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~~May 31,~~OCTOBER~~October 5~~, 1999

UNIFORM MONEY-SERVICES BUSINESS ACT

WITH REPORTER'S NOTES

NATIONAL CONFERENCE OF COMMISSIONERS

ON UNIFORM STATE LAWS

DRAFTING COMMITTEE ON UNIFORM MONEY SERVICES BUSINESS ACT⁽¹⁾

^{TOM BOLT, Corporate Place, Royal Dane
Mall, St. Thomas, VI 00802-6410,
Chair}

^{DAVID A. GIBSON, P.O.
Box 1767, 10 Park Place, Brattleboro, VT 05302}

^{MICHAEL HOUGHTON, P.O. Box 1347,
18th Floor, 1201 N. Market Street, Wilmington, DE
19899}

^{L. GENE LEMON, 1136 W. Butler Drive,
Phoenix, AZ
85021-4428}

^{SANDRA S. STERN, 509 Madison Avenue,
Suite 612, New York, NY
10022}

^{KEN H. TAKAYAMA, Legislative
Reference Bureau, State Capitol, Room 446, Honolulu, HI
96813}

^{ANITA RAMASASTRY, University of
Washington, School of Law, Condon Hall, 1100 N.E. Campus Parkway, Seattle, WA
98105-6627,
Reporter}

^EX
OFFICIO

^{JOHN L. McCLAUGHERTY, P.O. Box
553, Charleston, WV 25322,
President}

^{JOHN P. BURTON, P.O. Box 1357, Suite
101, 123 E. Marcy Street, Santa Fe, NM 87501, Division
Chair}

^{AMERICAN BAR ASSOCIATION
ADVISOR}

^{DAVID S. WILLENZIK, 643 Magazine Street, New Orleans, LA
70130, Advisor}

^{MARIETTA M. MAXFIELD, 1980 Post Oak Boulevard, Suite
748, Houston, TX 77056-3817}

^{EXECUTIVE
DIRECTOR}

^{FRED H. MILLER, University of Oklahoma, College of Law,
300 Timberdell Road, Norman, OK 73019, Executive Director}

^{WILLIAM J. PIERCE, 1505 Roxbury Road, Ann Arbor, MI
48104, Executive Director, Emeritus}

^{Copies of this Draft Act may be obtained
from:}

^{NATIONAL CONFERENCE OF
COMMISSIONERS}

^{ON UNIFORM STATE
LAWS}

^{211 East Ontario, Suite
1300}

^{Chicago, Illinois
60611}

^{(312)
915-0195}

^{http://www.law.upenn.edu/library/ul
c/ulc.htm}

^{DRAFTING COMMITTEE ON
UNIFORM MONEY-SERVICES BUSINESS ACT(2)}

^{TOM BOLT, Corporate Place, Royal Dane Mall, St.
Thomas, VI 00802, Chair}

^{DAVID A.
GIBSON, P.O. Box 1767, 10 Park Place, Brattleboro, VT
05302}

^{MICHAEL HOUGHTON, P.O. Box 1347, 18th Floor,
1201 N. Market Street, Wilmington, DE 19899}

^{L. GENE LEMON, 1840 N. Central Avenue, Suite
2311, Phoenix, AZ 85077}

^{SANDRA S. STERN, 509 Madison Avenue, Suite
612, New York, NY 10022}

^{KEN H. TAKAYAMA, Legislative Reference
Bureau, State Capitol, Honolulu, HI 96813}

^{**ANITA RAMASASTRY, University of
Washington, School of Law, 1100 N.E. Campus Parkway, Seattle, WA
98105}

~~^**Reporter~~
^EX
OFFICIO

^{GENE N. LeBRUN, P.O. Box 8250, 9th Floor, 909
Joseph Street, Rapid City, SD 57709, President, National
Conference}

^{SCOTT N. HEIDEPRIEM, 431 N. Phillips Avenue,
Suite 400, Sioux Falls, SD 57104, Division Chair}

^{AMERICAN BAR
ASSOCIATION ADVISOR}

^{DAVID S. WILLENZIK, 643 Magazine Street, New
Orleans, LA 70130, Advisor}

^{EXECUTIVE
DIRECTOR}

^{FRED H. MILLER, University of Oklahoma, College
of Law, 300 Timberdell Road, Norman, OK 73019, Executive
Director}

^{WILLIAM J. PIERCE, 1505 Roxbury Road, Ann
Arbor, MI 48104, Executive Director, Emeritus}

^{Copies of this Draft Act may be
obtained from:}

^{NATIONAL CONFERENCE
OF COMMISSIONERS}

^{ON UNIFORM STATE
LAWS}

^{211 East Ontario, Suite
1300}

^{Chicago, Illinois
60611}

^{(312)
915-0195}

^{http://www.law.upenn.edu/library/ul
c/ulc.htm}

^{UNIFORM
MONEY-SERVICES BUSINESS ACT}

^{TABLE OF
CONTENTS}

^ARTICLE
1

^{GENERAL
PROVISIONS}

^{SECTION 101. SHORT TITLE.
1}

^{SECTION 102. DEFINITIONS.
1}

^{SECTION 103. SUPERVISORY POWERS OF
[SUPERINTENDENT]. 8}

^{SECTION 104. EXCLUSIONS.
9}

^{SECTION 105. LICENSE REQUIRED.
11}

^ARTICLE
2

^{LICENSING OF MONEY
TRANSMITTERS}

^{SECTION 201. LICENSE REQUIRED.
12}

^{SECTION 202. APPLICATION FOR LICENSE.
12}

^{SECTION 202.
SECURITY.}

^{SECTION 203. SECURITY.
17}

^{SECTION 204. ISSUANCE OF LICENSE.
19}

^{SECTION 204.205. RENEWAL OF LICENSE.
20}

^{SECTION 205.
FEES.}

^{SECTION 206. NET WORTH.FEES.
22}

^{SECTION 207. NET WORTH.
23}

^{SECTION 208. PAYMENT INSTRUMENT
IDENTIFICATION. 23}

^ARTICLE
3

^{LICENSING OF CHECK
CASHERS}

^{SECTION 301. LICENSE REQUIRED.
23}

^{SECTION 302. APPLICATION FOR LICENSE.
24}

^{SECTION 302.303. ISSUANCE OF LICENSE.
25}

^{SECTION 303.304. RENEWAL OF LICENSE.
26}

^{SECTION 304.305. FEES
27.}

^ARTICLE
4

^{LICENSING OF CURRENCY
EXCHANGERS}

^{SECTION 401. LICENSE REQUIRED.
28}

^{SECTION 402. APPLICATION FOR LICENSE.
29}

^{SECTION 402.403. ISSUANCE OF LICENSE.
30}

^{SECTION 403.404. RENEWAL OF LICENSE.
31}

^{SECTION 404.405. FEES.
32}

^ARTICLE
5

^{AUTHORIZED
DELEGATES}

^{SECTION 501. RELATIONSHIP BETWEEN
LICENSEES AND AUTHORIZED DELEGATES.
32}

^{SECTION 502. SCOPE OF AUTHORIZED
DELEGATE'S ACTIVITY. 33}

^{SECTION 503. UNAUTHORIZED ACTIVITIES.
34}

^ARTICLE
6

^{EXAMINATIONS; REPORTS
AND OTHER RECORDS}

^{SECTION 601. AUTHORITY TO CONDUCT
EXAMINATIONS. 34}

^{SECTION 602. JOINT EXAMINATIONS.
35}

^{SECTION 603. REPORTS.
36}

^{SECTION 604. CHANGE OF CONTROL.
37}

^{SECTION 605. BOOKS, ACCOUNTS,
DOCUMENTS, AND OTHER RECORDS. 39}

^{SECTION 606. MONEY LAUNDERING REPORTS.
41}

^{SECTION 607. ELECTRONIC FILING OF
RECORDS. 42}

^{SECTION 608. CONFIDENTIALITY OF
RECORDS. 42}

^ARTICLE
7

^{PERMISSIBLE
INVESTMENTS}

^{SECTION 701. MAINTENANCE OF
PERMISSIBLE INVESTMENTS. 45}

^{SECTION 702. TYPES OF PERMISSIBLE
INVESTMENTS. 45}

^ARTICLE
8

~~^ENFORCEMENT~~

^{SECTION 801. ORDERS TO CEASE AND DESIST;
POWERS OF SUSPENSION AND REVOCATION.
49}

^{SECTION 802. AUTHORIZED DELEGATES;
ORDERS TO CEASE AND DESIST. 51}

^{SECTION 803. TEMPORARY ORDERS TO CEASE
AND DESIST. 52}

^{SECTION 804. CONSENT ORDERS.
53}

^{SECTION 805. CIVIL PENALTIES.
53}

^{SECTION 806. CRIMINAL PENALTIES.
54}

^ARTICLE
9

^{ADMINISTRATIVE
PROCEDURES}

^{SECTION 901. ADMINISTRATIVE
PROCEDURES. 55}

^{SECTION 902. HEARINGS.
56}

^ARTICLE
10

^{MISCELLANEOUS
PROVISIONS}

^{SECTION 1001. APPOINTMENT OF
[SUPERINTENDENT] AS AGENT FOR SERVICE OF PROCESS.
56}

^{SECTION 1002. UNIFORMITY OF APPLICATION
AND CONSTRUCTION. 57}

^{SECTION 1003. SEVERABILITY CLAUSE.
57}

^{SECTION 1004. EFFECTIVE DATE.
57}

^{SECTION 1005. SAVINGS AND TRANSITIONAL
PROVISIONS. 57}

^ARTICLE
1

^{GENERAL
PROVISIONS}

^{SECTION 101. SHORT TITLE. This [Act] may be
cited as the Uniform Money-Services Business
Act.}

^{SECTION 102. DEFINITIONS. In this
[Act]:}

^{(1) "Applicant" means a person filing an application
for a license under this [Act].}

^{(2) "Authorized delegate" means a person designated
by a licensee to engage in a money-services business on behalf of the
licensee.}

^{(3) "Bank" means an
institution organized under federal or state law that accepts demand deposits or checking
accounts and is also engaged in the business of making commercial
loans.}^

^{(3) "Check casher"(4) "Check casher" means a person
that engages in the business of check cashing and receives at least $500 compensation for check
cashing during any 30-day period.}

^{(4)(5) "Check cashing" means accepting a payment
instrument in exchange for money delivered to a presenter at the time and place of the
presentation.}

~~^{(5)(6) "Control" means:}~~

^{(A) ownership, control of, or the power to vote,
directly or indirectly, at least 25 percentor more of a class of voting securities or voting interests
of a licensee or controlling person;}

^{(B) controlling the election of a majority of directors,
managers, trustees, or other persons exercising managerial authority of a licensee or controlling
person; or}

^{(C) direct or indirect exercise of a controlling
influence over a licensee or controlling person, if the [superintendent], after notice and
opportunity for hearing, so determines.}

^{(6)(7) "Controlling person" means a person having
control.}

^{(7)(8) "Currency" means the coin and paper money of
the United States, or of a foreign government, which is designated as legal tender and
whichtender, circulates and is customarily used and accepted as a medium of exchange in the
country. The term includes coin and paper
money or a monetary unit of account established by an intergovernmental organization or by
agreement between two or more governments which is customarily used and accepted as a
medium of exchange in more than one country.}

^{(8)(9) "Currency
exchange" means exchanging money of one government for money of another
government.}~~~~

^{(9)(10) "Engage in the business" means to engage for
compensation more than 10 times in any calendar year in activities regulated under this
[Act].}

^{(10)(11) "Executive officer" means a licensee's
president, chairman of the executive committee, chief financial officer, responsible individual, or
other individual that performs similar functions.}

^{(11)(12) "Financial institution" means a bank, credit
union, savings and loan association, or other similar
institution.}

^{(12)(13) "Key shareholder" means a person or group
of persons, acting in concert, that owns at least 25 percentor more of a voting class of the
securities or of the voting interest of an applicant or
licensee.}

^{(13)(14) "Licensee" means a person licensed under
this [Act].}

^{(14)(15) "Limited station" means a private premises
where a check casher is authorized to engage in the business of check cashing solely for the
employees of the particular employer or group of employers specified in its license application,
for no more than two days of each week.}

^{(15)(16) "Material litigation" means litigation that,
according to generally accepted accounting principles, is considered significant to an applicant's
or licensee's financial condition.}

^{(16)(17) "Mobile location" means a vehicle or a
movable facility where check cashing occurs.}

^{(17)(18) "Money" means a medium of exchange that
is authorized or adopted by a domestic or foreign government. The term includes a monetary unit
of account established by an intergovernmental organization or by agreement between two or
more governments.}

^{(18)(19) "Money-services business" means a person
thatis licensed under this [Act] or engages in the business of money transmission, check cashing,
or currency exchange.}

^{(19)(20) "Money transmission" means the sale or
issuance of a payment instrument, or engaging in the business of receiving money for
transmission, or the business of transmitting money within the United States or to locations
outside the United States, by any means including
transmission by payment instrument, wire, facsimile, and electronic
transfer.}

^{(20)(21) "Outstanding," with respect to a payment
instrument, means a payment instrument issued by a licensee, which has been sold directly by the
licensee; issued by a licensee, which has been sold by an authorized delegate of the licensee; or
which has been reported to a licensee
as having been sold but not yet paid by or for the
licensee.}

^{(21)(22) "Payment instrument" means a check, draft,
money order, traveler's check in record form, stored-value instrument, or other instrument for the
transmission or payment of money, and in record form, whether or not negotiable, and in record
form. The term does not include
a credit card voucher, letter of credit, or instrument that is redeemable by the issuer in goods or
services.}

