State money transmitter licensing laws are among the most important statutes in the US that address the safety and integrity of the payments system and provide critical protections to consumers and companies that send or receive payments. Payment companies are required to obtain them by 48 US states to hold or move money on behalf of residents (consumers and businesses) of those states.
Obtaining these licenses requires significant investment and commitment of time, resources and expense. States will not approve all applications for licensure and licenses will be granted only to those companies that can prove they have the management, oversight and controls to carry out money transmitter obligations.
The process is rigorous and some applications will be rejected. The goal of it is to ensure safety, soundness and solvency of the applicant. Information required to be submitted with the application, includes:
- Detailed multi-year business plan
- Audited Financial Statements of the applicant
- Personal financial records of all directors, principal officer, owner or 10% shareholders
- Third party criminal and civil background checks
- Fingerprints of Control Persons
- A robust anti-money laundering (AML) Program and other compliance policies
- List of all lawsuits or criminal complaints against any Control Person in the last fifteen years
In addition to the disclosure requirements, the financial obligations are substantial. Licensed Money Transmitters must carry surety bonds of at least $500,000 in each state and the applicant must also satisfy the states’ minimum capitalization requirements.
Regular audits, reporting and examinations
Once approved, the licensee is required by state regulators to submit a monthly, quarterly and/or annual reports to determine its transaction volume and financial condition. Furthermore, the licensee undergoes rigorous state audits and examinations and yearly license renewals.
It is important to note that while some companies are registered as a Money Services Business (MSB) with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury Department (which only requires an easy online registration), not all MSBs have the required state money transmission licenses described above. It is a federal crime for an MSB to engage in money transmission without first obtaining the state money transmission licenses.
By being heavily regulated and licensed in 48 states (especially in NY and CA) – Payoneer provides its clients with confidence that their funds are fully protected, and guarantees that all payments are made through a fully compliant and safe payment platform that is recognized by financial regulators all around the world.