License Sponsorship
License sponsorship is an arrangement under which one business conducts regulated activity using a license held by another, instead of obtaining its own. In US money transmission it is normally implemented by appointing the sponsored business as an authorized delegate.
Also called: sponsorship · sheltering · licence leasing
License sponsorship lets a business start moving money before it holds licenses of its own. The sponsored firm is appointed an authorized delegate of a licensed principal MSB, and the states recognize that appointment on the principal’s license rather than issuing anything new. It is not a term of art in any statute, and nothing changes hands: a money transmission license cannot be transferred or assigned.
What is bought is time. What is given up is control. The principal approves the business, supervises its compliance, and usually holds or directs the funds, because the principal is the party the regulator will call — it has to keep written policies designed to make its delegates comply, background-check and contract with each one, and report them. Sponsorship agreements therefore carry approval rights over customers and products, audit and monitoring rights, reserve or indemnity terms, and termination clauses that can stop the business trading at short notice.
What sponsorship does not do is move the sponsored firm’s own obligations onto the sponsor. A delegate must operate in full compliance with the money transmission law in its own right and run its own anti-money-laundering program. Activity outside the scope of the appointment, or never disclosed to the regulator, is unlicensed money transmission, and the sponsored firm answers for it to the same extent as a licensee would.
The arrangement suits a firm testing a market, or one building its own license portfolio and needing to operate while applications run. It suits far less a firm that intends to rely on it permanently.
In practice
It is commonly described as leasing a license, but nothing is leased: a money transmission license cannot be transferred or assigned, and what the sponsored firm gets is an appointment as the licensee’s authorized delegate, good only for what the written contract covers and ending the moment the licensee’s own license does. The sponsor keeps real regulatory duties for the arrangement, which is why it controls the relationship. The sponsored firm keeps its own: it must comply with the money transmission law itself and run its own AML program, and acting outside the scope of the appointment is unlicensed money transmission.
Commonly confused with
| Term | How it differs |
|---|---|
| Authorized Delegate | Authorized delegate is the formal, regulator-recognized appointment; license sponsorship is the commercial description of the deal that sits behind it. |
| White Label | White labeling concerns whose brand the customer sees; sponsorship concerns whose license the activity is legally conducted under. |
See also
- Authorized DelegateA company authorized to conduct money transmission on behalf of a licensed principal, operating under that principal’s money transmitter license rather than holding one of its own. Most US states call this an authorized delegate; some call it an agent.
- Principal MSBA principal MSB is the licensed entity whose authority an authorized delegate operates under. The principal remains answerable to regulators for the delegate’s transactions, AML program and reporting, and for keeping the delegate inside the scope it was appointed to work in.
- Money Transmitter LicenseA money transmitter license is permission granted by a US state for a company to receive money from the public in that state and pay it, or its value, to someone else. Each state licenses separately.
- Money Services BusinessA money services business is a category in US federal law under the Bank Secrecy Act, covering seven capacities: dealer in foreign exchange, check casher, issuer or seller of money orders or traveler’s checks, provider of prepaid access, seller of prepaid access, money transmitter, and the US Postal Service.