^{(22)(23) "Person" means an individual, corporation,
business trust, estate, trust, partnership, limited liability company, association, joint venture, or
any other legal or commercial entity. The term does not include a government, governmental
subdivision, agency, or instrumentality,
or public corporation.}

^{(23)(24) "Record" means information that is inscribed
on a tangible medium or that is stored in an electronic or other medium and is retrievable in
perceivable form.}

^{(24)(25) "Remit" means to make direct payment of
moneys to a licensee or its representative authorized to receive the moneys or to deposit moneys
in a financial institution in an account specified by the
licensee.}

^{(25)(26) "Responsible individual" means an individual
who is employed by a licensee and has principal active managerial authority over the
money-services business of the licensee in this
State.}

^{(26)(27) "State" means a State of the United States,
the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular
possession subject to the jurisdiction of the United
States.}

^{(27)(28) "Stored-value instrument" means a card or
other tangible object for the transmission or payment of money or other value which contains a
microprocessor chip, magnetic stripe, or other means for the storage of information, which is
prefunded, and for which the value is
generally decreased uponwith each use. The term does not include a card or other tangible object
that is redeemable by the issuer in the issuer's goods andor
services.}

^{(28)(29) "[Superintendent]" means the [state
superintendent of banks or other senior state regulator charged with the regulation of
money-services businesses].}

^{(29)(30) "Traveler's check" means an instrument
identified as a traveler's check on its face or commonly recognized as a traveler's check and
issued in a specified denomination of currency with a provision for a specimen signature of the
purchaser to be completed at the time of
purchase and a countersignature of the purchaser to be completed at the time of
negotiation.}

^{(30)(31) "Unsafe or unsound practice" means a
practice or conduct that is contrary to generally accepted standards applicable to a money
transmitter, or that is a violation of an order of the [superintendent] against a money transmitter if
the practice, conduct, or violation creates
the likelihood of material loss, insolvency, or dissipation of assets of the money-services
business, or otherwise materially prejudices the interests of its
customers.}

^{Sources: Definitions in this Act have been mainly
derived from the Model Act Regulating Money Transmitters, the President's Commission Act,
the Arizona Code, and the Florida Money Transmitter's Code. Several definitions are
new.}

~~^{Notes to Tthis Draft:}~~

^{1. A new definition of bank has been added to clarify
the use of this term throughout the draft. The definition of bank provides a clearer comparison of
the money services businesses which are non-bank entities that do not accept deposits or make
commercial loans. The source of
this definition is a modified definition contained in section 2 (c) of the Federal Bank Holding
Company Act. 12 U.S.C. 1841(c)}

^{2. It is still an open question as to whether the
definition of "money transmission" contained in subsection (20) includes new internet or on-line
payment mechanisms that are operated by non-bank entities including the use or transmission of
electronic currency or on-line "scrip".
For example, an issuer might offer consumers the opportunity to buy internet scrip . A consumer
would buy this scrip from thean issuer and this notational value would be stored on the hard
drive of a computer and transferred to merchants for purchases over the internet. The
merchant would redeem the internet scrip or exchange it for value by redeeming it at the bank or
the nonbank which is the issuer. Some commentators have noted that the transfer of value or
funds over the internet is akin to money transmission. This issue needs to be more clearly
considered by the committee. To the extent that internet scrip or on-line currency providers are
covered by this Act, the Committee will need to consider the consequences of requiring an entity
which may have a virtual (as opposed to physical) presence in many jurisdictions to
obtain a license.}

^{In a 1996 report on emerging electronic methods for
retail payments, the United States Congressional Budget Office noted
that:}

^{[T]he supervision and regulations covering
depository institutions safeguard the safety and soundness of those institutions. Lacking those
safeguards, an electronic payment method issued by an unregulated institution is more likely to
fail. Such a failure could undermine consumers'
confidence in other issuers. Thus, the best interest of the payment system may be served by
having safeguards in place to protect it from consequences of the failure of individual
institutions}

~~^See~~^{Emerging
Electronic Methods for Making Retail Payments, Congressional Budget Office (June 1996), at
42).}

^{Reporter's
Notes}^

^{1. "Authorized
delegate." The ability of a state superintendent to regulate the conduct of authorized delegates is
of vital importance to the prevention and detection of money laundering. It is
important, therefore, to clearly define the outlets through which a money-services business,
primarily a money transmitter, conducts its business. The term "authorized delegate" was
selected rather
than "agent" to avoid confusion as to the nature of the legal relationship between a money
transmitter and the sales outlets through which it transacts business. Sales outlets provide money
transmission on behalf of a money transmitter on a contractual basis. Although the delegates are
not defined as "agents" of a money transmitter, there are circumstances under which the
superintendent
may take enforcement action against a licensed money transmitter on the basis of actions of its
delegates. The Act does impose some statutory obligations on the licensee with respect to the
conduct of
its delegates. Additionally, the superintendent has the authority to take action directly against the
delegate as well. See Section
801.}

^{2. "Check cashing."casher." The definition of check
cashingcasher excludes businesses that may offer a small amount of check cashing services
incidental to their primary business. Hotels, for example, which cash checks as a courtesy for
their guests, fall into the excluded category.
This definition was agreed upon at the October 1998 drafting meeting. The main difference in the
new definition (as compared with many existing state definitions) is the method used to
determine which businesses should be excluded because they cash checks as a service that is
incidental to their primary business and which is also at a de minimis level. The exemption
reflects an aggregate level of fees over a 30-day period, rather than relying on a daily level of
business.}

^{3. "Control." The
definition of control is derived from the definition contained in the Federal Bank Holding
Company Act, 12 U.S.C. Section 1842(a)(2). It was decided that the definition of control
included in the September 1998 draft was too formalistic in that it required a bright line threshold
of 25 percent or more ownership to trigger control. The Drafting Committee decided that the
Federal
Bank Holding Company Act provided a useful definition that did not relate solely to a threshold
of share ownership. The current definition is more flexible and allows for a broader interpretation
of
the concept of
control.}

^{4. "Engage in the business." Because the Act is
intended to apply only to those entities engaged in the money-services business as a commercial
enterprise, the current definition was added. The definition of engage in the business is a
modified version of the definition of "conduct the
business" included in the President's Commission on Model State Drug Laws, Model Money
Transmitter Licensing and Regulation Act ("President's Commission Act") Section 4(c); and the
President's Commission on Model State Drug Laws, Model Financial Transaction Reporting
Act Section 4(d). The commentary to the President's Commission Act states that "'[c]onduct the
business' derives its meaning from federal tax law relating to deductions available to persons in
the business of various profit-seeking pursuits. Its application to federal gambling law, 18
U.S.C. 1955, provides useful case law examples."}

^{5. "Limited station." This definition refers to sites
where check-cashing services are solely offered to employees of one or several employers.
Specifically, employers have arranged with a check casher to provide check cashing in
connection with payroll checks. It was necessary to
define this type of location because check casher licensees are required to list all of their
locations (including limited stations) on their license application and their renewal
reports.}

^{6. "Mobile location." Mobile locations are movable
locations (normally motor vehicles such as vans) from which check cashing or
currency-exchange services are provided to members of the public. This term is defined because
check casher and currency exchanger licensees are
required to report these locations on their license applications and subsequent renewal
reports.}

^{7. "Money-services business." As explained in the
Prefatory Note, money-services business is used to define a group of entities that engage in any
of the following activities: money transmission, sale of payment instruments (i.e., money orders
or traveler's checks or stored-value
instruments), check cashing and currency exchange. The definition focuses on the activities
engaged in rather than the entity that engages in the activities. The Drafting Committee decided
to use an activity-based definition because different money-services businesses may engage in
one or more of these money-services business
activities.}

^{8. "Money transmission." Money transmission
subsumes several activities or functions: the transmission of funds as well as the sale or issuance
of payment instruments and the sale or issuance of stored-value instruments. Stored-value
instruments, as defined in the Act, are treated as
payment instruments. The grouping of funds transmission and the sale or issuance of payment
instruments is consistent with existing state practice. The Drafting Committee has consolidated
related functions to simplify the Act.}

^{9. "Payment instrument." At the October 1998
meeting, the Drafting Committee affirmed its decision to include stored-value products and
stored-value providers within the scope of the Act. Drafting Committee members determined that
the use of stored value as a means of
payment was similar to money transmission as a process. Therefore, to the extent possible, the
Drafting Committee included stored value within existing definitions of money-services
businesses. The Act follows the Connecticut approach and treats stored-value instruments
(including
electronic traveler's checks) as payment
instruments.}

^{10. "Stored-value instrument." At the October 1998
drafting meeting, the Committee decided that stored-value providers should be required to obtain
licenses under the Act. At present, stored-value instruments are encompassed within the
definition of payment instruments. In 1998,
Connecticut enacted the Act Concerning Electronic Payment Instruments and Currency and
Foreign Transactions Reporting. The Connecticut statute amended existing money-transmission
law so those stored-value products (referred to as "electronic payment instruments") are
treated as payment instruments. Furthermore, issuers of such payment instruments are subject to
licensing and regulation in Connecticut. See CT. Legis. 98-192, cited in 1998 Conn. Legis. Serv.
P.A. 98-192 (S.S.B. 230) (West 1998). The Committee will continue to review the
definition of "stored value" in the Act. For example, there have been suggestions that such a
payment substitute should not be defined in relation to an instrument but more broadly in terms
of the actual concept of its "value."}

^{11. "Unsafe or unsound practice." Under the Act, the
superintendent possesses the authority to take action against a money transmitter or its authorized
delegates in the event that the money transmitter engages in an unsafe or unsound practice. The
term unsafe and unsound is a
general concept that has been used in state and federal banking and financial law. Unsafe and
unsound practices are ones that may pose financial risk to a financial institution. The Act
provides a definition of unsafe and unsound that applies solely to money transmitters. Money
transmitters who engage in unsafe or unsound activity may leave consumers with unredeemed
money orders or uncollected funds transfers. The superintendent is able to take protective action
in the event than a money transmitter engages in an unsafe or unsound activity. This
prevents the dissipation of licensee assets that should be used to fulfill obligations to
customers.}

^{The Drafting Committee determined that unsafe and
unsound practices related solely to the risk of financial loss posed by the actions of the money
transmitter. Currency exchangers and check cashers do not engage in an unsafe or unsound
practice with respect to their check cashing
or currency exchange activity because they provide their customers with funds immediately. To
the extent that a check casher or currency exchanger dissipates its assets or becomes insolvent, it
will typically have to cease business. However, this will not directly harm consumers, as
they will not be left with unpaid obligations. Furthermore, if a check casher or currency
exchanger engages in an unsafe activity with respect to money transmission this will not have
any direct impact on or harm to individual consumers. This is because the check casher may only
conduct money transmission as an authorized delegate. The money transmitter will remain liable
to the holders of its money orders, even if an authorized delegate sells them. Because the money
transmitter bears ultimate financial responsibility to customers, check cashers and
currency exchangers are not considered to engage in unsafe or unsound
practices.}

^{SECTION 103. SUPERVISORY POWERS OF
[SUPERINTENDENT]. Consistent with this [Act] the [superintendent] shall adopt rules pursuant
to the [administrative procedure act] necessary to achieve the purposes of this
[Act].}

^Source:
New

^{Reporter's
Note}

^{The State
Superintendent for Banking or Banking Commissioner is usually the state regulator that
supervises and regulates money-services
businesses.}

^{SECTION 104. EXCLUSIONS. This [Act]
does not apply
to:}

^{(1) the United States or a department, agency,
or instrumentality
thereof;}

^{(2) the United States Postal
Service;}

^{(3) a State or a governmental subdivision,
agency, or instrumentality
thereof;}

^{(4) a bank, bank holding company, thrift
company, credit union, building and loan association, savings and loan association, savings bank,
mutual bank, an office of an international banking corporation, a branch of a foreign bank, a
corporation organized pursuant to the Bank Services Act,
or an Edge Acta corporation Agreement Corporation organizedorganized pursuant to the Edge
Act under the laws of a State or the United States if the person does not issue, sell, or provide
payment instruments through an authorized delegate that is not such a
person;}

^{(5) electronic funds transfer of governmental
benefits for a federal, state, [county], or governmental agency by a contractor on behalf of the
United States or a department, agency, or instrumentality thereof, or a State or governmental
subdivision, agency, or instrumentality
thereof;}

^{(6) a board of trade designated as a contract
market under the Commodity Exchange Act or a person that provides in the ordinary course of
business clearance and settlement services for a board of trade to the extent of its operation as
such a board of trade or for such a board of
trade;}

^{(7) a person registered as a futures commission
merchant under the federal commodities laws to the extent of its operation as such a
merchant;}

^{(8) a person that provides clearance or
settlement services pursuant to a registration as a clearing agency or an exemption from such
registration granted under the federal securities laws to the extent of its operation as such a
provider;}

^{(9) an operator of a payment system which
provides processing, clearing, or settlement services, between or among persons excluded by this
section or licensees, in connection with wire transfers, credit-card transactions, debit-card
transactions, transactions involving stored-value
instruments, automated clearing house transfers, or similar funds transfers to the extent of its
operation as such an operator;such;}

^{(10) a person registered as a securities
broker-dealer under the federal or state securities laws to the extent of its operation as such a
broker-dealer;
or}

