Money transmission refers to the process of receiving currency with the intention of sending it to a different party. The movement of funds can impose certain security risks, such as money laundering or financing illegal activities. Due to these risks, money transmission is subject to strict federal and state regulations. Understanding money transmission licensing and how to obtain one is essential to ensuring your company handles your funds according to the law. Bates Group LLC is here to help ensure you uphold industry best practices. We explain what the money transmission process entails and whether your organization needs a money transmitter license.
What Is a Money Transmitter?
A money transmitter is a money services entity or business that transfers money for clients. These entities make up a category under Money Service Businesses, or MSBs. Any company that issues traveler’s checks, money orders and other items of monetary value is considered to be an MSB. A few examples of licensed money transmitters many of us know are payment services Square, Paypal and Venmo.
Understanding Why Money Transmission Laws Are Important
Federal and state laws outline how Money Service Businesses must operate when completing money transmission. The Bank Secrecy Act is a federal law requiring money transmitters to register with FinCEN, or the Financial Crimes Enforcement Network. The BCA enforces licensure to prevent money laundering and other crimes, as well as extreme situations like terrorism.
Each state has its own regulations, and these laws vary significantly, leading to an inconsistent array of guidelines for businesses to follow. Furthermore, money transmission laws are complicated because they aren’t a universal solution regarding regulation.
Does My Business Need a Money Transmission License?
Your business should be familiar with federal and state regulations if you are involved in any kind of money transmission. MSBs may either request an exemption or obtain a money transmission license. The registration process for a federal money transmission license is usually simple. After establishing your business as an MSB, you will register with FinCEN and file a Registration of Money Services Business. You will need to renew your regulation every couple of years and ensure that your services continue to comply with money transmission regulations. Obtaining a state-level license can be more difficult, depending on the regulations specific to your state.
Federal exemptions are applicable to businesses that fall into one of three categories: payment processor, payee agent and authorized delegate exemption. These exemptions each outline which payments or services do not need regulation under FinCEN. It’s important to note that these exemptions aren’t available consistently across states, meaning a national business may need to comply under other state laws as well.
Schedule a Consultation With a Consultant
Bates Group LLC is ready to assist you with compliance, state licensing, and more. If you’re interested in learning more about money transmitter licensing and how to obtain yours, contact us today to set up a consultation with one of our team members.