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DRAFT
FOR DISCUSSION ONLY
MONEY SERVICES BUSINESS ACT
_________________________________________________________________
NATIONAL CONFERENCE OF
COMMISSIONERS
ON UNIFORM STATE LAWS
_________________________________________________________________
September 1998
DRAFT NONDEPOSITORY PROVIDERS
OF FINANCIAL SERVICES ACT
February 1999
MONEY SERVICES BUSINESS
ACT
With Notes
Copyright © 19981999
By
NATIONAL CONFERENCE OF COMMISSIONERS
ON UNIFORM STATE LAWS
_________________________________________________________________
The ideas and conclusions herein set forth, including the drafts of proposed legislation, have
not been passed on by the National Conference of Commissioners on Uniform State Laws. They
do not necessarily reflect the views of the Drafting Committee, the Reporter or Commissioners.
Proposed statutory language, if any, may not be used to ascertain legislative meaning of any
promulgated final law.
DRAFTING COMMITTEE ONUNIFORM NONDEPOSITORY PROVIDERS
OF FINANCIALMONEY SERVICES ACTBUSINESS ACT*
TOM BOLT, Corporate Place, Royal Dane Mall, St. Thomas, VI 00802, Chair
ARTHUR E. BONFIELD, University of Iowa, College of Law, Iowa, IA 52242
DAVID A. GIBSON, P.O. Box 1767, 10 Park Place, Brattleboro, VT 05302
MICHAEL HOUGHTON, P.O. Box 1347, 18th Floor, 1201 N. Market St., Wilmington, DE
19899
L. GENE LEMON, 1840 N. Central Avenue, Suite 2311, Phoenix, AZ 85077
SCHOTT SCHERER, 1085 Palms Airport Drive, Las Vegas, NV 89119
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 98105-6627, Reporter
**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 70130-3405, Advisor
EXECUTIVE DIRECTOR
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
DRAFT NONDEPOSITORY PROVIDERS OF
http://www.law.upenn.edu/library/ulc/ulc.htm
FINANCIAL SERVICESMONEY SERVICES BUSINESS ACT
TABLE OF CONTENTS
PARTARTICLE 1
GENERAL PROVISIONS
SECTION 101. SHORT TITLE.
SECTION 102. DEFINITIONS.
PART 2
SCOPE, EXCEPTIONS AND EXCLUSIONS
SECTION 201. SCOPE.
SECTION 202. 103. SUPERVISORY POWERS OF [SUPERINTENDENT].
SECTION 203. 104. EXCLUSIONS.
SECTION 105. LICENSE REQUIRED.
ARTICLE 2
LICENSING OF MONEY TRANSMITTERS AND PAYMENT INSTRUMENT SELLERS
SECTION 201. APPLICATION FOR LICENSE.
SECTION 202. SECURITY.
SECTION 203. ISSUANCE OF LICENSE.
SECTION 204. LICENSE REQUIREMENT.RENEWAL OF LICENSE.
PART 3
LICENSING OF MONEY TRANSMITTERS, CHECK SELLERS, CHECK ISSUERS [AND
STORED VALUE PROVIDERS]SECTION 205. APPLICATION AND LICENSE FEES.
SECTION 206. NET WORTH.
ARTICLE 3
LICENSING OF CHECK CASHERS AND CURRENCY EXCHANGERS
SECTION 301. APPLICATION FOR LICENSE.
SECTION 302. BOND AND NET WORTH REQUIREMENTS.ISSUANCE OF LICENSE.
SECTION 303. ISSUANCERENEWAL OF LICENSE.
SECTION 304. LICENSE RENEWAL.APPLICATION AND LICENSE FEES.
SECTION 305. LICENSE FEE.NET WORTH.
SECTION 306. NET WORTH.
PART 4
LICENSING OF CHECK CASHERS AND CURRENCY EXCHANGERSARTICLE 4
AUTHORIZED DELEGATES
SECTION 401. APPLICATION FOR LICENSE.RELATIONSHIP BETWEEN LICENSEES
AND AUTHORIZED DELEGATES.
SECTION 402. ISSUANCE OF LICENSE.SCOPE OF AUTHORIZED DELEGATE'S
ACTIVITY.
SECTION 403. LICENSE RENEWAL.UNAUTHORIZED ACTIVITIES.
SECTION 404. LICENSE FEE.
SECTION 405. NET WORTH.
PART 5
AUTHORIZED DELEGATESARTICLE 5
EXAMINATIONS, REPORTS, AND RECORDS
SECTION 501. RELATIONSHIP BETWEEN LICENSEES AND AUTHORIZED
AUTHORITY TO CONDUCT EXAMINATIONS.
DELEGATES.
SECTION 502. SCOPE OF AUTHORIZED DELEGATE ACTIVITY.JOINT
EXAMINATIONS.
SECTION 503.PROHIBITED TRANSACTIONS.
PART 6
EXAMINATIONS, REPORTS AND RECORDS
SECTION 601. AUTHORITY TO CONDUCT EXAMINATIONS.
SECTION 602. JOINT EXAMINATIONS
SECTION 603. REPORTS.
SECTION 604. 504. CHANGE OF CONTROL.
SECTION 605. BOOKS AND RECORDS
SECTION 606. TRANSACTION RECORDS.505. BOOKS, RECORDS, ACCOUNTS, AND
DOCUMENTS.
SECTION 506. RECORDS OF TRANSACTIONS.
SECTION 607. 507. MONEY LAUNDERING REPORTS.
SECTION 508. ELECTRONIC FILING OF RECORDS.
608. SECTION 509. CONFIDENTIALITY OF RECORDS.
PART 7 ARTICLE 6
PERMISSIBLE INVESTMENTS
SECTION 701. 601. MAINTENANCE OF PERMISSIBLE INVESTMENTS.
PART 8
ENFORCEMENT.
SECTION 8001. CEASE AND DESIST ORDERS; SUSPENSION AND
REVOCATION POWERS.SECTION 602. TYPES OF PERMISSIBLE INVESTMENTS.
ARTICLE 7
ENFORCEMENT
SECTION 701. ORDERS TO CEASE AND DESIST; POWERS OF SUSPENSION AND
REVOCATION.
SECTION 8002. 702. AUTHORIZED DELEGATES; CEASE AND DESIST
ORDERS TO CEASE AND DESIST.
ORDERS.
SECTION 703. TEMPORARY ORDERS TO CEASE AND DESIST.
SECTION 8003. 704. CONSENT ORDERS.
SECTION 8004. 705. CIVIL PENALTIES.
SECTION 8005. 706. CRIMINAL PENALTIES.
SECTION 8006. UNAUTHORIZED ACTIVITY.
SECTION 8007. INJUNCTIONS.
PART 9
ADMINISRATIVE707. UNAUTHORIZED ACTIVITIES.
ARTICLE 8
ADMINISTRATIVE PROCEDURES
SECTION 901. 801. ADMINISTRATIVE PROCEDURES.
SECTION 902. 802. HEARINGS.
PART 10 ARTICLE 9
MISCELLANEOUS PROVISONS
SECTION 1001. CONSUMER DISCLOSURE.
SECTION 1002. 901. APPOINTMENT OF [SUPERINTENDENT] AS AGENT FOR
FOR SERVICE OF PROCESS.
SECTION 1003. 902. UNIFORMITY OF APPLICATION AND CONSTRUCTION.
SECTION 1004. 903. SEVERABILITY.
SECTION 1005. 904. EFFECTIVE DATE.
SECTION 1006. 905. SAVINGS AND TRANSITIONAL PROVISIONS.
PART 1.
GENERAL PROVISIONS.
ARTICLE 1
GENERAL PROVISIONS
SECTION 101. SHORT TITLE. This [Act] may be cited as the Money Services
Business Act.
