3 Axioms to be an Agent of a Money Services Business (US)


What are the three key requirements to be an Agent of a Money Services Business that has the necessary Money Transmitter Licenses (in the United States)?

Transcription: 

Hello my name is Faisal Khan. I’m a banking and a payment consultant. And the question today that I’m answering is what makes an agent of a principal license holder.

Well in order to be an agent any and everyone assumes that they can just go into the market and go talk to someone who already has money transmitter licenses and just become their agent. It’s not that easy. Things changed.

Well, there was a company called Precash, it still exists today and they were essentially renting the licenses out, until the state of Texas, you know, came down and you know clamped them down, and shut all those contracts out. And what, happened as a result of that was – three things.

If you want to become an agent of an existing license holder or PLH (principal license holder), you have to have three axioms that you have to follow.

Axiom number one – The client will legally belong to the principal license holder. Of course, obviously I’m using their license I don’t see why the client would legally belong to the principal license holder. I just happened to be an agent. Number two axiom – the flow of funds has to be such that the money has to flow through the principal license holder’s account. Otherwise how do you do accounting for it? Makes sense. Pretty simple. But the third axiom is the one that really makes a difference.

So, what’s the third axiom? The third axiom says you must be in the same business as the principal license holder and this is the differentiator if you will, that the state of Texas, the Department of banking or state of Texas put on Precash, when they were looking at contracts. So, that basically says if the principal license holder is in the business of let’s say Pizzas, you can be in the business of pizza delivery, pizza making, pizza topping, pizza Spice’s, boxes etc. that basically says you’re in the same vertical, but if the principle license holder is doing pizzas and you’re selling stereos – that’s a mismatch. That clearly indicates that the license is being rented out. So you have to be in the same vertical, the niche that they were operating in, as the principal license holder. Else, it would be very difficult to get a regulatory approval from state for an agent.

I hope that answers the question if you have any more ask them in the comments below and I’ll be happy to answer. Till next time, signing off.