Money Transmitter License Requirements
The money transmitter license requirements vary from State to State (a list of all the US State Financial Regulators can be found here).
The license application itself is not that difficult to pursue. Many applicants file for a money transmitter license for a single state using an attorney / law firm, and for the remainder of the applications, they file it themselves.
Once you have familiarized yourself with the money transmitter license requirements, you will observe that they are pretty much the same all across other States with a few differences here and there.
The most important aspect of getting a firm grasp on the money transmitter license requirements, is understanding the taxonomy and nomenclature used in the industry and by the financial regulators.
This is what a typical money transmitter license application would consist of (example taken from Department of Financial Service, New York).
Here is another example from the State of Colorado, Department of Regulatory Affairs, Money Transmitter License Application.
Most applications comes with instructions on how to go about filling them out. Most sections within the application are self explanatory, however, be cognizant, this is a legal document, so think ten times before committing it on paper. Under no circumstances should you lie &/or give false &/or incorrect information. You will be presenting this application under oath.
When in doubt! – Have it checked out!
Essential elements in the application, other than financial and background information are:
- Business Plan
- Compliance Program
- Flow of Funds
- Projected Income
Background checks, financial statements, etc. are all qualifying elements.
Just to discuss very briefly on the above mentioned items:
The business plan is essentially what you are being provided the money transmitter license for. So say your business wants to be a stored-value (e-money) wallet provider, your business plan would be reflecting that, and the assumption and grant of a money transmitter license by the State would be made on the basis of the information and business functions contained in your money transmitter application, specifically the business plan.
This is extremely critical. Every state examiner will sift through your compliance program with a fine tooth-comb. A robust compliance program not only addresses areas like Anti-Money Laundering (AML) / Combating the Financing of Terrorism (CTF), but also areas like data retention, the ability to pull non-repudiated reports, elementary (read; granular) details on each transaction. A secure, robust and scalable Transaction Monitoring System (TMS), real-time and batch mode filters & flags. The ability to define complex mechanisms for monitoring and control recommendations local to your geography, country and worldwide recommendations like Financial Action Task Force (on Money Laundering) (FATF), also known by its French name, Groupe d’action financière (GAFI). Compliance program also looks into data retention, rotation, preservation, forensics, control, access, etc. If further extends to human resources and how employees, customers and partners are screened, trained, revised, reported, etc.
Flow of Funds
The state examiner’s office will pay special attention to how the flows of funds for your particular products &/or services play out. In the information gathering stage of money transmitter license requirements, many applicants pay little or no heed to the flow of funds. Don’t let this happen to you. An Entity/Time-Motion flow of funds is the best way of not only understanding your business but also being able to see graphically (and very quickly) how money moves and traverses over the various entities (hopefully BSA entities) and other organizations.
Though the bulk of your documentation that you have amassed for money transmitter license requirements will be describing in detail your company, its employees, the financials, the background checks, the compliance programs, etc. it does all come down to money! How much money you will make, who your customers will be, what is your pricing mechanism, etc.
Though you may believe very strongly about your projected income, the state examiner will have a very strong say in how realistic, optimistic or full-of-holes your projected income plan is. Also based on this, the assignments for surety bonding, tax calculations, net worth, etc. would also be examined.
Play it safe, don’t go overboard or undersell yourself. Be realistic.
A strong suggestion is to spend lots of time organizing yourself when collecting the money transmitter license requirements. Remember the 5 P’s: Prior Planning Prevents Poor Performance!
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