^{(11) a person
engaging in the business of issuing, selling, or redeeming stored-value instruments and which is
subject by a state or federal banking supervisor to a safety and soundness regime that
addresses investment and capital requirements.}

^{Notes to Tthis
Draft:}^{: The exclusion for entities that provide
stored value but who do are supervised by a federal or state-banking agency has been amended.
Previously, these entities were excluded if
they did not issue, sell or redeem stored value directly to consumers and also were}^{subject to regulation, supervision, and
examination by a federal or state banking agency which does not issue, sell,
or redeem stored-value instruments to or from
individuals.}

^{agency. Based on recommendations from the
American Bar Association's Task Force on Stored Value, the Committee decided to refine the
exclusion for entities that issue stored value instruments to exclude those entities that are subject
to regulation, supervision and examination by a state
Source: President's Commission Act Section 6 (with several modifications and additions).}

^{Reporter's Note orstate or federal banking
agency as long as the stored value provider is subject to a safety and soundness regime.
See Letter from American Bar Association Task Force on Stored Value to David S.
Willenzik, ABA Advisor to the UMSBA Drafting Committee (March 23, 1999)
(copy on file with NCCUSL). Safety and soundness requirements would include minimum
capital requirements and restrictions on investments. The Committee felt that entities that were
already subject to regulatory oversight by a banking regulator and which had to comply with
safety and
soundness requirements would not pose a risk with respect to consumers. Furthermore, the
concern about having information about the entity and its delegates would similarly be fulfilled
because of oversight from banking
regulators.}

^{Reporter's
Notes}

^{1. Exemptions1.
Exemptions are provided liberally to reduce the cost of the Act to a minimum both in
terms of administration and in terms of regulation. This list should be modified to match a state's
existing regulatory categories and terminology as appropriate. The entities listed in paragraphs
(1) through (5) are exclusions normally included in relevant state
licensing statutes for money
transmitters.}

^{2. Many2. Many of
the new exclusions apply to organizations that provide clearing and settlement services (which
do involve the transmission of money). Clearing and settlement often involves the transfer of
funds from one bank account to another (e.g., the debiting and crediting of accounts of various
participants in a trading system or credit card consortium)
where funds are transferred from bank accounts of a participant's financial institution. The
clearing and settlement organizations listed in the exemptions are already subject to supervision
by other federal or other state
regulators.}

~~^regulators.~~

^{3. The3. The proposed
exclusion involving boards of trade was submitted to the Financial Crimes Enforcement Network
of the United States Department of Treasury by various clearing organizations that collectively
represent several of the largest commodity exchanges and commodities/options clearing
organizations. In a letter dated October 8, 1997, these
organizations recommended that FinCEN change the proposed definition of money-services
business to exclude regulated entities that are already subject to regulation by the U.S. Securities
and Exchange Commission and the U.S. Commodities and Futures
TradingCommission.}

~~^{TheCommission.}~~

^{4. The proposed exclusion for broker-dealers
arises from the fact that broker-dealers are already subject to Bank Secrecy Act Reporting
requirements and are highly regulated by the U.S. Securities and Exchange
Commission.}

⁵^{5. The4.
The proposed exclusion for stored-value issuers, sellers or redeemers relates only to those
entities that are subject to oversight by a federal or state banking agency and that do not issue,
sell or redeem stored value directly to individuals. which are subject to safety and
soundness regime that includes investment and capital requirements. Such entities would
already be regulated from a safety and soundness standpoint by banking agencies and would not
have direct obligations to individuals. Instead, such entities would sell stored value on a
wholesale basis to other institutions.regulators. Because such entities will have to adhere
to capital requirements and also have their investment activity monitored and also
regulated, consumer interests should be
protected.}

^{SECTION 105. LICENSE
REQUIRED.}~~~~

^{(a) A person may not engage in a
money-services business without:}

^{(1) first obtaining a license under
this [Act];
or}

^{(2) becoming an authorized
delegate with respect to that
business.}

^{(b) A person that is not licensed
under this [Act] and is not an authorized delegate of a licensee is engaged in a money-services
business if the person advertises, solicits, or holds itself out as a money-services business or
engages in the
business.}

^{(c) A person that engages in a
money-services business only as an authorized delegate of a licensee and acts solely within the
scope of a contract between the authorized delegate and the licensee is not required to be licensed
under [Article] 2, 3, or
4.}

^{(d) A license is not transferable
or assignable except as otherwise provided by the
[superintendent].}

^{Source: Model Act Regulating
Money Transmitters Section 2 combined with President's Commission Act Section 5. The
restrictions on transfer or assignment of a license come from California Financial Code Section
12219, which prohibits the transfer of check selling
licenses.}

^{Reporter's
Note}

^{This section sets forth
the overall licensing structure for money-services businesses created by the Act. All
money-services businesses (including money transmitters as broadly defined, check cashers
and currency exchangers) must either obtain a license or become an authorized delegate with
respect to the type of money-service service}^{business it wishes to perform. Additionally, should
a
money-services business have neither a license nor status as an authorized delegate, the person is
treated, for purposes of the Act, as if it is engaging in money-services business on its own
behalf.}

^ARTICLE
2^ARTICLE
2

^{LICENSING OF MONEY
TRANSMITTERS}

^{SECTION
201. APPLICATION FOR LICENSE.LICENSE
REQUIRED.}

^{(a) A
person may not engage in the business of money transmission, or advertise the person's
engagement in money transmission without first obtaining a license under this
[article].}

^{(b) A
person licensed under this [article] may also engage in check cashing without obtaining a
separate license under [Article] 3 and currency exchange without obtaining a separate license
under [Article]
4.}

^Source:
New

^{Notes
to Tthis Draft:}^{: A new Section
201 has been created in order to separate the requirements for which entities must obtain a
license and the license applications procedures (which are now
set forth in Section 202
below).}

^{SECTION 202. APPLICATION FOR
LICENSE.}

^{(c)(a) A person applying for a license under this [article] must do so in writing,
under oath, and in a form prescribed by the [superintendent]. The application must state or
contain:}

^{(1) the legal
name and residential and business addresses of the applicant and any fictitious or trade name
used by the applicant in the conduct of its
business;}

^{(2) the
applicant's material litigation for the last five
years;}

^{(3) a
description of any money-services business previously or presently engaged in by the applicant,
and the business in which the applicant seeks to engage in this
State;}

^{(4) a list of
the applicant's proposed authorized delegates, and the locations in this State where the applicant
and its authorized delegates propose to engage in money transmission or other
money-services
business;}

^{(5) a
sample form of contract for authorized delegates, if applicable, and a sample form of payment
instrument, if
applicable;}

^{(6) the
name and address of any clearing financial institutions through which the applicant's payment
instruments will be
payable;}

^{(7) a
document confirming that the requirements for security and net worth as set forth in Sections 202
and 206203 and 207 have been or will be satisfied;
and}

^{(8) other
information the [superintendent] reasonably requires with respect to the
applicant.}

^{(d)(b) If an applicant is a corporation, the applicant shall also
provide:}

^{(1) the date
of the applicant's incorporation and State or country of
incorporation;}

^{(2) a
certificate of good standing from the State or country in which the applicant is
incorporated;}~~~~

^{(3) a
description of the corporate structure of the applicant, including any parent or subsidiary of the
applicant, and whether any parent or subsidiary is publicly traded on a securities
exchange;}

^{(4) the legal
and any fictitious name, business and residential addresses, and employment, for the past five
years, of each executive officer, director, and key shareholder of the
applicant;}

^{(5) material
litigation and criminal convictions for the past fiveten years of each executive
officer and key shareholder of the
applicant;}

^{(6) a copy
of the applicant's audited financial statements for the current year and, if available, for the next
preceding two
years;}

^{(7) a copy
of the applicant's unconsolidated financial statements for the current year, whether audited or not,
and, if available, for the next preceding two
years;}

^{[ALTERNATIVE
1]}

^{(8) if the
applicant is a publicly traded corporation, copies of all filings made with the United States
Securities and Exchange Commission within the year next preceding the date of the filing
of the application;
and}

^{[ALTERNATIVE
2]}

^{(8) if the
applicant is a publicly traded corporation, a copy of the most recent 10K report filed with the
United States Securities and Exchange Commission;}

^{(9) if the
applicant is a wholly owned subsidiary
of:}

^{(A) a corporation publicly traded in
the United States, audited financial statements for the parent corporation for the current year or
the parent corporation's most recent 10K reports filed
with the United States Securities and Exchange
Commission;}

^{(B) a
corporation publicly traded outside of the United States, similar documentation filed with the
parent corporation's non-United States regulator;
and}

^{(9)(10) other information the
[superintendent] reasonably
requires.}

^{(e)(c) If the applicant is not a
corporation, the applicant shall also
provide:}

^{(1) evidence that the applicant is qualified to
do business in this
State;}

^{(2) the legal and any fictitious name, business
and residential addresses, personal financial statements, and employment for the last five years,
for each controlling person that is an individual
and each responsible individual of the
applicant;}

^{(3) material litigation and criminal
convictions, for the last fiveten years, of each controlling person that is an
individual and each responsible individual of the
applicant;}

^{(4) a copy of the applicant's audited financial
statements for the current year, and, if available, for the next preceding two years;
and}

^{(5) other information the [superintendent]
reasonably
requires.}

^{(f)(d) The [superintendent] may
waive a requirement of this sectionsubsections (a) through
(cd)}^{or permit an applicant to submit substituted
information in lieu of the required information if the
waiver is in the public
interest.}

^{Source: Arizona Money Transmitter Law
Section 6-1203; President's Commission Act Section 7; Florida Money Transmitters' Code
Section
560.205.}

^{Notes to Tthis
Draft:}^{Two major changes have been made to
Section 202. First, a new alternative subsection 8 has been proposed. As an alternative to the
requirement that publicly traded
corporations submit all filings made to the United States Securities and Exchange Commission
("SEC"), it has been suggested that the corporate applicant submit a copy of its most recent 10K
report filed with the SEC. This report is required pursuant to the Securities and Exchange Act of
1934 for exchange-traded securities and contains financial information and other details
concerning the status of a publicly held company. Second, a new requirement has been included
for applicants that are wholly owned subsidiaries of publicly traded corporations. These
applicants are required to submit a copy of the parent's audited financial statement or its most
recent 10K report filed with the SEC or if it is a foreign corporation, any similar filings made
with the foreign regulator of the corporation. See MTRA Model Legislation Outline Section
IV(C)(5). Additionally, applicants must furnish information concerning material litigation and
criminal convictions for the past ten rather than five years.}

^{Reporter's
Notes}

^{At the February 1998 drafting meeting, the
Drafting Committee decided to create separate licensing provisions for money transmitters
(which includes payment instrument sellers and stored-value issuers and sellers) as distinct from
check cashers and currency exchangers. It was determined that check cashers and currency
exchangers posed less safety and
soundness concerns because customers who exchanged currency or cashed checks were provided
with cash
immediately.}~~~~

^{As set forth in Articles 2, 3, and 4, separate
licensing requirements are established for money transmitters and for check cashers/foreign
currency exchangers. The superintendent's supervisory and enforcement powers, however, are
the same for all money-services businesses. The licensing requirement promotes one of the main
goals of the Act: to create an
appropriate regulatory framework to deter and eliminate the use of money-services businesses as
potential vehicles for money laundering. Only a handful of states have attempted to create a
framework that links all money-services businesses together within a statute, while recognizing
the differences inherent in the various activities concerned. Florida and
Arizona, for example, are two states that have enacted statutes that have uniform enforcement
and penalty provisions for all money-services businesses, while retaining separate licensing and
recordkeeping provisions for each type of money-service activity. The Drafting Committee chose
this approach because, for law enforcement purposes, the state
superintendent and the Attorney General need general enforcement powers with respect to each
of the different entities as a means of prevention and detection of money laundering. Therefore,
the Act contains uniform enforcement provisions and different licensing requirements for each
type of
activity.}

^{The licensing application is the first point at
which the state may protect the public by prohibiting entry by those persons that would bring
discredit on the industry, and the first source of information for investigators and regulators in
the event that there is future misconduct by a licensee. The information requested from
money-money-transmitter applicants
in Section 201 is the type of information recommended by the Money Transmitters Regulators'
AssociationMTRA in Section IV of theits Model Legislation
Outline and also in the Model Act Regulating Money Transmitters. The information concerning
criminal convictions and employment histories, as well as the identity of executive officers, key
shareholders,
controlling persons and responsible individuals is designed to assist the superintendent in
determining whether the license applicant is a reputable business or whether there are any
suggestions that the business might be used for illegal purposes. Additionally, information
relating to the applicant's financial position (including information about net worth) is
necessary in order to determine whether an applicant will be able to meet its obligations with
respect to any obligations it might have (in connection with the sale of money orders, traveler's
checks and stored value and funds
transfer).}

^{SECTION 202.203.
SECURITY.}~~~~

^{(a) A surety bond, irrevocable letter of credit,
or other similar security acceptable to the [superintendent], in the amount of [$50,000] must
accompany an application for a
license.}

^{(b) If an applicant proposes to engage in the
business at more than one location through authorized delegates or otherwise, the amount of the
security is increased by [$10,000] per location, not exceeding a total increase of [$250,000]. The
[superintendent] may, however, may increase the amount of security required to a
maximum of [$500,000] upon the basis of
the impaired financial condition of a licensee, as evidenced by net worth
reduction,reduction of net worth, financial losses, or other relevant
criteria.}

