a merchant bank account. Understand the rules and the fees you’re allowed to charge. Keep detailed records of every transaction. Security of financial information and financial transfers is paramount. It is not necessary to use foreign exchange contracts to run a money transfer business unless you’re dealing with very large amounts of money in currencies changing their valuation significantly over time.



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