Reporter's Note: The Proposed Money Services Business Act ("Proposed Act") was
previously referred to as the Proposed Nondepository Providers Act.
of Financial Services Act. The name change was recommended at the last meeting of the
Drafting Committee held in Washington, D.C. in October 1998. Observers and Drafting
Committee members felt that "money services business" was a more appropriate description of
the various types of entities that fall within the scope of the Proposed Act. The Financial Crimes
Enforcement Network of the United States Department of Treasury ("FinCEN") has also
suggested the use of this term in its proposed rules concerning the non depository providers such
as money transmitters, check cashers, payment instrument sellers and stored value providers in
its proposed rules concerning such industries. The Executive Committee of the National
Conference of Commissioners on Uniform State Laws ("NCCUSL") approved the change of the
Proposed Act's name at its last meeting in January 1999.
SECTION 102. DEFINITIONS. In this [Act]:
(1) "Applicant" means a person filing an application for a license under this [Act].
Source: Non-Bank Funds Transmitter Group Model Act Regulating Money Transmitters
("Model Act Regulating Money Transmitters") Section 3.
SUBPARAGRAPH (2) ALTERNATIVE 1
(2) "Authorized (2) "Authorized delegate" meansan entity designated by the
licensee under this [Act] to sell or issue payment instruments, to transmit funds, cash checks, sell
or exchange currency, or sell, issue, or redeem stored value products on behalf of aa person
designated by a licensee to engage in a money services business on behalf of the licensee.
Source: Model Act Regulating Money Transmitters Section 3 with modifications.
Reporter'sReporter's Note: It is important to clearly define the outlets through which money
service businesses conduct theira money services business conducts its business. This definition
will help to define the legal relationship between money service businessesa money services
business and those outlets. The Money Transmitters Regulators'Regulators' Association Model
Legislation Outline ("Model Legislation Outline") uses the term "authorized agent" as an
alternative to authorized delegate. The Financial CrimesFinCEN, in its May 1997 Enforcement
Network of the United States Department of Treasury ("FinCEN") in its recent proposed
rulemaking concerning money service businessesservices businesses, uses the term "agent" for
those same entities. In its comments, FinCEN notes that "Treasury intends that the concept of
'agent''agent' for the list requirement should be as broad as the common law of agency would
allow, that is, it would extentextend to any relationship that would be deemed to create
obligations of principal and agent at common law. Thus, for example, it is likely that virtually all
independent contractor arrangements for money services businesses -- whatever their
characterization for employment law or income tax purposes -- would be treated as creating
principal-agent relationships to define the parameters of the rights, obligations and direct and
derivative liabilities of the parties. See Restatement (Second) of Agency Sections 2(c)28 and
14N." 62 Fed. Reg. 27895.
27895. Finally, theThe Non-Bank Funds Transmitters Group has suggested another alternative,
"money transmitter outlet" to refer to independently owned sales outlets. The definition of money
transmitter outlet defines the entity as "a person, whether or not licensed or required to be
licensed, who is engaged in the business of transferring funds through a money transmitter even
if incidental to another business."
SUBPARAGRAPH (2) ALTERNATIVE 2
(2) "Agent" means a person whom the licensee appoints as its agent with authority to conduct
money service business activities on behalf of the licensee.
Source: Modification of definition contained in Section 33043 of the California Financial
Code.
Reporter's Note: Rather than use the term delegate the committee may consider using the
term "agent" to signify the relationship between a licensee and outlets that conduct business on
behalf of the licensee.The principles of agency law may apply in some states with respect to the
relationship of the licensee and its authorized delegates. Some of the Observers have noted that
the relationship of delegate and licensee should explicitly be governed by agency principles. This
issue needs to be discussed again during the March 1999 drafting meeting.
(3) "Check casher" means a person that accepts a payment instrument in exchange for
money delivered to a presenter at the time and place of the presentation and receives
compensation for the exchange and receives at least [$1,500] in such fees during any [30]
- day period.
Source: New
Reporter's Note: Industry Observers proposed the new definition at the October 1998
drafting meeting. The main difference in the new definition 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.
who, for compensation sells currency in exchange for payment instruments received. The term
does not include aPreviously, the definition of check casher excluded "a person who cashes
checks in an amount less than or equal to [$500] for any person on a singleday.
Source: Florida Money Transmitters Code Section 560.102 (with modifications).
Reporter's Note: The $1,000 per day threshold is an attemptday." Such definitions are used
to exempt small businesses -- such as grocery stores and businesses where check cashing is a
service offered to customers incidental to another business (e.g., hotels) -- from having to obtain
a license. FinCEN, in its proposed amendments to the Bank Secrecy Act used a $500 per day
threshold. Many of the responses to FinCEN's proposed rules advocated a higher dollar limit of
license.
$1,000 or more. An alternative definition that is used in some of the states excludes "persons
engaged in check cashing [or currency exchanging] which is incidental to the retail sale of goods
and services, whose compensation for cashing checks [or exchanging currency] does not exceed
5 percent of the total gross income from the retail sale of goods or services . . . ."
The Drafting Committee, at its February meeting, noted that the $1,000 threshold might be too
high and would potentially exempt too many money service businesses. Consequently, the
recommended threshold remains at $500.Florida State Department of Banking has drafted
suggested amendments to its Money Transmitters' Code. To date, these amendments have not
been presented to the legislature. The proposed amendments include a revised definition of check
casher:
"Check casher" means a person who, for compensation or gain, or in the expectation of
compensation or gain, either directly or indirectly, sells currency in exchange for payment
instruments received, except travelers checks and foreign-drawn payment instruments.
Suggested Amendments to Florida Money Transmitters' Code Section 560.120.
(4) "Check cashing" means exchangingaccepting, for compensation a payment
instrument in exchange for money delivered to thea presenter at the time and place of the
presentation.
Source: Arizona Money Transmitter Act Section 6-1201 (with modifications).
Reporter's Note: It is important to have a definition for each of the services that have been
grouped under the general heading of nondepository providers of financial services.
money services business. The Florida Banking Department has proposed an amendment to the
(5) "Check issuer" means a person who engages in the business of issuing payment instruments
and who is responsible for payment on the instruments, other than a person who issues payment
instruments in an amount less than $500 in currency or monetary or other negotiable instrument
to any person on any day.
Source: FinCEN proposed amendments to the Bank Secrecy Act Regulations -- Definition
and Registration of Money Service Businesses amending 31 C.F.R. Part 103 (with
modifications).
(6) "Check seller" means a person who engages in the business of selling payment instruments
issued by another person, even if incidental to another business.
Source: FinCEN Proposed Amendments to the Bank Secrecy Act Regulations B Definition
and Registration of Money Service Businesses amending 31 C.F.R. Part 103 with proposed
modifications of Non-Bank Funds Transmitters Group.
Reporter's Note: An alternative term is "Payment Instrument Seller."
(7) "Closed-end stored value product" means a stored value product where the issuer is also the
payee and the product is issued to pay for a series of goods and services that are provided by the
issuer.
Source: New.
Reporter's Note: This definition is derived from A Commercial Lawyer's Take on the
Electronic Purse: An Analysis of Commercial Law Issues Associated with Stored Value Cards
and Electronic Money prepared by the American Bar Association's Uniform Commercial
Code Committee, Subcommittee on Payments, the Banking Law Committee, Subcommittee on
Domestic and International Payments and EFT and the Committee on Law of Commerce in
Cyberspace (1996). Many of the comments received by FinCEN with respect to registration
requirements for stored value issuers discussed the distinction between closed-end systems such
as phone cards and metro cards and open systems that can be used by consumers for a wide
variety of transactions. The definitions provided in the proposed act are an attempt to distinguish
between closed and open systems for purposes of licensing and regulation. Other exceptions that
may need to be included in the definition of stored value include (i) a small dollar exception for
issuers and (ii) an exception for merchants or others that honor stored value instruments.
(8) "Control" means ownership of, or the power to vote, 25% or more of the outstanding voting
securities of a licensee or controlling person. The interests of any other person controlled by that
person are aggregated with that person's interest for the purposes of determining the percentage
of a licensee controlled by a person.