^{(c) A security must be in a form satisfactory to
the [superintendent] and run to the State for the benefit of any claimant against the licensee to
secure the faithful performance of the obligations of the licensee with respect to money
transmission.}~~~~

^{(d) The aggregate liability on a surety bond
may not exceed the principal sum of the bond. A claimant against a licensee may maintain an
action directly on the bond, or the [superintendent] may maintain an action on
behalf of the claimant. The bond must be payable to any person injured by a wrongful act,
omission, default, fraud, or misrepresentation of a
licensee or an authorized delegate or employee of the licensee in the conduct of its business as a
licensee or to the State for the benefit of the [superintendent] and of the injured person. Only one
bond is required of a licensee, irrespective of the number of executive officers,
directors, locations, employees, or authorized delegates of the
licensee.}

^{(e) An irrevocable letter of credit must run to
the State, for the benefit of the [superintendent] and any person injured by a wrongful act,
omission, default, fraud, or misrepresentation of a licensee or an authorized delegate or employee
of the licensee in the conduct of its business as a licensee. An irrevocable letter of credit may be
drawn upon by sight drafts in
amounts determined by the [superintendent] up to the aggregate amount of the irrevocable letter
of
credit.}^

^{(f) A security must remain in effect until
cancellation, which may occur only after 30 days' written notice to the [superintendent] of the
intended
cancellation.}

^{(g) A security must remain effective for as
long as the [superintendent] specifies but at least five years after the licensee ceases to be a
money-services business in this State. However, the [superintendent] may permit the amount of
security to be reduced or eliminated before that time to the extent that the amount of the
licensee's payment instruments outstanding
in this State is reduced. The [superintendent] may permit a licensee to substitute another form of
security acceptable to the [superintendent] for the security effective at the time the licensee
ceases to be a money-services business in this
State.}

^{(h) In lieu of the security prescribed in this
section, an applicant for a license or a licensee may deposit with the [superintendent] cash, or
alternatives to cash acceptable to the [superintendent], in the amount of the required security. The
principal amount of the deposit may be released to the applicant for a license or licensee only
upon authorization in a record
of the [superintendent] or on the order of a court of competent
jurisdiction.}

^{Source: Arizona Revised Statutes, Title 6,
Banks and Financial Institutions, Chapter 12 Transmitters of Money; A.R.S. Section 6-1205;
President's Commission Act Section
8.}

^{Reporter's
Note}

^{The bond and net worth requirements are
safety and soundness measures designed to protect the public, but also to deter companies that
have questionable solvency or business practices from entering the market. The bond
requirement serves as a barrier to entry for financially unstable companies. Alternatives to the
bond requirement, however, are provided
in the form of cash or letters of credit. Licensees may also be permitted to deposit specified
liquid assets in the amount of the bond. The Drafting Committee has attempted a balance
between the goals of safety and soundness and of providing open access to businesses that wish
to enter the money transmission market, recognizing that decisions as to the final
dollar amounts will need to reflect the particular fiscal needs and concerns of different
states.}^

^{SECTION 203.204.
ISSUANCE OF
LICENSE.}

^{(a) Upon the filing of an application under this
[article], the [superintendent] shall investigate the applicant's financial condition and
responsibility, financial and business experience, character, and general fitness. The
[superintendent] may conduct an on-site investigation of the applicant, the reasonable cost of
which the applicant must bear. The
[superintendent] may issue a license to an applicant under this [article] if the [superintendent]
finds that all of the following conditions have been
fulfilled:}

^{(1) the applicant has complied with Sections
201 and 202;202 and
203;}

^{(2) the competence, experience, character, and
general fitness of the executive officers, directors, and controlling persons indicate that it is in the
interest of the public to permit the applicant to engage in money transmission;
and}

^{(3) the applicant has paid the requisite
application and license
fees.}

^{(b) The [superintendent] shall approve or deny
an application for an original license within 120 days after a complete application is filed. The
[superintendent] fora good cause may extend the period. The [superintendent] shall notify the
applicant of the date on which the application is determined to be complete. If the application is
not approved or denied
within the period allowed for approval, the application is deemed approved and the
[superintendent] shall issue the license under this [article] effective as of the first business day
after expiration of the
period.}

^{(c) An applicant whose application is denied
by the [superintendent] under this [article] may appeal from the denial within 30 days after
receipt of the notice of the denial in a hearing before the [superintendent] pursuant to the
[administrative[the administrative procedure
act].}

^{Source: Arizona Revised Statutes Section
6-1206(B); Tennessee Revised Code Section
45-7-210.}

~~^{Notes to Tthis Draft: :}~~^{Concerns have been expressed about
whether the costs of examining an applicant by the superintendent (which may have locations in
other states and overseas) may be onerous and burdensome. It is customary for regulators to set
examination fees by administrative rule. Those fees are often capped or structured in such a
manner to
provide the applicant with a clear picture of the potential costs of an
investigation.}

^{Reporter's
Notes}~~~~

^{The Drafting Committee has previously
inquired as to whether states have mandatory time frames in which the superintendent must
respond to license applications. The Money Transmitters' Regulators Association
("MTRA")MTRA supplied the Drafting Committee with sample statutory
provisions that included mandatory time frames for response to a
license application. Based on existing state practice, the Drafting Committee decided on a
120-day response period. The MTRA Model Legislation Outline recommends a 120-day time
period. The extension for "good cause" comes from the Maine Act to Regulate Money
Transmitters and Amend Consumer Credit Laws, 32 M.R.S.A. Section
6109(2).}

^{SECTION 204.205.
RENEWAL OF
LICENSE.}

^{(a) A licensee under this [article] must apply
for a renewal of its license and pay a renewal fee annually on the anniversary of the issuance of
the license or, if that date is not a business day, on the first business day after that
date.}

^{(b) A licensee under this [article] shall submit
with the renewal fee a report, in a form prescribed by the [superintendent]. The [superintendent]
shall send a copy of the form to each licensee under this [article] no later than [three months]
immediately before the date for license renewal. The renewal report must state or
contain:}

^{(1) a copy of the licensee's most recent audited
annual financial statement or, if the licensee is a wholly owned subsidiary of another corporation,
the most recent audited consolidated annual financial statement of the parent corporation or the
licensee's most recent audited consolidated annual financial
statement;}

^{(2) the number of payment instruments sold by
the licensee in this State that have not been previously included on a renewal report, the
monetary amount of those instruments, and the monetary amount of those instruments currently
outstanding;}

^{(3) a description of each material change in
information submitted by the licensee in its original license application which has not been
previously reported to the [superintendent] on any required
report;}^

^{(4) a list of the licensee's permissible
investments and a certification that the licensee continues to maintain permissible investments
according to the requirements set forth in Sections 701 and 702; and}

^{(5) proof that the licensee continues to
maintain adequate security as required by Section 203;
and.}

^{(56) a list of the locations in this
State where the licensee or an authorized delegate engages in money transmission or other
money-services
business.}

^{(c) Tthe [superintendent] may require
the licensee to increase the amount of its security to if the number of its locations has increased
as indicated in its renewal report. The amount of the security may be increased by [$10,000] per
location, not exceeding a total increase of [$250,000].}^{The [superintendent], however, may
also increase the amount of security
required to a maximum of [$500,000] upon the basis of the impaired financial condition of a
licensee, as evidenced by reduction of net worth, financial losses, or other relevant
criteria.}

^{in a record, shall notify a licensee under this
[article] that has not filed(d) If a licensee fails to
file}^{a renewal report or paidto pay
its renewal fee by the renewal date, , and has not been granted an extension of time
to do so by the [superintendent], that its license has been suspended a ofon the renewal
date}^{. The licensee has 30 days afterreceipt of the
notice of
suspensionits license is
suspensionded}^{in which to file a
renewal report and to pay the renewal fee plus $100[$100] for each day thereafter
that the superintendent does not receive the renewal form and application are not
received by the [superintendent].application.}

^{Source: Model Act Regulating Money
Transmitters Section 11 (with
modifications).}

^{Notes to tThis
Draft: :}^{Section 205 has been revised to provide for
automatic license suspension in the event that a licensee fails to renew its license in a timely
fashion. In the previous draft, the
superintendent was required to send a notice of suspension to the licensee. The superintendent
has a preexisting duty to notify the licensee of the renewal date and to send the licensee a
renewal form.
Thus, it was felt unnecessary to require the superintendent to notify the licensee of its own failure
to renew its license. A new subsection (c) has also been added which allows the superintendent
to
adjust the amount of security which the licensee is required to maintain.}

^{Reporter's
Note}

^{The Drafting Committee decided
that it was too cumbersome to have a hearing provision for failure to renew a license. The
Drafting Committee decided that a preferable alternative was for the license to expire if not
renewed in a timely fashion. The licensee, however, will have 30 days to cure its failure to renew
its license. As part of the renewal process, Article 2
licensees are required to submit additional information to the superintendent as a means of
appraising the safety and soundness of the
business.}

^{SECTION
205.206.
FEES.}^

^{(a) A nonrefundable application
fee of [$2,000] and a license fee of [$2,000] must accompany an application for a license under
this [article]. The license fee must be refunded if the application is
denied.}

^{(b) An annual renewal fee of
[$2,000] must accompany a license renewal
report.}^

^{(c) A nonrefundable fee of
[$2,000] must accompany an application for change of
control.}

^{Source: President's Commission
Act Section 8. Paragraphs (b) and (c) are
new.}

^{Reporter's
Note:}~~~~

^{This section provides
for an initial license application fee as well as for renewal fees and fees for applications for a
change in control. This section leaves the final amount to be charged for each
procedure to be determined by each
State.}

^{SECTION 206.SECTION
207. NET WORTH. A licensee under this [article] shall maintain a net worth in liquid
assets of at least [$100,000] plus [$10,000] for each location at which the licensee or an
authorized delegate engages in the business, not to exceedup to a maximum of at
least
[$500,000].}

^{Source: President's Commission
Act Section
8.}

^{Reporter's
Note}

^{Net worth requirements, in
combination with bonding/security and permissible investment requirements, are a means of
ensuring that a money transmitter has sufficient resources to honor its obligations to customers.
As stated in the Prefatory Note, only Article 2 licensees are subject to net worth requirements.
Check cashers and currency exchangers provide funds
immediately to customers; therefore there is no risk of non-payment. Net worth requirements are
a means of screening an applicant, at the time of their initial entry into the money-services
business, as to their ability to meet their
obligations.}

^{SECTION 207. PAYMENT
INSTRUMENT IDENTIFICATION.208. IDENTIFICATION OF PAYMENT
INSTRUMENT. A payment instrument sold by a licensee directly, or
indirectly through an authorized delegate, must bear the name of the licensee and a unique,
consecutive number clearly stamped orstamped, imprinted or electronically
recorded on the
instrument.}

^ARTICLE
3

^{LICENSING OF CHECK
CASHERS}

^{SECTION 301. APPLICATION FOR
LICENSE.LICENSE REQUIRED.}

^{(a) A person that is not an authorized delegate of a
licensee under [Article] 2 orthat is not licensed under [Article] 2 or 4 may not engage in the
business of check cashing without first obtaining a license under this
[article].}

^{(b) A person licensed under this [article] may not
engage in money transmission other than as an authorized delegate of a person licensed under
[Article] 2.}

^{(c) A person licensed under this [article] may also
engage in the business of currency exchange without obtaining a separate license under [Article]
4.}

^Source:
New

^{Notes to Tthis Draft: : A new Section 301 has
been created in order to state the requirements for which entities must obtain a license separately
from the license applications procedures (which are now set forth in Section 302
below).}

^{SECTION 302. APPLICATION FOR
LICENSE.}

^{(d) A person applying for a license under this [article]
must do so in writing, under oath, and in a form prescribed by the [superintendent]. The
application must state or contain:}

^{(1) the legal name and residential and business
addresses of the applicant, if the applicant is an individual or, if the applicant is not an individual,
the name of each partner, executive officer, and
director;}

^{(2) the location of the principal office of the
applicant;}

^{(3) complete addresses of other locations in this State
where the applicant proposes to engage in check cashing or currency exchange,
including all limited stations and mobile locations;}

^{(4) a description of the source of moneys to be used
for check cashing; and}

^{(5) other information the [superintendent] reasonably
requires with respect to the applicant, but not more than the [superintendent] may require under
[Article] 2.}

^{Source: Arizona Money Transmitter Law Section
6-1203; President's Commission Act Section 7; Florida Money Transmitters' Code Section
560.205.}

^{Reporter's
Note}

^{At the February 1998 drafting meeting, the Drafting
Committee decided that check cashers should be treated differently than money transmitters with
respect to licensing, bonding and, in particular, net worth. Because check cashers and currency
exchangers provide customers with funds
immediately, they do not need the same type of bond or security requirements. Existing state law
makes a distinction between check cashers and money transmitters with respect to information
provided to superintendents (e.g., audited as contrasted to unaudited financial statements are
requested and bond and net worth requirements are not imposed). In general, fewer states have
check-cashing laws. The Drafting Committee decided to include separate licensing provisions in
the Act as an alternative to a unified licensing system as contained in the February 1998
draft.}

^{A new provision has been added to require that check
cashers provide superintendents with information about the source of their funds.
Superintendents and law enforcement officials want to ensure that the cash used in such a
business is not derived from money laundering or other illegal
activity. For a general discussion of the main differences between Article 2 and Articles 3 and 4
see the Reporter's Note to Section 201202 (which also explains the rationale for
separate licensing requirements for different types of money-services businesses). The Note to
Section 201 also
discusses the reasons why certain types of information are requested from applicants during the
application process.}