Source: Model Act Regulating Money Transmitters Section 3.
(9) "Controlling person" means any person directly or indirectly in control of a
licensee.definition of check cashing which mirrors the changes to the definition of check casher
(i.e., it inserts the terms or gain or in the expectation of compensation or gain, either directly
or indirectly into the definition).
(5) "Check issuer" means a person who engages in the business of issuing payment
instruments and who is responsible for payment on the instrument.
Source: FinCEN proposed amendments to the Bank Secrecy Act Regulations -- Definition
and Registration of Money Services Businesses amending 31 C.F.R. Part 103 (with
modifications).
Reporter's Note: The definition of check issuer has been eliminated and the activity of
issuing payment instruments has been included as part of the definition of check seller. Existing
state legislation tends to group these activities together. Some Observers have also pointed out
that the phrase check issuer is unique to federal regulations.
(ALTERNATIVE 1)
(5) "Control" means ownership of, or the power to vote, 25 percent or more of the
outstanding voting securities of a licensee or controlling person. For the purpose of determining
the percentage controlled by a person, the person's interest shall be aggregated with the interest
of any other person controlled by an officer, partner, authorized delegate, spouse, parent, or child
of the person.
Source: Model Act Regulating Money Transmitters Section 3 (first sentence); Arizona's
A.R.S. 6-1201(3) (second sentence).
Reporter's Note: The previous language of Subsection (5) (formerly 1-102(8)) stated that
"the interests of any other person controlled by that person are aggregated with that person's
interest for the purposes of determining the percentage of a licensee controlled by a person." To
Observers and Drafting Committee Members, this sentence appeared a bit vague. The addition of
language from the Arizona statute is an attempt to provide clearer guidance as to when the
interest of one person will be aggregated with the ownership interest of another.
More generally, the Drafting Committee felt that Subsection (5) was a formalistic definition of
control and did not take into account the ability of persons to influence management in other
ways such as the ability to elect directors or otherwise exert control. The circumstances under
which shares will be aggregated is not fully defined. Furthermore, aggregation is only triggered
when the interests of one person are controlled by the other person. Consequently, two
alternatives have been offered which may provide for a more flexible approach to the notion of
control.
(ALTERNATIVE 2)
(5) "Control" means:
(A) ownership, control of, or the power to vote, directly or indirectly, 25 percent
or more of a class of voting securities of a licensee or controlling person; or
(B) control of the election of a majority of directors or trustees of the licensee or
controlling person; or
(C) direct or indirect exercise of a controlling influence over the management of a
licensee or controlling person, if the [superintendent], after notice and opportunity for hearing, so
determines.
Source: Federal Bank Holding Company Act, 12 U.S.C.A. Section 1842(a)(2)(with
modifications).
Reporter's Note: At the October 1998 Drafting Committee meeting, Drafting Committee
members and Observers felt that the definition of control included in the September 1998 draft
was too formalistic in that it required a threshold of 25 percent or more ownership to trigger
control. Suggestions were made that the Federal Bank Holding Company Act might provide a
useful definition that did not relate solely to a threshold of share ownership.
This is a very flexible category that allows for a broader interpretation of the concept of control.
Additionally, the Bank Holding Company Act includes a presumption that a company that owns
five percent or less of a bank's shares is not in control. Thus, there is a presumption against
control if share ownership does not exceed five percent.
Selected Issues:
Should discussion of how control is determined (e.g., how share ownership is aggregated, how
control may be determined after notice and hearing?) be included in the substantive provisions
concerning control under Article 6 of the Proposed Act?
Should the definition of control include a provision which allows for determination of control
through notice and hearing?
(6) "Controlling person" means a person having control.
Source: Arizona Money Transmitter Act Section 6-1201; Model Act Regulating Money
Transmitters Section 3 (modified to include the word "indirectly").
Reporter's Note: Some Observers have commented that the definition of control essentially
negates the use of the terms "directly or indirectly" in the definition of controlling person. This
was the case previously because the circumstances under which the aggregation of shares would
occur was unclear.
(10) (7) "Currency" means the coin and paper money of the United States or of any
other country thatStates, or of a foreign government which is designated as legal tender and
thatwhich circulates and is customarily used and accepted as a medium of exchange ina
foreignthe country.
Source: Florida Money Transmitters' Code Section 560.102.
Reporter's Note: The use of the phrase "foreign government" replaces the words "any other
country" as suggested by NCCUSL's Committee on Style in order to make the definition of
currency consistent with the definition of currency exchanger in 1-102(8) below.
(11) (8) "Currency exchanger" means a person who exchanges,that, for compensation,
currency of the United States or a foreign government toexchanges currency of one government
for currency of another government.
Source: Florida Money Transmitters' Code Section 560.102.
(9) "Engage in the business" means engage for compensation in activities regulated
under this [Act] [more than 10 times in any calendar year].
Source: Modified version of 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 (Model Financial
Transaction Reporting Act Section 4 (d)).
Reporter's Note: Both Drafting Committee members and Observers noted that the previous
draft used the term "conduct business" and "engage in the business" without further defining the
term. The commentary to the President's Commission Act states "'[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 legislation, 18 U.S.C. 1955,
provides useful case law examples."
(12) (10) "Executive officer" means thea licensee's president, chairman of the executive
committee,senior officer responsible for the licensee's business, a chief financial officer,
andresponsible individual, or any other person whoindividual that performs similar functions.
Source: Model Act Regulating Money Transmitters, Section 3.
(13) "Key Shareholder" means any person or group or persons acting in concert who is the
owners of [25%] percent or more of any voting class of the stock of an applicant.
(11) "Key shareholder" means a person, or group of persons acting in concert, that
owns 25 percent or more of a voting class of the securities of an applicant or licensee.
Source: Model Act Regulating Money Transmitters Section 3.
(12) "Licensee" means a person licensed under this [Act].
Source: Model Act Regulating Money Transmitters Section 3.
(13) "Limited station" means a place where a check casher is authorized to engage in
check cashing for the employees of a single business or office at a single location at or near the
business or office.
Source: Modified version of definition of "Limited Station" included in Title 5, Chapter 27
of Delaware Code (Cashing of Checks, Drafts and money Orders) 5 Del. Code. Section 2701(4).
Reporter's Note: The previous definition of a "location" blurred the distinction between
mobile locations (e.g., travelling check cashing stations) and limited purpose locations (e.g.,
check cashing services which cash payroll checks for a certain employer on or near the
employer's premises). Therefore former 1-102(17) has been omitted and two new definitions of a
mobile location and a limited facility have been added.
(14) "Material litigation" means litigation that, according to generally accepted
accounting principles, is considered significant to an applicant's or licensee's financial condition
and responsibility, and is referred to in that applicant's or licensee's [annual audited financial
statements], reports to shareholders, or similar documents.
Source: Model Act Regulating Money Transmitters Section 3.
(14) "Licensee" means a person licensed under this [Act].
Source: Model Act Regulating Money Transmitters Section 3.
(15) "Location" means a place of business at which money service business activity occurs.
Source: New.
(16) "Material litigation" means litigation that, according to generally accepted accounting
principles, is considered significant to anReporter's Note: Some Observers noted that
the language "and is referenced in that applicant's or licensee's financial health, and is referenced
in that entity'sannual reports" seems to leave what is "material" up to the licensee to decide.
However, this does not take annual audited financial statements, reports to shareholders, or
similar documents.
Source: Model Act Regulating Money Transmitters Section 3.
(17) "Mobile location" means a mobile check cashing facility, where on no more than [2] days
per week, on property occupied by an employer, a licensed check casher may, under written
contract with the employer, engage in the business of cashing payroll checks for the employees
of the employer.
Source: Connecticut Negotiable Instruments, Check and Check Cashing Services Act,
Section 36a-580.
Reporter's Note: The Drafting Committee recommended that mobile check cashing facilities
be included as a specific type of location.
into account that the licensee would have to comply with certain accounting principles in
preparing an annual report.