^{SECTION 302.303. ISSUANCE OF
LICENSE.}

^{(a) Upon the filing of an application under this
[article], the [superintendent] shall investigate the applicant's financial condition and
responsibility, financial and business experience, character, and general fitness. The
[superintendent] may conduct an on-site investigation of the applicant,
the reasonable cost of which the applicant must bear. The [superintendent] may issue a license to
an applicant under this [article] if the [superintendent] finds that all of the following conditions
have been fulfilled:}

^{(1) the applicant has complied with Section
301;302;}

^{(2) the competence, experience, character, and general
fitness of the executive officers, directors, and controlling persons indicate that it is in the interest
of the public to permit the applicant to engage in the business of check cashing;
and}

^{(3) the applicant has paid the requisite application and
license fees.}

^{(b) The [superintendent] shall approve or deny an
application for an original license within 120 days after a complete application is filed. The
[superintendent] fora good cause may extend the period. The [superintendent] shall notify the
applicant of the date on which the application is
determined to be complete. If the application is not approved or denied within the period allowed
for approval, the application is deemed approved and the [superintendent] shall issue the license
under this [article] effective as of the first business day after expiration of the
period.}

^{(c) An applicant whose application is denied by the
[superintendent] under this [article] may appeal from the denial within 30 days after receipt of
the notice of the denial in a hearing before the [superintendent] pursuant to the
[administrative[the administrative procedure
act].}

^{Source: Arizona Revised Statutes Section 6-1206(B);
Tennessee Revised Code Section 45-7-210.}

^{Reporter's
Note:}~~~~

^{See the Reporter's Note accompanying Section
202.203.}

^{SECTION 303.304. RENEWAL OF
LICENSE.}

^{(a) A licensee under this [article] must
apply biennially for a renewal of its license and pay a renewal fee biennially on the anniversary
of the issuance of the license or, if that date is not a business day, on the first business day after
that date.}

^{(b) A licensee under this [article] shall submit with the
renewal fee a report, in a form prescribed by the [superintendent]. The [superintendent] shall
send a copy of the form to each licensee under this [article] no later than [three months]
immediately before the date for license renewal. The
renewal report must state or contain:}

^{(1) a description of each material change in
information submitted by the licensee in its original license application which has not been
previously reported to the [superintendent] on any required report;
and}

^{(2) a list of the locations in this State where the
licensee or an authorized delegate of the licensee engages in the business of check cashing,
including limited stations and mobile locations.}

^{(c) The
[superintendent], in a record, shall notify(cd)
If}^{a licensee under this [article] that has not
filedfails to file a renewal report or paid itsto pay it
s}^{renewal fee by the renewal date, ,
and has not been granted an extension of time to do so by the [superintendent], that its
license has been suspended.is suspended on the renewal date. The licensee has 30
days after receipt of the
notice of suspensionits license is
suspended}^{in which to file a renewal report and to pay the
renewal fee plus $100[$100] for each day thereafter}^{t
hat the [superintendent] does not receive the renewal form and
application.}^{the renewal form and application are not received by the
[superintendent].}

^{Notes to Tthis Draft: : As
in Section 204, the licensee's license shall be suspended immediately if the licensee fails to
renew its license in a timely
fashion.}

^{Source: Model Act Regulating
Money Transmitters Section 11 (with
modifications).}

^{Reporter's
Note:}~~~~

^{See the Reporter's
Note accompanying Section 204.205. The Drafting Committee decided to require
check cashers and currency exchangers to renew their licenses biennially rather than annually.
Because
check cashers and currency exchangers pose no safety and soundness concerns, the
superintendent does not have a need to examine renewal reports on an annual basis for these
businesses. The
superintendent, however, will have the authority to conduct an on-site examination if the check
casher or currency exchanger engages in money-laundering activity or violates a provision of the
Act.}

^{SECTION 304.SECTION
305.
FEES.}^

^{(a) A nonrefundable
application fee of [$2,000] and a license fee of [$2,000] must accompany an application for a
license under this [article]. The license fee must be refunded if the application is
denied.}

^{A biennial renewal fee of
[$2,000] must accompany a license renewal
report.}^

^{A nonrefundable fee of [$2,000]
must accompany an application for change of
control.}

^{Source: President's Commission
Act Section 8. Paragraphs (b) and (c) are
new.}

^{Reporter's
Note}

^{See the Reporter's Note
accompanying Section
205.206.}

^ARTICLE
4

^{LICENSING OF CURRENCY
EXCHANGERS}

^{SECTION 401. APPLICATION FOR
LICENSE.LICENSE REQUIRED.}

^{(a) A person that is not an authorized delegate of a
licensee under [Article] 2 or that is not licensed under [Article] 2 or 3 may not
engage in the business of currency exchange without first obtaining a license under this
[article].}

^{(b) A person licensed under this [article] may not
engage directly in money transmission but the person may act as an authorized delegate of a
person licensed under [Article] 2.}

~~^(c)~~^{(c) A
person licensed under this [article] may also engage in the business of check cashing without
obtaining a separate license under [Article] 3.}

^{Source: :
New}

^{Notes to Tthis Draft: : A new Section 401 has
been created in order to state the requirements for which entities must obtain a license separately
from the license applications procedures (which are now set forth in Section 402
below).}

^{(d)SECTION 402. APPLICATION FOR
LICENSE. A person applying for a license under this [article] must do so in writing,
under oath, and in a form prescribed by the [superintendent]. The application must state or
contain:}

^{(1) the legal name and residential and business
addresses of the applicant, if the applicant is an individual or, if the applicant is not an individual,
the name of each partner, executive officer, and
director;}

^{(2) the location of the principal office of the
applicant;}

^{(3) complete addresses of other locations in this State
where the applicant proposes to engage in check cashing or currency exchange,
including all limited stations and mobile locations;}

^{(4) a description of the source of moneys to be used
for currency exchange; and}

^{(5) other information the [superintendent] reasonably
requires with respect to the applicant, but not more than the [superintendent] may require under
[Article] 2.}

^{Reporter's
Notes}~~~~

^{At the March 1999 drafting meeting, Observers noted
that the Act should contain a different Article for the licensing of check cashers and currency
exchangers. Although the provisions contained in Articles 3 and 4 are almost identical, the
Drafting Committee thought that states should be
presented the option to include less than all of the Articles in a money-services business licensing
statute. Thus, each of the licensing parts of the Act is separable. As indicated in the Prefatory
Note, at present, very few states have licensing requirements for currency exchangers. At the
same
time, the activity of currency exchange (exchanging larger amounts of one currency for smaller
denominations in another, for example) has been identified by law enforcement officials as
vulnerable to money laundering (as contrasted with check
cashing).}

^{For a general discussion of the main differences
between Article 2 and Articles 3 and 4 see the Reporter's Note to Section 201202
(which also explains the rationale for separate licensing requirements for different types of
money-services businesses) and Section 301.302. The Note to Section
201202 also discusses the reasons why certain types of information are requested
from applicants during the application process.}

^{SECTION 402.403. ISSUANCE OF
LICENSE.}

^{(a) Upon the filing of an application under this
[article], the [superintendent] shall investigate the applicant's financial condition and
responsibility, financial and business experience, character, and general fitness. The
[superintendent] may conduct an on-site investigation of the applicant,
the reasonable cost of whichby the applicant must bear. The [superintendent] may issue a license
to an applicant under this [article] if the [superintendent] finds that all of the following conditions
have been fulfilled:}

^{(1) the applicant has complied with Section
401;}

^{(2) the competence, experience, character, and general
fitness of the executive officers, directors, and controlling persons indicate that it is in the interest
of the public to permit the applicant to engage in currency exchange;
and}

^{(3) the applicant has paid the requisite application and
license fees.}

^{(b) The [superintendent] shall approve or deny an
application for an original license within 120 days after a complete application is filed. The
[superintendent] for good cause may extend the period. The [superintendent] shall notify the
applicant of the date on which the application is
determined to be complete. If the application is not approved or denied within the period allowed
for approval, the application is deemed approved and the [superintendent] shall issue the license
under this [article] effective as of the first business day after expiration of the
period.}

^{(c) An applicant whose application is denied a license
by the [superintendent] under this [article] may appeal from the denial within 30 days after
receipt of the notice of the denial in a hearing before the [superintendent] pursuant to the
[administrative procedure act].}

^{Source: Arizona Revised Statutes Section 6-1206(B);
Tennessee Revised Code Section 45-7-210.}

^{Reporter's
Note}

^{See the Reporter's Note accompanying Section
202.203.}

^{SECTION 403.404. RENEWAL OF
LICENSE.}

^{(a) A licensee under this [article] must
apply biennially for a renewal of its license and pay a biennial renewal fee on the anniversary of
the issuance of the license or, if that date is not a business day, on the first business day after that
date.}

^{(b) A licensee under this [article] shall submit with the
renewal fee a report, in a form prescribed by the [superintendent]. The [superintendent] shall
send a copy of the form to each licensee under this [article] no later than [three months]
immediately before the date for license renewal. The
renewal report must state or contain:}

^{(1) a description of each material change in
information submitted by the licensee in its original license application which has not been
previously reported to the [superintendent] on any required report;
andand}

^{(2) a list of the locations in this State where the
licensee or an authorized delegate of the licensee engages in currency exchange or check
cashing.}

^{(c) The [superintendent], in a record, shall notify a
licensee under this [article] that has not filed If a licensee fails to file a renewal
report or paidto pay its renewal fee by the renewal date, , and has
not been granted an extension of time to do so by the [superintendent], that its license has been
suspended.is suspended on the renewal date. The licensee has 30 days after receipt
of the notice of suspensionits license is suspended in which to file a renewal
report and to pay the renewal fee plus $100[$100] for each day thereafter the
superintendent does not receive the renewal form and
application are not received by the
[superintendent].}

^{Source: Model Act Regulating Money Transmitters
Section 11 (with modifications).}

^{Notes to tThis
Draft:}^{: As in Section 204, the licensee's license
shall become suspended immediately if the licensee fails to renew its license in a timely
fashion.}

^{Reporter's
Note}

^{See the Reporter's
Note accompanying Section 204. The Drafting Committee decided to require check cashers and
currency exchangers to renew their licenses biennially rather than annually. Because check
cashers and currency exchangers pose no safety and soundness concerns, the superintendent does
not have a need to examine renewal reports on an annual basis for these businesses. The
superintendent,
however, will have the authority to conduct an on-site examination if the check casher or
currency exchanger engages in money-laundering activity or violates a provision of the
Act.}

^{SECTION 404.405.
FEES.}

^{(a) A nonrefundable application fee of
[$2,000] and a license fee of [$2,000] must accompany an application for a license under this
[article]. The license fee must be refunded if the application is
denied.}

^{(b) A biennial renewal fee of [$2,000]
must accompany a license renewal report.}

^{(c) A nonrefundable fee of [$2,000]
must accompany an application for change of
control.}

^{Source: President's Commission Act Section 8.
Paragraphs (b) and (c) are new.}

^{Reporter's
Note}

^{See the Reporter's Note accompanying Section
205.206.}

^ARTICLE
5

^{AUTHORIZED
DELEGATES}

^{SECTION 501. RELATIONSHIP BETWEEN
LICENSEES AND AUTHORIZED
DELEGATES.}

^{(a) A contract between a licensee and an authorized
delegate must require the authorized delegate to operate in full compliance with this [Act]. The
licensee shall furnish in a record to each authorized delegate policies and procedures sufficient to
permit compliance with this [Act].}

^{(b) An authorized delegate shall remit all money
owing to the licensee in accordance with the terms of the contract between the licensee and the
delegate.}

^{(c) Upon the suspension or revocation of a license or
the failure of a licensee to renew its license, the [superintendent] shall notify all authorized
delegates of the licensee whose names are on record with the [superintendent] of the suspension,
revocation, or failure to renew. On receipt of the
notice, an authorized delegate shall immediately cease to engage in the business as a delegate of
the licensee.}

^{Source: President's Commission Act Section
10.}

^{Reporter's
Note}

^{The sections included in Article 5 are meant to further
delineate the nature of the authorized delegate's relationship with the licensee and to further
clarify the delegate's responsibilities and obligations. Similarly, this section also sets forth some
of the general obligations that the licensee has
with respect to providing the delegate with a contract and making the delegate aware of relevant
laws and rules.}

^{SECTION 502. SCOPE OF AUTHORIZED
DELEGATE'S ACTIVITY. An authorized delegate may not intentionally engage in the business
that is outside the scope of activity permissible under the contract between the authorized
delegate and the licensee, except activity for which the
authorized delegate is licensed under [Article] 2, 3, or 4. An authorized delegate of a licensee
holds in trust for the benefit of the licensee all money net of fees received from money
transmission.}

^{Source: Model Act Regulating Money Transmitters
Section 19 (with modifications).}

^{Reporter's
Note}

^{Similar to Section 501, Section 502 further provides
that an authorized delegate is only authorized to perform those money services that it is
authorized to perform pursuant to its contract with the licensee. To the extent that the delegate
wishes to perform activities falling outside the scope of
its contract, the delegate is required to obtain its own license under the Act. This section also
imposes a trust for the benefit of the licensee for moneys received by the delegate from the sale
of the licensee's products or services. The imposition of a trust is a safety and soundness measure
designed to protect the funds that are paid by consumers to the delegate for the purchase of a
money order or for transmission.}