(15) "Mobile location" means a vehicle or other movable object where a check casher
engages in check cashing.
Source: Modification of definition of "mobile unit" contained in Title 5, Chapter 27 of
Delaware Code (Cashing of Checks, Drafts or Money Orders) 5 Del. Code. Section 2701.
Reporter's Note: The previous definition of a "location" blurred the distinction between
mobile locations (e.g., travelling check cashing stations) and limited purposes locations (e.g.,
check cashing services which cash payroll checks for a certain employer on or near the
employer's premises). Therefore former 1-102(17) has been omitted and two new definitions of a
mobile location and a limited facility have been added. The term "movable object" replaces the
term "movable means" used in the Delaware definition.
(18) (16) "Money" means a medium of exchange that is authorized or adopted by a
domestic or foreign government [andgovernment. The term includes a monetary unit of account
established by an intergovernmental organization or by agreement between two or more
nations].governments.
Source: Uniform Commercial Code Section 1-201(24).
PARAGRAPH (19) ALTERNATIVE 1
(19) "Money service business" means a person who is located or doing business within this State,
as an organized business concern, in one or more of the capacities listed as follows:
currency dealer or exchanger;
check issuer;
check seller;
check casher;
money transmitter; or
(F) stored value provider.
Source: FinCEN Proposed Amendments to Bank Secrecy Act Regulations B Definition and
Registration of money Service Businesses (with modifications) amending 31 C.F.R, Part 103.
Reporter's Note: FinCEN defines each of the money service businesses within the definition
itself. This draft includes general definitions of each money service business as well as a global
definition. FinCEN also uses the terms "issuer of traveler checks, money orders or stored value
rather than check issuer" and "seller or redeemer of traveler's checks, money orders, or stored
value." This draft uses the term check seller and check issuer to more closely mirror existing
state legislation.
PARAGRAPH (19) ALTERNATIVE 2
(19) "Money service business" means a person who is located or doing business in this
State, (17) "Money services business" means a person that is licensed under this [Act]
or that engages in the business (see definition) including a check casher, checkpayment
instrument seller, money transmitter, and stored value provider, whocurrency exchanger, that
does any of the following:
(A) sells or issues (A) sells, issues, or provides payment instruments;
(B) engages in the business of receiving money forthe transmissionof or
transmitting money;
(C) engages in the business of exchanging payment instruments or money intofor
any form of money or payment instrument; or
(D) engages in the business of receiving money for obligors for the purpose of
paying the obligor's bills, invoices or accounts; orinvoices, or accounts.
Source: Model Money Transmitter Licensing and Regulation Act.President's Commission
Act Section 4(k) (with modifications).
Reporter's Note: The Model Money Transmitter Licensing and RegulatingPresident's
Commission Act groups all money services businesses (except stored value issuers or
sellers)providers) together as "money transmitters." The current definitionsimply substitutes the
term "money transmitter" with "money services business." Subsection (E),(e) of the President's
Commission definition which included entities that meet the definition of a bank, financial
agency or financial institution as set forth in 31 U.S.C. Section 5312, was omitted from this draft
by agreement of the Drafting Committee at its March 1998 meeting.
PARAGRAPH (20) ALTERNATIVE 1
(20) (18) "Money transmitter" means a person who engagesthat engages, for
compensation, in the transmission of money by any means, including transmissions within this
country or to or from locations outside this country by payment instrument, wires,wire,
telecopier, facsimile, electronic transfer, or courier. The term does not include a clearinghouse or
other association of banks that effects transfers of funds between or among banks through check
clearing, wire transfer, automated clearinghouse, or similar services.
Source: Model Act Regulating Money Transmitters Section 3 (with modifications)
proposed by New York Clearinghouse in letter dated October 2, 1997 to FinCEN concerning
FinCEN's proposed amendments to the Bank Secrecy Act. The exclusion language proposed by
the New York Clearinghouse is based in part on the New York Uniform Commercial Code
Section 4A-105(1)(E) and the New York Superintendent of Banks regulations on
moneyRegulations on Money Transmitters, N.Y. Comp. Codes. R. & Regs. Tit. 3. Section
406.2(K)(7).
Reporter's Note: The current definition of money transmitter was previously included in the
September 1998 draft as Alternative 1. Alternative 2 was the proposed definition of money
transmitter included as part of FinCEN's proposed rulemaking concerning money services
businesses. The Drafting Committee felt that there was less utility in harmonizing state
definitions with federal definitions because: (1) state legislation had different goals and purposes
with respect to oversight of money services businesses (as compared to federal oversight) and (2)
the federal regulations concerning money services businesses had not yet been promulgated and
therefore FinCEN's proposed definitions may change in the future.
Reporter's Note: Query to the Drafting Committee: DoesSelected Issue: Should
the current definition of money transmitter (and also the definition of payment instrument
defined below) include stored value providers? (See the Reporter's Noteelectronic currency
providers who provide customers with the ability to transmit funds over the Internet?
included after Section 301)Discussion: At present, several states including Connecticut
and West Virginia have amended their money transmission legislation to include stored value
providers including Connecticut and West providers.Virginia. Other states, such as Texas, have
included stored value providers by interpretation. West Virginia defines "currency transmission"
or "money transmission" to include "the transmission of funds through the issuance and sale of
stored value cards which are intended for general acceptance and use in commercial or consumer
transactions." See WV ST. Section 32A-2-1-32A-2-1(6)
PARAGRAPH (20) ALTERNATIVE 2
(20) "Money transmitter" means a person who accepts currency or funds, either directly or
through an authorized delegate, and transmits the currency or funds, or the value of currency or
funds, by a means through a financial agency or institution, a Federal Reserve Bank, or other
facility of the Board of Governors of the Federal Reserve System, or an electronic funds transfer
network.
Source: FinCEN proposed amendments to the Bank Secrecy Act Regulations -- Definition
and Registration of Money Service Businesses amending 31 C.F.R. Part 103.Connecticut has
taken a different approach and has defined the term "payment instrument" to include "electronic
payment instruments." The Connecticut Department of Banking, in a memorandum prepared
concerning the amendments to Connecticut law noted:
The explosive growth in electronic commerce and the increasing use of electronic payment
instruments such as electronic travelers checks and other prepaid instruments, exposes the
consumers of such instruments to the potential for loss due to the insolvency of the issuers of
such instruments or fraud. [The Connecticut bill] will provide protection to consumers of
electronic payment instruments by making issuers of such instruments subject to the
Commissioner's jurisdiction and by imposing licensing, net worth and bonding requirements on
such issuers.
See Memorandum from John P. Burke, Banking Commissioner regarding An Act Concerning
Electronic Payment Instruments and Currency and Foreign Transactions Reporting (S.B. 230)
dated February 17, 1998 presented at Connecticut Banks Committee Public Hearing.
Based on recommendations from Observers, the current draft of the Proposed Act
treats stored value instruments as payment instruments. Therefore, a stored value provider would
also be a payment instrument seller (as opposed to a money transmitter). The current draft
contains an additional definition of a stored value provider. This may not be necessary and it will
be useful for Observers to provide input into whether the Connecticut approach seems the most
appropriate and also whether a separate definition is needed for stored value providers as distinct
from payment instrument sellers.
Additionally, the Drafting Committee will need to consider whether electronic currency which is
transmitted over the Internet (as compared with stored-value instruments) would fall within the
current definition of money transmitter and also whether this form of currency transmission
needs to be separately addressed in the Proposed Act.
(21) "Outstanding payment instrument" (19) "Outstanding", in regard to a payment
instrument, means a payment instrument issued by a licensee, which has been soldin the United
States directly by the licensee, or a payment instrument issued by a licensee which has been sold
by an authorized delegate of the licensee in the United States, which has been reported to the
licensee has having been sold, and which has not yet been paid by or for the licensee.
Source: Model Act Regulating Money Transmitters Section 3.
(22) (20) "Payment instrument" means a check, draft, money order, travelers
check,traveler's check whether in written or electronic form, stored-value instrument, or other
instrumentor written order for the transmission or payment of money, sold or issued to one or
more persons, whether or not themoney whether instrument is negotiable. or not negotiable, and
whether or not in written or electronic form. The term does not include a credit card voucher,
letter of credit, or any instrument that is redeemable by the issuer in goods or services.
Source: Model Act Regulating Money Transmitters Section 3.
3 with modifications. The term "stored value instrument" has been added. Additionally, proposed
modifications to the definition of "payment instrument" in the Florida Money Transmitters' Code
Section 560.103(14) have also been included which make reference to writing or electronic form.
Reporter's Note: Query:Reporter's Note: Should the term payment instrument include
stored value products? Connecticut, for example, has recently amended its money transmission
legislation to include the term "electronic payment instrument" which is defined as "a card or
other tangible object for the transmission or payment of money which contains a microprocessor
chip, magnetic stripe, or other means for the storage of information, that is prefunded and for
which the value is decremented upon each use, but does not include a card or other tangible
object that is redeemable by the issuer in the issuer'sissuer's goods and services." CT.ST. Section
36a-596. Connecticut has also amended its definition of "instrument" to include an electronic
payment instrument. Id.
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 Proposed Act. Drafting
Committee members felt 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
recommended including stored value within existing definitions of money services businesses.
Industry Observers subsequently made a similar recommendation with respect to the expansion
of the definition of payment instruments. Currently, the Proposed Act follows the Connecticut
approach and treats stored value instruments (including electronic traveler's checks) as payment
instruments.
(21) "Payment instrument seller" means a person that engages in the business of
issuing payment instruments or selling payment instruments issued by another person, even if
incidental to another business.
Source: FinCEN Proposed Amendments to the Bank Secrecy Act Regulations B Definition
and Registration of Money Services Businesses amending 31 C.F.R. Part 103 with proposed
modifications of Non-Bank Funds Transmitters Group.
Reporter's Note: The term used by FinCEN is check seller rather than payment instrument
seller.
(23) (22) "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 [government;corporation] or any other legal or commercial
entity.
include government; governmental subdivision, agency, or instrumentality; or public
corporation.
Source: USL Drafting Manual.
Reporter's Note: This is the Standard ConferenceNCCUSL formulation for this definition.
(24) "Permissible investments" means the following:
(A) cash, certificates of deposit, or other debt obligations of a financial institution either domestic
or foreign;
(B) bills of exchange or time drafts drawn on and accepted by a commercial bank, otherwise
known as bankers' acceptances, which are eligible for purchase by member banks of the Federal
Reserve System;
(C) an investment bearing a rating of one of the three highest grades as defined by a nationally
recognized organization that rates securities;
(D) investment securities that are obligations of the United States, its agencies, or
instrumentalities or obligations which are guaranteed fully as to principal and interest of the
United States, or an obligation of a State, municipality, or any political subdivision thereof;
(E) shares in a money market mutual fund, interest-bearing bills or notes or bonds, debentures or
stock traded on nay national securities exchange or on a national over-the-counter market, or
mutual fundsReporter's Note on former Section 1-102(26): The previous definition of
"permissible investments" has been moved into Article 7 of the Proposed Act. Many Observers
and Drafting Committee members felt that the definition primarily composed of one or moreof
permissible investments as described in this section; was more of a substantive provision that
belonged within the permissible investments segment of the draft.
(F) a demand borrowing agreement made to a corporation or a subsidiary of a corporation whose
capital stock is listed on a national exchange; and
(G) receivables that are due to a licensee from its authorized delegates pursuant to a contract
which are not past due or doubtful of collection; or any other investments or security device
approved by the [superintendent].
Source: Model Act Regulating Money Transmitters Section 3.
Reporter's Note: It was previously noted by the Drafting Committee that the investments
listed under (f) and (g) may be too risky to be included as permissible investments.
(26) (23) "Remit" meanseither to make direct payment ofthe funds to thea licensee or
its representatives authorized to receive those funds,the funds or to depositthe funds in a bank,
credit union,or savings and loan association, or other similar financial institution in an account
specified by the licensee.
Source: Model Act Regulating Money Transmitters Section 3(m).
(27) (24) "Responsible individual" means an individual whothat is employed by a
licensee and whothat has principal active management within this country or to or from locations
outside the country by payment instrument. wire, authority over the money services business of
the licensee in this State.
facsimile, or electronic transfer, courier, or otherwise.
Source: Arizona Money Transmitter Act Section 6-1021.6-1210(4) (with modifications)
Reporter'sReporter's Note: Many states have incorporated some notion of a "responsible"
individual or controlling person, or money transmitter affiliated party to indicate persons who
have oversight or managerial responsibility with respect to money services businesses. A
responsible individual is someone who has an active role in management and operations as
contrasted with a controlling person or key shareholder that may or may not have such a role.
(28) (25) "State" means a State of the United States, the District of Columbia, Puerto
Rico,the United States Virgin Islands, or any Territoryterritory or insular possession subject to
the jurisdiction of the United States.
Source: USL Drafting Manual.
Reporter'sReporter's Note: This is standard ConferenceNCCUSL formulation.
(26) "Stored-value instrument" means a card or other tangible object for the
transmission or payment of money which contains a microprocessor chip, magnetic stripe, or
other means for the storage of information, which is prefunded, and for which the value is
decremented upon each use, but does not include a card or other tangible object that is
redeemable only by the issuer in the issuer's goods and services.
Source: Conn. Gen Stat. Ann 36a-596(1) (with modifications proposed by Observers).
Reporter's Note: Observers who represent electronic currency providers have suggested the
use of the Connecticut definition as an alternative to the previous definition of stored
value which was contained in the March 1998 and September 1998 drafts. See Memorandum to
the Reporter for the Money Services Business Act dated October 29, 1998 from Mondex USA.
This definition (as with the previous definition of closed end stored value product also excludes
closed end products from the definition). One recommendation suggested by Observers is the
addition of the terms "or other value" after the word "money." As noted, frequently stored value
is not denominated in a national currency, but in a scrip, tied to a national currency, that
represents the obligation of the issuer of stored value.
The previous definitions included in the earlier draft (which have been eliminated from the
current draft) are:
"Closed-end stored value product" means a stored value product where the issuer is also the
payee and the product is issued to pay for a series of goods and services that are provided by the
issuer.
This definition was derived from A Commercial Lawyer's Take on the Electronic Purse: An
Analysis of Commercial Law Issues Associated with Stored Value Cards and Electronic
Money prepared by the American Bar Association's Uniform Commercial Code Committee,
Subcommittee on Payments, the Banking Law Committee, Subcommittee on Domestic and
International Payments and EFT and the Committee on Law of Commerce in Cyberspace (1996).
Many of the comments received by FinCEN with respect to registration requirements for stored
value issuers discussed the distinction between closed-end systems such as phone cards and
metro cards and open systems that can be used by consumers for a wide variety of transactions.
The definitions previously provided in the Proposed Act were an attempt to distinguish between
closed and open systems for purposes of licensing and regulation. Other exceptions that may still
need to be included in the definition of stored value include a small dollar exception for issuers.
(29) "Stored value" means funds or monetary value [greater than $500] represented in digital
electronics format, whether or not specially encrypted, and stored or capable of storage on
electronic media so as to be retrievable and transferable electronically. [The term excludes funds
or monetary value in digital electronics format that is part of a closed-end stored value network.]
Source:The previous definition of stored value was derived from the FinCEN proposed
amendments to the Bank Secrecy Act Regulations B Definition and Registration of Money
Services Businesses amending 31 C.F.R. Part 103.