^{SECTION 503. UNAUTHORIZED ACTIVITIES. A
person may not engage in conduct as an authorized delegate of a person that is not licensed under
this [Act]. A person that engages in that conduct is engaging in the business to the same extent as
if the person were the principal.a
licensee.}

^{Source: Arizona Money Transmitter Act Section
6-1218; President's Commission Act Section 10.}

^{Reporter's
Note}

^{This section provides that an authorized delegate may
only be a delegate for a licensee. Should the licensee lose its license, the delegate will be
considered to act in its own capacity as if the delegate were a licensee itself. This section may
trigger potential civil and criminal liability pursuant to
Sections 805 and 806.}

^ARTICLE
6

^{EXAMINATIONS; REPORTS
AND OTHER RECORDS}

^{SECTION 601. AUTHORITY TO CONDUCT
EXAMINATIONS. (a)}

^{(a) The [superintendent] may conduct an annual
examination of a licensee or of any of its authorized delegates upon 45 days' notice in a record to
the licensee. The [superintendent] may examine the licensee or its authorized delegate
without having given Ifnotice, to determine if the licensee
or authorized delegate is engaging in an unsafe or unsound practice or has violated or is violating
this [Act] or a rule adopted or an order issued under this [Act], the[superintendent] may examine
the licensee or its authorized delegate without having given
notice.}

^{(b) If the [superintendent] concludes that an on-site
examination under subsection (a) is necessary, the licensee shall pay all reasonably incurred costs
of the examination. If the [superintendent] determines, based on the licensee's financial
statements and previous conduct in this State, that
an on-site examination is unnecessary, the [superintendent] may waive the on-site
examination.}

^{(c) Information obtained during an examination
under this [Act] may be disclosed only as provided in Section
608.}

^{Source: Model Act Regulating Money Transmitters
Section 14 and Florida Money Transmitters' Code Section 560.118(1)(a) (with
modifications).}

^{Reporter's
Note}

^{This section provides the superintendent with general
authority to conduct on-site supervisory exams of licensees and their authorized delegates. This
provision is essential to ensure the safety and soundness of licensees and enable the
superintendent to examine a licensee's books and records
in the event that it is suspected of money laundering or any other violation of the Act. Subsection
(a) permits the superintendent to examine a licensee or its delegates without advance notice if the
licensee is engaging in an unsafe or unsound practice or has violated the Act. Previously, this
section stated that the superintendent had to have a reason to believe that the licensee or
authorized delegate was engaging in an unsafe or unsound practice. It was noted, however, that
this is an ambiguous standard that may hinder the superintendent's ability to examine licensees
and
delegates in a timely fashion (i.e., because licensee will be able to challenge the examination).
Additionally, it was noted that superintendents have not abused this authority where it has been
given to them by statute. Furthermore, some regulators have observed that resource constraints
provide a natural check on abuse of examination
authority.}

^{Subsection (b) allows the superintendent to waive an
annual on-site examination for licensees. It gives the superintendent flexibility in dealing with
reputable licensees. For example, if a licensee has been licensed for several years, has maintained
adequate financial resources, and has been
cooperative with regulators, the superintendent may determine that annual examinations are not
necessary. The waiver also conserves financial resources of the
superintendent.}

~~^{SECTION 602. JOINT EXAMINATIONS.}~~

^{(a)(a) An on-site examination of
books, accounts, documents, and other records listed in Section 605 may be conducted in
conjunction with representatives of other state agencies or agencies of another State or of the
federal government as determined by the [superintendent]. In lieu of an
examination, the [superintendent] may accept the examination report of an agency of this State or
of another State or of the federal government or a report prepared by an independent licensed or
certified public accountant. A joint examination or an acceptance of an examination report is
not a waiver of the [superintendent's] authority to conduct an examination as provided by law. A
joint report or a report accepted under this subsection is an official report of the [superintendent]
for all purposes.}

^{(b) Information
obtained during an examination under this [Act] may be disclosed only as provided in Section
608.}

^{Source: Model Act Regulating Money Transmitters
Section 14.}

^{Reporter's
Note}

^{The use of joint examinations is an important feature
of the Act that will reduce some of the increased costs that may be incurred as a result of
licensing and regulation. Many states already engage in joint examinations of major
money-services businesses or allow the submission of reports
generated by another regulator in lieu of an on-site examination. This is another provision
designed to conserve financial resources.}

^{SECTION 603.
REPORTS.}

^{(a) A licensee shall file with the [superintendent]
within 45 days after the end of each fiscal quarter a current list of all authorized delegates,
responsible individuals, and locations in this State. The licensee must state or include the name
and street address of each location and authorized
delegate.}

^{(b) A licensee shall file with the [superintendent]
within one business day after its occurrence a report of any of the following
events:}

^{(1) the filing of a petition under the United States
Bankruptcy Code for bankruptcy or reorganization by the
licensee;}

^{(2) the commencement of a proceeding to revoke or
suspend its license in a State or countrry in which the licensee engages in business
or is licensed;}

^{(3) the cancellation, interruption, or
non-renewal of the licensee's bond, letter of credit; or other
security;}

^{(4) an [indictment], prosecution, or conviction of the
licensee or of an executive officer, director, or controlling person offor a felony
related to activities regulated under this [Act] or[Act], , involving a
violation of state or federal money laundering laws or other financial crimes;
or}

^{(5) an [indictment], prosecution, or conviction of an
authorized delegate offor a felony of which athe licensee has
knowledge related to activities regulated under this [Act] or involving a violation of state or
federal money laundering laws, or other financial
crime.}

^{Source: President's Commission Act Section
13.}

^{Reporter's
Note}

^{Reports are essential to the proper regulation of
problem delegates or licensees. Although on-site examinations are authorized, the reporting
requirements provide a cost efficient mechanism for superintendents and industry members alike.
Certain significant events must be reported
immediately, including a money-laundering laundering allegation against a
delegate. The Drafting Committee, after consultation with Observers, decided that quarterly
reporting was only necessary with respect to changes in authorized delegates. Furthermore,
annual audited financial
statements are only required for Article 2 licensees (as this relates once again to the safety and
soundness of money transmitters and their financial solvency). All licensees are required to file
renewal reports pursuant to Articles 2, 3 and 4.}

^{SECTION 604. CHANGE OF
CONTROL.}

^{(a) A person or group of persons that proposes to
acquire control shall give written notice to the [superintendent] and request approval of the
acquisition and also submit a nonrefundable fee of
[$2,000].}

^{(b) A licensee whose voting securities or voting
interests are traded on an organized securities exchangewho is subject to federal or state
securities laws, shall give the [superintendent] written notice of a proposed change of
control within [15] days after learning of the proposed change of
control.}

^{(c) A licensee whose voting securities or voting
interests are not traded on an organized securities exchangewho is not subject to federal or
state securities laws, shall give the [superintendent] written notice of a proposed change
of control at least 30 days before the date of the proposed change
of control.}

^{(d) After review of the request for approval under
subsection (a), the [superintendent] may require the licensee to provide additional information
concerning the proposed controlling person or key shareholder of the licensee or controlling
person. The additional information must be limited to
the same type required of the licensee or controlling person as part of its original license or
renewal application.}

^{(e) The [superintendent] shall approve a request for
approval under subsection (a) if, after investigation, the [superintendent] determines that the
person or group of persons requesting approval has the competence, experience, character, and
general fitness to operate the licensee or
controlling person in a lawful and proper manner and that the interests of the public will not be
jeopardized by the change of control.}

^{(f) This section does not apply to the following
persons or transactions:}

^{(1) a registered dealer that acts as an underwriter or
member of a selling group in a public offering of the voting securities or voting interests of a
licensee or controlling person of a licensee;}

^{(2) a person that acts as a proxy for the sole purpose of
voting at a designated meeting of the security holders or holders of voting interests of a licensee
or controlling person of a licensee;}

^{(3) a person that acquires control of a licensee or
controlling person of a licensee by devise or
descent;}

^{(4) a person that acquires control as a personal
representative, custodian, guardian, conservator, or trustee, or as an officer appointed by a court
of competent jurisdiction or by operation of law;}

^{(5) a pledgee of a voting security or voting interest of
a licensee or controlling person that does not have the right, as pledgee, to vote the
security or interest; or}

^{(6) a person or transaction that the [superintendent] by
rule or order exempts in the public interest.}

^{(g) Before filing a request for approval to acquire
control, a person may request in writing a determination from the [superintendent] as to whether
the person would be considered a controlling person upon consummation of a proposed
transaction. If the [superintendent] determines that the
person would not be a controlling person, the [superintendent] shall enter an order to that effect
and the proposed person and transactionwill is notbe subject to the requirements of subsections
(a) through (e).}

^{Source: Florida Money Transmitters' Code Section
560.127 (with modifications).}

^{Reporter's
Note}

^{Section 604 requires
all persons who wish to acquire a controlling interest in a licensee (as broadly defined in Section
102) to apply for approval from the superintendent prior to obtaining control.
The Drafting Committee determined that prior notification was essential for both safety and
soundness reasons, as well as for the superintendent to properly assess the background of the
persons who
wish to acquire control (in order to evaluate whether such persons pose any risks in terms of
potential illegal activity). The superintendent retains discretion to request additional information
from
an applicant (e.g., personal financial information) that might assist the superintendent in
evaluating the
application.}

^{The Committee and Observers debated the issue of
whether the superintendent should require applicants to provide personal financial information
under Section 604 about controlling persons, such as executive officers of the acquiring
company. It was noted, however, that it should not be a
mandatory requirement because many executive officers at larger publicly traded companies
would object to such a requirement as an unnecessary invasion of privacy, since the financial
well-being of the company would bear no connection to the officer's personal wealth. The
superintendent
retains the discretion to request such information for smaller entities where the superintendent
needs more information to make an assessment of net worth and financial capability (i.e.,
individual proprietors who wish to acquire control of a money-services
business).}

^{SECTION 605. BOOKS, ACCOUNTS,
DOCUMENTS, AND OTHER RECORDS.}

^{(a) A licensee shall maintain books, accounts,
documents, and other records necessary to determine the licensee's compliance with this [Act].
At a minimum, a licensee shall maintain the following for at least three
years after the record is created:}

^{(1) a record of each payment instrument
sold;}

^{(2) a record of each payment instrument
cashed;}

^{(3) a general ledger posted at least monthly containing
all asset, liability, capital, income, and expense
accounts;}

^{(4) bank statements and bank reconciliation
records;}

^{(5) records of outstanding payment
instruments;}

^{(6) records of each payment instrument paid within the
three-year period;}

^{(7) a list of the last known names and addresses of all
of the licensee's authorized delegates; and}

^{(8) any other books, accounts, documents, and other
records that may be prescribed by the [superintendent] by
rule.}

^{(b) The items specified in subsection (a) may be
maintained in paper, photographic, electronic, or similar
medium.}

^{(c) Books, accounts, documents, and other records
may be maintained outside of this State if they are made accessible to the [superintendent] on
seven days' notice in a record.}

^{All books, accounts, documents and records
maintained by the licensee as required in subsections (a) through (c) shall be open to inspection
by the [superintendent] pursuant to Section
601.}

^{Source: Model Act Regulating Money Transmitters
Section 15 (with modifications).}

^{Notes to Tthis Draft: : A new subsection (d) has
been added to clarify that the records maintained by the licensee are subject to inspection
pursuant to a regulatory examination as set forth in Section
601.}

^{Reporter's
Note}

^{This section combines the more general reporting
provisions of the Florida Money Transmitters' Code Section 560.310 and the more detailed
reporting requirements contained in Section 15 of the Model Act Regulating Money
Transmitters. The Drafting Committee determined that the
statutory prescription for recordkeeping should be a minimum and that additional books and
records might be required by rule, if needed. Therefore, the current Section 605 is an
amalgamation of two previous provisions. The reporting requirements contained in Section 605
pertain mainly to
money transmitters (with respect to the sale of payment instruments). Most check cashing and
currency exchange law simply states that the licensee must maintain books and records as
required by rule. Both Committee members and Observers were in agreement with a three-year
record
retention period. The record retention period also reflects existing state
practice.}

^{SECTION 606. MONEY LAUNDERING
REPORTS.}

^{(a) A licensee shall file with the [attorney general] all
reports required by federal currency reporting, record keeping, and suspicious transaction
reporting requirements as set forth in 31 U.S.C Section 5311, 31 C.F.R. Part 103, and other
federal and state laws pertaining to money
laundering.}

^{(b) The timely filing of a complete and accurate report
required under subsection (a) with the appropriate federal agency inis compliance
with the reporting requirements of subsection (a), unless the [superintendent] notifies the licensee
that the [attorney general] has notified the
[superintendent] that reports of this type are not being regularly and comprehensively transmitted
by the federal agency to the [attorney general].}

^{Source: Abbreviated version of Florida Money
Transmitter Code Section 560.128 and President's Commission Model Financial Transaction
Reporting Act Section 5 (Reports to the Attorney
General).}

^{Reporter's
Note}

^{Money-services businesses are required to file relevant
reports required under federal or state law with respect to suspected money laundering. This
provision is meant to achieve two purposes. First, it requires licensees and their authorized
delegates to comply with federal and state
anti-money-laundering reporting requirements. By making this requirement explicit in a state
statute, money-services businesses will be put on notice of their reporting obligations. Second,
the superintendent has a basis for taking enforcement actions against non-compliant licensees
and
delegates.}

^{This section also permits licensees to comply with
state reporting requirements by filing the appropriate federal anti-money-laundering reports, and
thereby avoid duplicative filing. For most jurisdictions, federal data and reports are available
through FinCEN's Gateway computer system.
According to information the Drafting Committee received from the National Association of
Attorneys General, seven states receive such data on a computer tape from FinCEN under a
memorandum of understanding.}