103. As noted Reporter's Notes: Mostpreviously, most comments received in response
to FinCEN's proposed money services business rules suggested that stored value products should
be eliminated altogether from the definition of money service businesses. services business. The
major reason is that these products are very new and still changing rapidly. At the first
committeeDrafting Committee meeting, however, the Drafting Committeemembers observed
that it might be prudent to create a framework for regulation since it would take some time
before the draft act would be promulgated. The comments that FinCEN received also suggested
that closed-end systems be excluded from a definition of stored value. This would exclude
private smart card and debit card systems such as university debit cards or metro cards, etc. In the
preamble to the proposed rule, FinCEN statesstated that it may be appropriate to exclude closed
system products that are limited to facilitating small transactions (also known as "micro"
transactions) FinCEN also notes that "in a purely closed system, the stored value card is accepted
only by a single merchant or entity and operates as prepayment for specific goods ands services,
such as public transportation or telephone calls. . . ." See 62 Fed. Reg. 27894.
The Federal Reserve Bank of New York has suggested that the phrase "funds or monetary value"
should be replaced with "intangible entitlement to be paid" because the term "funds" may give
the impression that a stored value product has inherent value whereas the product only has value
if the issuer is credit worthy.
worthy.
The other major issue is at what dollar amountSelected Issue: Should stored value
productsshould be excluded from licensing. licensing if they are below a certain dollar
threshold? Comments on FinCEN's proposed rules suggest that only stored value cards that are
over $500 in value should be included in the definition of money service businesses. services
business. At the October drafting committeeDrafting Committee meeting, there was much
discussion of the issue of whether stored value products would be created in the near future to
carry sums over $500. Additionally, the Drafting Committee has previously discussed whether
smaller denomination products might be purchased and used to launder funds in the aggregate
(e.g., a money launderer buys several hundred phone cards). Alternatively, certain stored value
products may hold less than $500 but can be reloaded several times and thus exceed the $500
threshold.
(30) "Stored value (27) "Stored-value provider" means a person whothat engages in the
business of issuing, selling, or redeeming open-end stored value products.
stored-value instruments. The term includes a person that is subject to regulation, supervision,
and examination by a federal or state banking agency and which does not issue, sell, or redeem
stored-value instruments to or from consumers.
Source: New.
Reporter's Note: The scope of regulation for stored value products needs to be clearly
defined. As discussed above (under the definitions of payment instrument and money
transmitter), states such as West Virginia and Connecticut have already included stored value
within the scope of their money transmission statutes.
statutes. As noted above, the definition of stored value instrument has been added (to replace the
previous definitions of closed value stored value and stored value products). The new definition
of stored value provider is consistent with the definition of stored value instrument. Mondex
suggested in its comments to the Drafting Committee that the definition of stored value provider
should exempt a provider that is "subject to regulation, supervision, and examination by a
Federal or State banking agency, and which does not issue, sell or redeem stored value products
to or from consumers." See Memorandum to Reporter for the Money Services
Businesses Act prepared by Mondex USA dated October 29, 1998.
The Drafting Committee will need to consider whether stored value providers should remain
distinct entities from payment instrument sellers and if so, the function of payment instrument
seller should also be revised to exempt entities subject to supervision by a banking regulator.
(31) ["Superintendent"] means the [State (28) "[Superintendent]" means the [state
superintendent of Banks or other Senior Statebanks or other senior state regulator charged with
the regulation of money service businesses.]services businesses].
Source: Model Act Regulating Money Transmitters Section 3.
Reporter's Note: States use different regulatory bodies to supervise the conduct of money
service businesses. a money services business. In some states, the superintendent of banking is
vested with this responsibility. In other jurisdictions, it is the stateState securities commissioner.
(32) (29) "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 money multiple of United
States of foreignspecified 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.
Source: Model Act Regulating Money Transmitters Section 3.
(33) (30) "Unsafe or Unsoundunsound practice" means any practice or conduct which is
contrary to generally-accepted standards applicable to a specific money transmitter, or a violation
of any prior order of an appropriatethat is contrary to [generally accepted standards] applicable to
a money services business, or that is a violation of a rule or an order of the regulatory agency,
which practice or[Superintendent] under this act, if the practice, conduct, or violation creates the
likelihood of material loss, insolvency, or dissipation of assets of the money transmitterservices
business or otherwise materially prejudices the interests of its customers.
In making this determination, the department may consider the size and condition of the money
service business, the magnitude of the loss, the gravity of the violation, and the prior conduct of
the person or business involved.
Source: Florida Money Transmitters' Code Section 560.103(20).
Reporter'sReporter's Note: During its annual meeting in July 1998, the Money Transmitter
Regulators Association ("MTRA") noted that state regulators needed regulatory authority with
respect to the unsafe or unsound practices of money services businesses. The Drafting
Committee should also decide that the superintendent's ability to take into account the size of the
money services business, the magnitude of the loss and the gravity of the money service
businesses.
PART 2.
SCOPE, EXCEPTIONS AND EXCLUSIONS.
SECTION 201. SCOPE. Except as otherwise provided in Section 203, this [Act] applies to
money service businesses.violation should be moved into the substantive provisions of
the Proposed Act.
SECTION 202. SECTION 103. SUPERVISORY POWERS OF
[SUPERINTENDENT]. Consistent with this [Act] the [superintendent] has supervision
over all money services businesses and their authorized delegates.
Source: Florida Money Transmitters' Code Section 560.105.
Reporter'sReporter's Note: Some Observers have suggested that an alternative to
multi-state supervision would be a home state/host state licensing regime.
home-state/host-state licensing regime. The Drafting Committee has rejected this approach as the
state regulators and other Observers favor a state-based approach to regulation of money services
businesses. Resource sharing in the form of information sharing and joint examinations,
however, are provided for in the Proposed Act.
SECTION 203. SECTION 104. EXCLUSIONS. This [Act] does not apply to:
(1) the United States or any department, agency, or instrumentality thereof;
(2) the United States Post Office;Postal Service;
(3) this State or any (3) a State or a political subdivision thereof;
(4) a bank, bank holding company, thrift company, credit union, building and loan
association, savings and loan association, savings bank, or mutual bank, offices of an
international banking corporation, Bank Service Act corporation or Edge Act or
agreementbranches of foreign banks, a corporation organized pursuant to the Bank Service Act,
or an Edge Act Agreement Corporation organized under the laws of any State or the United
States, if the person does not issue, sell, or States which do not issue or sellprovide payment
instruments through an authorized delegate whothat is not such an entity; a person;
(5) the provision of (5) electronic funds transfer of government benefits for a federal,
State, county,state, [county], or governmental agency, by a contractorfor and on behalf of the
United States, or a department, agency, or instrumentality thereof, or a State or political
subdivisions;
governmental subdivision, agency, or instrumentality thereof;
(6) a board of trade designated as a contract market under the Commodity Exchange
Act, and a person whoAct or a person that in the ordinary course of business provides clearance
and settlement services for a board of trade;
trade to the extent of its operation as such;
(7) a person registered as a futures commission merchant under the federal
commodities laws to the extent of its operation as such;
(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;
laws to the extent of its operation as such;
any (9) an operator of payment systems operator thatwhich provides processing,
clearing and/orclearing, or settlement services, between or among persons exempt underexcluded
by this section or licensees, in connection with wire transfers, credit cardcredit-card transactions,
debit card transactions, stored value transactions;debit-card transactions, stored-value
transactions, automated clearing house transfers, or similar funds transfers to the extent of its
operation as such;
(10) a person registered as a securities broker-dealer under the federal securities laws
to the extent of its operation as such; or
(11) reserved for future use.
Source: Model Money Transmitter Licensing and Regulation Act (with modifications).
(11) [reserved for future use].
Source: President's Commission Act Section 6 (with modifications).
Reporter's Notes: 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.
Proposed exclusions involving boards of trade were submitted to FinCEN by various clearing
organizations who collectively several of the largest commodities exchanges and
commodities/options clearing organizations. In a letter dated October 8, 1997, these
organizations recommended that FinCEN change the proposed definition of money service
business to exclude regulated entities that are already subject to regulation by the SEC and the
CFTC.
This draft omits reference to "businesses where sale of alcohol beverages and food are equal to or
greater than fifty (50) percent of the total annual gross sales." The Drafting Committee believed
that this exclusion was far too general to be adopted.
A new exclusion has been included under subsection (9) for payment systems operators who
provide clearing and/or settlement services. This proposed exemption responds to the comments
of observers who note that the provision of those services is distinct from the issuing or selling of
payment instruments or stored value products.
SECTION 204. LICENSE REQUIREMENT.
A person may not engage in money service business activities without first obtaining a license
under this [Act] or becoming an authorized delegate with respect to those activities.
A person who is not licensed under this [Act] or who is not an authorized delegate of the licensee
with respect to those activities is presumed to be engaged in a business that is regulated by this
[Act] and that requires a license if the person advertises, solicits, or holds himself or herself out
as a money service business and engages in money service business activities.
A person who engages in money service business activities regulated in this [Act] 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 apply for a license. A person who is an
authorized delegate but who also engages in a money service business activity other than as an
authorized delegate must apply for a license under part 2 or part 3 of this [Act].
(d) A license is not transferable or assignable except as otherwise provided in this [Act].
Source: Model Act Regulating Money Transmitters Section 2. combined with Model
Money Transmitter Licensing and Regulation Act Section 5; The restrictions on transfer or
assignment of a license comes from California Financial Code Section 12219 which prohibits the
transfer of check selling licenses.
Reporter's Note: The act will need to distinguish between authorized delegates who provide
services solely pursuant to contracts with money service businesses and those entities who serve
as delegates but also operate as principals with respect to some aspect of money services. For
example, a check casher might operate as a principal with respect to check cashing services and
also operate as an authorized delegate for a money transmitter.
PART 3.
LICENSING OF MONEY TRANSMITTERS, CHECK SELLERS, CHECK ISSUERS [AND
STORED VALUE PROVIDERS].
SECTION 301. APPLICATION FOR LICENSE.
(a) No person shall engage for consideration, nor in any manner advertise that they engage in
money transmission, sell or issue a payment instrument, [or provide stored value products],
without first obtaining a license under the provisions of this part.
(b) A person licensed under this part is permitted to engage in money transmission, sell or issue
payment instruments, or provide stored value products. A person registered under this part may
also engage in check cashing and currency exchange activities as authorized under part 3 of this
[Act].
(c) A person applying for a license under this part must do so in writing, under oath, and in the
form prescribed by the [superintendent]. The application shall set forth such information as the
[superintendent] reasonably requires, including but not limited to:
the name and address of the applicant, including any fictitious or trade names used by the
applicant in the conduct of its business;
(2) the history of applicant's material litigation;
(3) a description of them activities conducted by the applicant, the applicant's history of
operations, and the business activities in which the applicant seeks to engage in this State;
(4) a list of the applicant's proposed authorized delegates, including the location or locations in
its State in which the applicant and its authorized delegates propose to conduct money
transmission activities;
a sample form authorized delegate contract, if applicable; sample form of payment instrument, if
applicable.
the name and address of the clearing financial institution or financial institutions through which
the applicant's payment instruments will be payable; and
documents confirming that the net worth and bonding requirements set forth in section have or
will be satisfied.
If the applicant is a corporation, the applicant shall also provide such information as the
[superintendent] requires, including, but not limited to:
the date of the applicant's incorporation and state of incorporation;
a certificate of good standing from the state or country in which the applicant was incorporated;
a description of the corporate structure of the applicant, including the parent or subsidiary of the
applicant, and whether any parent or subsidiaries is publicly traded on any stock exchange;
the name, business and residential address, and employment history, for the past [5] years for
each executive officer, key shareholder, and responsible person;
the history of material litigation and criminal convictions for each executive officer, key
shareholder and responsible person;
copies of the applicants audited financial statements for the current year, and if available, for the
preceding [2] year period. In cases where the applicant is a wholly owned subsidiary of another
corporation, the parent's consolidated audited financial statements may be submitted to satisfy
this requirement;
copies of the applicant's unconsolidated unaudited financial statements for the current year, if
available, and if available, for the preceding [2]year period; and
If the applicant is a publicly traded company, copies of all filings made with the United States
Securities and Exchange Commission, within the year preceding the date of the filing of the
application.
Each applicant that is not a corporation shall also provide such information as the
[superintendent] reasonably requires, including, but not limited to:
evidence that the applicant is registered to do business in this state;
the name, business and residential addresses, personal financial statements and employment
history for the past [5] years for each individual having a controlling ownership interest in the
applicant, and each responsible person;
the history of material litigation and criminal convictions for each individual having a controlling
ownership interest in the applicant and each responsible person; and
copies of the applicant's audited financial statements for the present year, and if available for the
preceding [2] years.
(e) The [superintendent] may waive any requirement of this section or permit an applicant
to submit substituted information in lieu of the information required by this section.
Source: Arizona Money Transmitter Law Section 6-1203; Model Money Transmitter
Licensing and Regulation Act Section 7; Florida Money Transmitter Code Section 560.205.
Reporter's Notes: Selected Issue: Should the Draft NDP Act include separate
licensing regimes for money transmitters and check sellers, and stored value providers (as one
group) and check cashers and currency exchangersProposed exclusions involving boards of trade
were submitted to FinCEN by various clearing organizations who collectively represent several
of the largest commodities 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 SEC and the CFTC. The September 1998 Draft included a new exclusion under
subsection (9) for payment systems operators who provide clearing and/or settlement services.
This proposed exemption responded to the comments of Observers who note that the provision
of those services is distinct from the issuing or selling of payment instruments or stored value
products. This inclusion has been retained.
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 that is not an authorized delegate of a
licensee is engaging in 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 the 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 or Article 3.
(d) A person that is an authorized delegate and also engages in the business other than as an
authorized delegate must apply for a license under either Article 2 or Article 3.
(e) A license is not transferable or assignable except as otherwise provided in this [Act].
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: The act will need to distinguish between authorized delegates who provide
services solely pursuant to contracts with money services businesses and those entities who serve
as delegates but also operate as principals with respect to some aspect of money services. For
example, a check casher might operate as a principal with respect to check cashing services and
also operate as an authorized delegate for a money transmitter.
ARTICLE 2
LICENSING OF MONEY TRANSMITTERS AND PAYMENT INSTRUMENT SELLERS
SECTION 201. APPLICATION FOR LICENSE.
(a) A person may not engage, for consideration, in money transmission, advertise the
person's engagement in money transmission, or sell, issue, or provide a payment instrument,
without first obtaining a license under this article.
(b) A person licensed under this article may also engage in check cashing and currency
exchange as authorized under Article 3 without being licensed under Article 3.
(c) An applicant under this article must apply in writing, under oath, and in the form
prescribed by the [superintendent]. The application must include the following:
(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 past [five] years;
(3) a description of the 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 at which the applicant and its authorized delegates propose to transmit money or sell, issue,
or provide payment instruments;
(5) a sample form of contact for authorized delegates, if applicable, and a sample form
of payment instrument, if applicable;
(6) the name and address of any clearing financial institution 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 206 have or will be satisfied; and
(8) other information the [superintendent] reasonably requires with respect to the
applicant.
(d) If an applicant is a corporation, the applicant shall also provide the following:
(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 national
securities exchange;
(4) the legal and any fictitious name, business and residential addresses, and
employment, for the last [five] years, of each executive officer, key shareholder, and responsible
individual of the applicant;
(5) the material litigation and criminal convictions of each executive officer, key
shareholder, and responsible individual 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, if available;
(7) a copy of the applicant's unconsolidated, unaudited financial statements for the
current year, and for the next preceding [two] years, if available;
(8) if the applicant is a publicly traded company, copies of all filings made with the
Securities and Exchange Commission within the year next preceding the date of the filing of the
application; and
(9) other information the [superintendent] requires.
(e) If the applicant is not a corporation, the applicant shall also provide the following:
(1) evidence that the applicant is registered to do business in this State;
(2) the legal and any fictitious name, business and residential addresses, personal
financial statements, and employment for the past [five] years, for each controlling person that is
an individual and each responsible individual of the applicant;
(3) the material litigation and criminal convictions, for the past [five] 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] requires.