^{Approximately ten states require that a
money-services business comply with all federal and state money-laundering and currency
transaction reporting laws. State laws typically replicate the federal law and require that cash
transactions in excess of $10,000 be reported to a state authority, as
well as to the U.S. Treasury. Most of the state reporting law does not specifically address
money-services businesses (but may apply to money-services businesses by implication).
Several states, including Colorado, Connecticut, Idaho, Indiana and Oklahoma, require
financial institutions to
file suspicious activity reports concurrently with Federal and state authorities. Arizona has its
own suspicious activity form for financial institutions. Suspected money-laundering activities are
reported to Arizona's Attorney General on a one-page form. Georgia provides that each financial
institution must keep a record of currency transactions in excess of $10,000 and that those reports
must be filed with the state within 15 days of the
transaction.}

~~^{SECTION 607.}~~^{ELECTR
ONIC FILING OF RECORDS. The [superintendent], by rule, may order that an application,
report, or record that is required to be filed pursuant to [this Act] may be filed
electronically.}

^{Source: Proposed addition to Florida Money
Transmitters' Code (new Section 560.120).}

^{Reporter's
Notes}~~~~

^{This provision is included in a series of proposed
amendments to the Florida Money Transmitters' Code that have been drafted by the Florida State
Department of Banking. These amendments have not been put before the Florida Legislature. At
the October 1998 drafting meeting, there was a
general sentiment that there needed to be some provision for the submission of records
electronically, as well as in writing.}

^{[ALTERNATIVE
1]}

^{SECTION 608. CONFIDENTIALITY OF
RECORDS.}

^{(a) Except as
otherwise provided in this [Act], the records of the [superintendent] relating to licensees and
authorized delegates are not public records and are not open to inspection by the public.
Neither the [superintendent], exceptExcept as otherwise provided in subsections
(b) through (d), neither the [superintendent], ,}^{nor an employee of the [superintendent] may
disclose information
obtained in the discharge of official duties to a person not employed by the [name of appropriate
state department or regulatory
agency].}

^{(b) The [superintendent] may disclose confidential
information pertaining to a licensee and authorized delegate
to:}

^{(1) a country district attorney in this
State;}

~~⁽²⁾~~^{(1) the
attorney general of this State;}

^{(2)(3) a representative of a federal or
state agency or a foreign country having regulatory or supervisory authority over the activities of
the licensee and authorized delegate if the representative is permitted to and, upon request of the
[superintendent], discloses similar information respecting
licensees and authorized delegates under its regulation or supervision and who avers in writing
under oath that the representative will maintain the confidentiality of the information;
and}

^{(43) to a federal, state, or [county] grand
jury in response to a lawful subpoena.}

^{(c) The [superintendent]
may:}

^{(1) disclose the fact of a licensee's filing of an
application with the [superintendent] under this [Act], give notice of a hearing, if any, regarding
an application, and announce the action taken on the
application;}

^{(2) disclose a final decision in connection with
proceedings for the suspension or revocation of a license issued under this [Act]; and}

^{(3) for general statistical information, prepare and
circulate a report reflecting the assets and liabilities of licensees and authorized delegates,
including other information considered pertinent to the purpose of the
report.}

^{(d) This section does not preclude the disclosure of
information admissible in evidence in a civil or criminal action, suit, or proceeding brought by or
at the request of the [superintendent] to enforce or prosecute a violation of this [Act] or a rule
adopted or an order issued under this [Act].}

^{Source: President's Commission Act Section 24 (with
modifications).}

^{[ALTERNATIVE
2]}

^{SECTION 608. CONFIDENTIALITY OF
RECORDS.}

^{Financial information not normally available to
the public that is submitted on a confidential basis by an applicant or a licensee to comply with
licensing or other regulatory functions of the [superintendent] is
confidential.}

^{Nothing in this section prohibits the
[superintendent] from releasing to the public a list of persons licensed under this act or from
releasing aggregate financial data on
licensees.}

^{Source: : Maine Money Transmitters Act
Section 6115 (with
modifications).}~~~~

^{Reporter's
Note}

^{At the annual meeting in July 1999, some
concern was expressed that the confidentiality provisions contained in Alternative 1 were too
onerous and that the public should have access to some information about licensees. Alternative
2 is a pared down confidentiality provision which protects
the business or proprietary financial information that may be submitted by a license applicant or
licensee. This provision might also be coupled with a separate investigative provision that would
permit the attorney general or county attorney to conduct investigations to determine whether a
licensee, authorized delegate or person engaged in money services business has failed to file a
report required by this Act or has engaged in any act that constitutes a violation of this Act. See,
e.g., Iowa Financial Transactions Reporting Act Section 529.3 (IA St.
�529.3)}

^ARTICLE
7

^{PERMISSIBLE
INVESTMENTS}

^{SECTION 701. MAINTENANCE OF
PERMISSIBLE INVESTMENTS.}

^{(a) A licensee shall maintain at all times permissible
investments that have a market value computed in accordance with generally accepted
accounting principles of not less than the aggregate amount of all of its outstanding payment
instruments issued or sold and money transmitted by the
licensee or its authorized delegates.}

^{(b) The [superintendent], with respect to any licensees,
may limit the extent to which a class of permissible investments may be considered a permissible
investment, except for money and certificates of deposit issued by a United State bank or
financial institution.. The [superintendent] by rule
may prescribe or by order allow other types of investments that the [superintendent] determines
to have a safety substantially equivalent to other permissible
investments.}

^{(c) Permissible investments, even if commingled with
other assets of the licensee, are held in trust for the benefit of the purchasers and holders of the
licensee's outstanding payment instruments in the event of bankruptcy or receivership
of the licensee.}

^{Source: : President's Commission Act Section
14 (with
modifications).}~~~~

^{Reporter's
Note}

^{Money transmitters
are required to maintain a certain level of investments that are equal to the value of their
outstanding obligations as a means of protecting individual consumers. This is another
safety and soundness requirement designed to safeguard funds received from
consumers.}

^{SECTION 702. TYPES OF PERMISSIBLE
INVESTMENTS.}

^{(a) Except to the extent otherwise limited by the
[superintendent] pursuant to Section 701, the following investments are permissible under
Section 701:}

^{(1) cash, a certificate of deposit, or other debt
obligation of an insured depository institution, as defined in Section 3 of the Federal Deposit
Insurance Act [12 U.S.C. Section 1813];}

^{(2) a banker's acceptance or bill of exchange that is
eligible for purchase by member banks of the Federal Reserve
System;}

^{(3) an investment bearing a rating of one of the three
highest grades as defined by a nationally recognized organization that rates
securities;}

^{(4) an investment security that is an obligation of the
United States or a department, agency, or instrumentality thereof; an investment in an obligation
that is guaranteed fully as to principal and interest by the United States or an investment in an
obligation of a State or a governmental
subdivision, agency, or instrumentality thereof;}

^{(5) receivables that
are duepayable to a licensee from its authorized delegates pursuant to contracts
which are not past due or doubtful of collection if the aggregate amount of investments in
receivables under this paragraph does not exceed 20 percent of the total permissible investments
of a licensee and a licensee does not have at one time investments in receivables under this
paragraph
in any one person aggregating more than 10 percent of the licensee's total permissible
investments;
and}

^{(6) a share or a certificate issued by an open-end
management investment company that is registered with the Securities and Exchange
Commission under the Investment Company Act of 1940 [15 U.S.C. Sections 80a-1 et. seq.], and
the portfolio of which is restricted by the management
company's investment policy to investments specified in paragraphs (1) through
(4).}

^{(b) The following investments are
permissible under Section 701, but only to the extent
specified:}

^{(1) an interest-bearing bill, note, bond, or debenture of
a person whose shares are traded on a national securities exchange or on a national
over-the-counter market, if the aggregate investments under this paragraph do not exceed 20
percent of the total permissible investments of a licensee
and a licensee does not at one time have investments under this paragraph in any one person
aggregating more than 10 percent of the licensee's total permissible
investments;}

^{(2) a share of a person traded on a national securities
exchange or a national over-the-counter-marketover-the-counter market or a share
or a certificate issued by an open-end management investment company that is registered with
the Securities and Exchange Commission under the
Investment Company Act of 1940, and the portfolio of which is restricted by the management
company's investment policy to shares of a person traded on a national securities exchange or a
national over-the-counter-market,over-the-counter market, if the aggregate
investments under this
paragraph does not exceed 20 percent of the total permissible investments of a licensee and a
licensee do not at one time have investments under this paragraph in any one person aggregating
more than 10 percent of the licensee's total permissible
investments;}

^{(3) a demand borrowing agreement made to a
corporation or a subsidiary of a corporation whose securities are traded on a national securities
exchange if the aggregate of the amount of principal and interest outstanding under demand
borrowing agreements under this paragraph does not
exceed 20 percent of the total permissible investments of a licensee and a licensee does not at one
time have principal and interest outstanding under demand borrowing agreements under this
paragraph with any one person aggregating more than 10 percent of the licensee's total
permissible
investments; and}

^{(4) any other investment the [superintendent]
determines to be permissible, to the extent specified by the
[superintendent].}

^{(c) The aggregate investments under subsection (b)
may not exceed 50 percent of the total permissible investments of a licensee calculated in
accordance with Section 701.}

^{Source: This is a new provision that works with some
of the categories of permissible investments contained in the Model Act Regulating Money
Transmitters Section 3.}

^{Reporter's
Notes}~~~~

^{At the October 1998 drafting meeting, the Drafting
Committee expressed some concern about the types of permissible investments that have been
included in model legislation, as well as in existing state money-transmission statutes. As stated
in the Prefatory Note, money transmitters have to
maintain investments that are equal to the aggregate face amount of all their outstanding funds
transfers and payment instrument obligations (on a dollar for dollar basis). The Drafting
Committee observed that certain investments appeared more risky than others -- especially in the
absence
of any limitations or caps on percentage of the licensee's portfolio invested in any of these
items.}

^{The items that the Committee identified as potentially
problematic were:}

^{shares in a money-market mutual fund,
interest-bearing bills or notes or bonds, debentures or stock traded on any national securities
exchange or on a national over-the counter-market, or mutual funds primarily composed of one
or more investments as described in this section;}

^{a demand borrowing
agreement made to a corporation or a subsidiary of a corporation whose capital stock is listed on
a national exchange; and}

^{receivables that are due to a licensee from its
authorized delegates pursuant to a contract which are not past due or doubtful of
collection.}

^{The Drafting Committee thought that these types of
investments posed higher levels of risk to the licensee and ultimately to the public than was
appropriate for money-services businesses. Industry Observers noted, however, that such
investments were commonly included in state law. In fact,
the MTRA outline lists such investments as permissible, though it states that loans should not
exceed 10 percent of the net worth of a licensee, and the amount of such loans as a total
percentage of permissible investments may be subject to
legislation.}

^{The current list of permissible investments is an
attempt to balance the concerns of regulators for safety and soundness and of industry
participants who have concerns about their ability to properly conduct business. The categories
of investments listed in Section 702(b) permit the type of
investments that had previously raised concerns. The main difference in the new Section 702(b)
and current practice is that the aggregate cap on such investments is set at 20 percent of the
licensee's portfolio. Additionally, the licensee may not invest in more than 10 percent of any one
person
with respect to these same investment categories. This balances the need to allow licensees to
have flexible and diverse options for investment, but also limits the aggregate amount that a
licensee can invest in these riskier categories.}

^{Receivables, in particular, was one category that
received considerable attention by members of the Committee. Industry Observers, however,
explained that there was a practical reason for including receivables as a category of permissible
investments. They noted that the practice of
including receivables as permissible investments had become a necessity due to the use of
automated money-order dispensers. Typically, money orders are sold at sales outlets through
automated dispensers. The automated dispenser immediately records the sale of the money order
and notifies
the money transmitter. This real-time "notification" immediately triggers the obligation of a
money transmitter to retain permissible investments for the money order sold on a dollar for
dollar basis. However, while the obligation to maintain investments is triggered at the time of
sale, there is
a lag of time until the sales outlet actually remits funds to the money transmitter. For the time
period between sale and remittance of the funds that the sales outlet has received, the money
transmitter needs to treat those "receivables" as part of its permissible investment portfolio.
Previously,
authorized delegates had notified a money transmitter of the number of money orders sold at the
same time that it remitted a check for the funds
received.}

^ARTICLE
8

~~^ENFORCEMENT~~

^{SECTION 801. ORDERS TO CEASE AND DESIST;
POWERS OF SUSPENSION AND
REVOCATION.}

^{(a) After notice and hearing, the [superintendent] may
issue an order to cease and desist, suspend or revoke a license, , place a licensee in
receivership, or order a licensee to revoke the designation of an authorized delegate if:}

^{(1) the licensee does not comply with this [Act] or a
rule adopted or an order issued under this [Act];}

^{(2) the licensee or authorized delegate of the licensee
engages in fraud, misrepresentation, deceit, or gross
negligence;}

^{(3) an authorized delegate violates the Bank Secrecy
Act, a state or federal anti-money-laundering statute, or a rule adopted or an order issued under
this [Act] as a result of the licensee's willful failure to supervise the authorized delegate or as a
result of the willful misconduct or willful
blindness of the licensee;}

^{(4) the licensee is insolvent or suspends payment of its
obligations, or makes an assignment for the benefit of its
creditors;}

^{(5) the licensee does not remove an authorized
delegate after the [superintendent] issues and serves upon the licensee a final order setting forth a
finding that the authorized delegate has violated this
[Act];}

^{(6) the competence, experience, character, or general
fitness of the licensee or authorized delegate or a controlling person of the licensee or authorized
delegate indicates that it is not in the public interest to permit the person to engage in the
money-services business; or}

^{(7) the licensee engages in an unsafe or unsound
practice.}

^{(b) In determining whether a person is engaging in an
unsafe or unsound practice, the [superintendent] may consider the size and condition of the
money transmitter, the magnitude of the loss, the gravity of the violation of this [Act], and the
previous conduct of the person involved.}

^{Source: Florida Money Transmitters' Code Section
560.11; President's Commission Act Sections 11 and
12.}

^{Reporter's
Notes}~~~~

^{Section 801 sets forth the circumstances pursuant to
which the superintendent may take disciplinary actions against a licensee. This is an important
mechanism for the prevention of money laundering. The issuance of a cease and desist order and
suspension and revocation of a license may
only occur after a hearing in accordance with the state's administrative procedure act. Licensee
violation of state money-laundering prohibitions is specified on the list. Section 801 also
specifics the circumstances under which the superintendent may take action against the licensee
for the
authorized delegate's conduct. Pursuant to Section 801 (a)(3), the superintendent is authorized to
take action against a licensee for a delegate's violations of money-laundering prohibitions or any
act done "as a result of a course of a willful failure to supervise or of the willful misconduct or
willful blindness of the licensee." A willful misconduct standard has been chosen because a strict
liability standard may result in consequences disproportionate to the social harm involved from
the delegate's activity.}

^{Some states provide more detailed standards for when
a cease and desist order becomes effective. The Texas Currency Exchange Transportation and
Transmission provisions of the Texas Finance Code provide that a cease and desist order takes
effect on issuance if the Banking
Commissioner finds a threat of immediate and irreparable harm to the license holder or the
public. If no immediate or irreparable harm is found, the order is not effective before 10 days
after the order is received. Other state laws enumerate separate and specific grounds for the
denial of a
license or for revocation, suspension or restriction of a previously granted license. Florida, for
example, lists a material misstatement of fact in an initial or renewal application, the loss of
license in another jurisdiction (due to fraud or dishonest dealing) and criminal convictions
involving
fraud or dishonest dealing as grounds for license denial, suspension or non-renewal. See Florida
Money Transmitters' Code Section
560.114(2)(a)-(c).}

^{SECTION 802. AUTHORIZED DELEGATES;
ORDERS TO CEASE AND DESIST.}

^{(a) After notice and hearing, the [superintendent] may
issue an order to cease and desist against a licensee or its authorized delegate, including an order
requiring the licensee to cease engaging in the business through an authorized delegate and to
take appropriate affirmative action, if the
[superintendent] finds that:}

^{(1) the authorized delegate is violating or has
violated this [Act] or a rule adopted or an order issued under this
[Act];}

^{(2) the authorized delegate does not cooperate with an
examination or investigation by the
[superintendent];}

^{(3) the competence, experience, character, or general
fitness of the authorized delegate or a controlling person of the authorized delegate indicates that
it is not in the public interest to permit the person to engage in the money-services
business;}

^{(4) the financial condition of the authorized delegate
jeopardizes the interests of the public in the conduct of the money-services
business;}

^{(5) the authorized delegate is engaging in an unsafe or
unsound practice; or}

^{(6) the authorized delegate commits a
felony.}

^{(b) In determining whether a person is engaging in an
unsafe or unsound practice, the [superintendent] may consider the size and condition of the
money transmitter, the magnitude of the loss, the gravity of the violation of this [Act], and the
previous conduct of the person involved.}

^{Source: President's Commission Act Section 10 (with
modifications).}

^{Reporter's
Note}

^{Section 802 complements Section 801. Section 802
sets forth the circumstances pursuant to which the superintendent may take direct action against
the authorized delegate. This is another important enforcement and regulatory tool for the
prevention of money laundering. Because authorized
delegates may be potential sites for money-laundering activity (due to a lesser degree of
supervision and oversight and also the large number of delegates that may exist for a given
licensee), the superintendent needs to have authority to take action against the delegate
directly.}

^{SECTION 803. TEMPORARY
ORDERS TO CEASE AND DESIST.}

^{(a) If the [superintendent] determines that a violation
of this [Act] or of a rule adopted or an order issued under this [Act] by a licensee or authorized
delegate is likely to cause immediate and irreparable harm to the licensee, its customers, or the
public as a result of the violation, or cause
insolvency or significant dissipation of assets of the licensee, the [superintendent] may issue a
temporary order requiring the licensee or authorized delegate to cease and desist from the
violation. The order becomes effective upon service of it upon the licensee or
authorized delegate.}

^{(b) A temporary order remains effective and
enforceable pending the completion of an administrative proceeding pursuant to Section 801 or
802.}

^{(c) Within 10 days after a licensee or an authorized
delegate is served with a temporary order to cease and desist, the licensee or authorized delegate
may petition the [appropriate court], for an injunction setting aside, limiting, or suspending the
enforcement, operation, or effectiveness of the
temporary order pending the completion of an administrative proceeding pursuant to Section 801
or 802.}

^{Source: This new provision is loosely based on
Section 8(c) of the Federal Deposit Insurance Act, 12 U.S.C. Section
1818(c).}

^{Reporter's
Note}

^{There was some concern expressed at the October
1998 meeting that the Act did not provide the superintendent with sufficient authority to deal
with exigent situations through the use of expedited procedures. Section 803 provides the
superintendent with limited authority to issue temporary
orders to cease and desist without prior notice and hearing procedures. The superintendent,
however, must have a reasonable belief that the licensee or its authorized delegate is engaging in
an unsafe or unsound activity or is violating a provision of the Act, before invoking temporary
powers.}

^{SECTION 804. CONSENT ORDERS. The
[superintendent] may enter into a consent order at any time with a person to resolve a matter
arising under this [Act]. A consent order must be signed by the person thatto
whom it is issued to or by the person's authorized representative, and must
indicate agreement with the terms contained in the order. A consent order need not constitute an
admission by a person that this [Act] or a rule adopted or an order issued under this [Act] has
been violated.}

^{Source: Model Act Regulating Money Transmitters
Section 24.}

^{Reporter's
Note}

^{Section 804 gives the superintendent the ability to
enter into a negotiated settlement with a money-services business with respect to alleged
violations of the Act and potential disciplinary proceedings. The use of consent orders provides
the superintendent with a flexible means of achieving
enforcement goals while minimizing the administrative and fiscal burden of lengthy
administrative proceedings and hearings.}

^{SECTION 805. CIVIL
PENALTIES.}

^{(a) A person that intentionally violates this [Act] or a
rule adopted or an order issued under this [Act] may be assessed a civil penalty by [the
superintendent] in an amount equal to [$1,000] per day plus the State's costs and expenses for the
investigation and prosecution of the matter, including
reasonable attorney's fees.}

^{(b) The [superintendent] may maintain an action in the
[name of appropriate court or adjudicatory body] in the [county] in which a violation of this
[Act] or of a rule adopted or an order issued under this [Act] is alleged to have occurred or in any
other [county] in which venue is permitted
under [reference to this State's venue statutes and rules] in the same manner as in other civil
actions.}

^{Source: Florida Money Transmitters' Code Section
560.117; President's Commission Act Section 23.}

^{Reporter's
Note}

^{In addition to the ability to take disciplinary action
against a money-services business or its delegates for violations of the Act, civil penalties
provide another enforcement mechanisms aimed at deterring money laundering. As discussed at
the first meeting of the Drafting Committee, civil
penalties are preferred enforcement mechanisms due to the commercial nature of the Act. The
current Section 805 was the second of two alternatives included in the February 1998 draft. The
first alternative capped the maximum civil penalty at $100 per day per violation. The same
provision
also allowed licensees an opportunity to cure their violations. The Drafting Committee decided
that such a "cure" provision eliminated much of the effectiveness of the civil money penalty
provision. The second alternative, which was retained in the Act, has been modified. Previously,
it
included a reference to a fine equal to the gross business engaged in connection with the
violation. The Drafting Committee and Observers alike considered this too imprecise a formula.
Instead, a civil money penalty of $1,000 per day is included. Additionally, the Committee
eliminated
former subsection 805 (b), which included a separate fine of $1,000 per day for engaging in a
money-services business without a license. It was decided that this was, by definition, a violation
of the Act and therefore did not need to be the subject of a separate
provision.}

^{SECTION 806. CRIMINAL
PENALTIES.}

^{(a) A person that intentionally makes a false statement,
misrepresentation, or false certification in an application, financial statement, book, document,
account, customer receipt, report, or other record filed or required to be maintained under this
[Act] or that intentionally makes a false entry
or omits a material entry in such a record is guilty of a [reference to state classification]
felony.}

^{(b) A person that refuses to permit a lawful
examination or investigation by the [superintendent] is guilty of a [reference to state
classification] felony.}

^{(c) A person that intentionally engages in any conduct
for which a license is required under this [Act] without being licensed under this [Act] is guilty
of a [reference to state classification] felony.}

^{Source: President's Commission Act Section 22.
Subsection (e) was added from the Maine Act to Regulate Money Transmitters and Amend
Consumer Credit Laws, 32 MRSA Section
6124(3).}

^{Reporter's
Note}

^{General criminal penalties for all violations are typical
of regulatory codes. False statements and other misrepresentations are at the core of the
regulatory process and therefore are listed separately. Although the Drafting Committee
expressed some concern about the inclusion of criminal
penalties in a civil licensing statute, Observers who represented law enforcement emphasized the
need for criminal penalties in connection with serious violations of the Act. The Committee
supports the inclusion of those provisions in Section 806 because they relate to very serious,
specific
and tangible violations of the Act.}

^ARTICLE
9

^{ADMINISTRATIVE
PROCEDURES}

^{SECTION 901. ADMINISTRATIVE
PROCEDURES. All administrative proceedings under this [Act] must be conducted in
accordance with [the state administrative procedure
act].}

^{Source: Florida Money Transmitters' Code Section
560.108(2) (with modifications).}

^{Reporter's
Note}

^{The Drafting Committee noted that the Act should
generally conform to the Model State Administrative Procedure Act. MTRA members also
expressed their position that the Act should conform to state administrative procedure
laws.}

^{SECTION 902.
HEARINGS.}

^{(a) Except as otherwise provided in Sections 204(c),
303(c), 403(c),205(c), 305(c), 405(c), and 803, the [superintendent] may not
suspend or revoke a license, issue an order to cease and desist, revoke the designation of an
authorized delegate, or assess a civil penalty without notice and a
hearing.an opportunity to be heard. The [superintendent] shall also hold a hearing
when requested to do so by an applicant whose application for a license is
denied.}

^{(b) The [superintendent], in a record, shall give a
licensee or an applicant at least [10] days' notice of the time and place of a hearing, addressed to
the licensee or applicant at its last known address contained in the records of the
[superintendent].}

^{Source: President's Commission Act Section 12 (with
modifications).}

^{Reporter's
Note}

^{Except for the issuance of temporary orders pursuant
to Section 803, the superintendent is required to provide notice and have a hearing before taking
any disciplinary or enforcement actions against a licensee or its authorized delegates. The
President's Commission Act only refers to
suspension, revocation and denial of licenses. Section 802 has been also been extended further to
include cease and desist authority and the ability to assess civil
penalties.}

^ARTICLE
10

^{MISCELLANEOUS
PROVISIONS}

^{SECTION 1001. APPOINTMENT OF
[SUPERINTENDENT] AS AGENT FOR SERVICE OF
PROCESS.}

^{(a) A licensee or a person that engages in the business
without being licensed under this [Act] is deemed to
have:}

^{(1) consentedCconsented to the
jurisdiction of the courts of this State for all actions, suits, andactions and other
proceedings arising under this [Act]; and}

^{(2) appointed the [superintendent] as its lawful agent
for the purpose of accepting service of process in an action, suit, or proceeding arising under this
[Act].}

^{(b) Within [three] business days after service of
process upon the [superintendent], the [superintendent] shall send by certified mail copies of all
lawful process accepted by the [superintendent] as a person's agent to the person at its last known
address. Service of process is complete [three]
business days after the [superintendent] deposits the copies of the process in the United States
mail.}

^{SECTION 1002. UNIFORMITY OF APPLICATION
AND CONSTRUCTION. In applying and construing this Uniform [Act], consideration must be
given to the need to promote uniformity of the law with respect to its subject matter among
States that enact it.}

^{SECTION 1003. SEVERABILITY CLAUSE. If any
provision of this [Act] or its application to any person or circumstance is held invalid, the
invalidity does not affect other provisions or applications of this [Act] which can be given effect
without the invalid provision or application, and to
this end the provisions of this [Act] are severable.}

^{SECTION 1004. EFFECTIVE DATE. This [Act]
takes effect on .. ......}

^{SECTION 1005. SAVINGS AND TRANSITIONAL
PROVISIONS.}

~~^{1. *}~~^{Formerly the
Nondepository Providers of Financial Services Act.}^{The
Drafting Committee voted to change the draft act's name at the October 1998 meeting. The
Executive Committee approved the name change as of January
1999.}

^{2. *Formerly the Nondepository Providers of Financial Services Act. The Drafting
Committee voted to change the draft act's name at the October 1998 meeting. The Executive
Committee approved the name change as of January
1999.}