(f) The [superintendent] may waive any requirement of this section or permit an applicant to
submit substituted information in lieu of the required information.
Source: Arizona Money Transmitter Law Section 6-1203; President's Commission Act
Section 7; Florida Money Transmitters' Code Section 560.205.
Reporter's Notes: Selected Issue: At the February 1998 Drafting Committee
meeting, the Drafting Committee decided to create separate licensing, net worth and bonding
requirements for both categories of money services (as a separate group). At the February
Drafting Committee meeting, the Drafting Committee decided to create separate licensing, net
worth and bonding requirements for both categories of money service businesses. It was felt that
check cashers and currency exchangers posed less safety and soundness concerns because
customers were provided with cash immediately. Additionally, observersObservers stated that
check cashers are typically subject to minimal or no net worth requirements in states where they
are regulated. requirements.
As set forth in PartsArticles 2 and 3, separate licensing, recordkeeping and net worth
requirements have been established for money transmitters and for check cashers/foreign
currency exchanges. The superintendent'ssuperintendent's supervisory and enforcement powers,
however, are the same for all money services businesses. This is the approach taken by several
states including Florida and Georgia. This is to promote the other main goalone of the main goals
of the Draft NDPProposed Act which is to create an appropriate regulatory framework to deter
and eliminate the use of money services businesses as potential vehicles for money laundering.
The licensing application is the first point at which the state may protect the public from
permitting entry by those persons who 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 the
licensee.
Selected Issue: ShouldAt the October 1998 Drafting Committee meeting, it was decided
that stored value providers should be required to obtain a state license? The Committee will need
to decide whether stored value products (with the exclusion of closed stored value net works) be
treated aslicenses under the Proposed Act. payment instruments. If so,At present, stored value
providers will fallinstruments are encompassed within the definition of payment
instruments.money transmitters. In 1998, Connecticut enacted the Act Concerning Electronic
Payment Instruments and Currency and Foreign Transactions Reporting. This act amended
existing money transmission legislation suchso that 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). West Virginia also
adopted new legislation, designed to amend its current money transmission legislation. West
Virginia'sVirginia's legislation includes stored value within the definition of money transmission.
1998 West Virginia Laws Ch. 73 (H.B. 4591). As in Connecticut, this triggers licensing and
other requirements for stored value providers. Texas has also interpreted its sale of checks statute
to apply to smart cards issued by non-banks for us in open networks. See Remarks of Catherine
A. Ghigieri, Texas Department of Banking to the PULSE EFT Assoc. Member Conference
(October 11, 1996) located at www.banking.state. tx.us/exec/speech10a.
SECTION 302. BOND AND NET WORTH REQUIREMENTS. SECTION 202.
SECURITY.
(SUBSECTIONS (a) AND (b) ALTERNATIVE 1)
(a) Each (a) An application for a license, under this partarticle, must be accompanied by a
surety bond, irrevocable letter of credit, or other similar securitydevice acceptable to the
[superintendent] in the amount of [$50,000].
(b) If the (b) If an applicant proposes to engage in the businessunder this [Act] at more than
one location, through authorized delegates or otherwise, the amount of the securitydevice is
increased by [$10,000] per location, upnot to exceed to a maximum of [$250,000]. The security
device shallmust be in a form satisfactory to the [superintendent] and shall run to the State for the
benefit of any claimants against the licensee to secure the faithful performance of the obligations
of the licensee with respect to the receipt, handling, transmission, and payment of money in
connection with the sale and issuancesale, issuance, and provision of payment instruments and
the transmission of money.
(SUBSECTIONS (a) and (b) ALTERNATIVE 2)
(a) Each application under thispart (a) An application for a license, under this article, must
be accompanied by a surety bond, irrevocable letter of credit, or other similar security device
acceptable to the [superintendent].
[superintendent].
(b) Each application under this article shall be accompanied by, and each licensee shall
maintain at all times, a bond executed by the licensee as principal and a surety company
authorized to do business in this (b)State as surety. The bond shall be in the amount of [$25,000]
for a licensee with five or fewer authorized delegates and locations; [$100,000] for a licensee
with more than five but fewer than [21] authorized delegates 21and locations; and an additional
[$5,000] for each authorized delegate and location in excess of [20] but fewer than [200]
authorized delegates and locations, to a maximum of [$250,000] and an additional [$5,000] for
each authorized delegate and location in excess of 200[200] authorized delegates and locations,
to a maximum of [$500,000].
Source: Model Money Transmitter Licensing and Regulation Act Section 8.Arizona
Revised Statutes, Title 6, Banks and Financial Institutions, Chapter 12 Transmitters of Money;
A.R.S. Section 6-1205.
Reporter's Note: At present, money services businesses that engage solely in check cashing
or currency dealing and exchange do not have to post bond or a security device. Alternative
subsections (a) and (b) are1 which is derived mainly from the Model Money Transmitter
Licensing and RegulationPresident's Commission Act attempts to provide a uniform standard for
all money services businesses. An alternative would be to create different security requirements
based on the number of locations or authorized delegates, which the licensee utilizes within a
state. The Drafting Committee has not yet made a decision as to which of these two options is
preferable.
(c) In the case of a bond, the (c) The aggregate liability of the surety shallon a surety bond
may not exceed the principal sum of the bond.Claimants against the licensee or the authorized
delegates may bring suit directly on the security deviceA claimant against a licensee may
commence and maintain an action directly on the bond or the [superintendent] may bring suit on
behalf of the claimants. The bond is conditioned on the compliance of the licensee, including its
directors, officers, authorized delegate, and employees, with this [Act]. commence The bond
shall be payable to anyand maintain an action on behalf of the claimant. The bond must be
payable to a person injured by the wrongful act, omission, default, fraud, or misrepresentation of
a licensee or an authorized delegate or employee of default, fraud, or misrepresentation of the
licensee, his or her authorized delegates or employees,the licensee in the conduct of its business
as a licensee or to the State for the benefit of the [superintendent] and of the person injured. Only
one bond is required of a licensee irrespective of the number of officers, directors, locations,
employees, or authorized delegates of the licensee.
(d) In the case of an (d) An irrevocable letter ofcredit, the letter of credit must run to the
State, for the benefit of the [superintendent] and for the benefit of all personsany person injured
by theomission, default, fraud, or misrepresentationa wrongful act, omission, default, fraud, or
misrepresentation of a by alicensee or an authorized delegate or employee of the licensee in the
conduct of its activitybusiness as a licensee. Draws upon an irrevocable letter of credit must be
available by sight drafts in amounts determined by the [superintendent] up to the aggregate
amount of the irrevocable letter of credit.
(e) The (e) A security device shallmust remain in effect until cancellation, which may occur
only after [30] days' written notice to the [superintendent]. Cancellation shall not affect any
liability incurred during this [superintendent] of the intended cancellation.
period.
(f) The security device shall remain in place for no longer than [5] (f) A security must
remain effective for as long as the [superintendent] specifies but no less than [five] years after the
licensee ceases money service operationsits money services business in this State. However, the
[superintendent] may permit the securitydevice to be reduced or eliminated before that time to
the extent that the amount of the licensee'slicensee's payment instruments outstanding in this
State areis reduced. The superintendent[superintendent] may permit a licensee to substitutea
letter of credit or otheranother form of securitydevice acceptable to the [superintendent] for the
security device in placeeffective at the time the licensee ceases money service business
activitiesto be a money services business in this State.
Source: Model Act Regulating Money TransmittersPresident's Commission Act Section 8;
Delaware Code, Chapter 27, Section 2714.
Reporter's Note: As discussed at the Drafting Committee's initial meeting in October 1997,
irrevocable letters of credit provide an alternative for licensees to the use of surety bonds.
(g) In lieu of the securitydevice prescribed in this section, an applicantfor 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 device. security. The principal amount of
the deposit may be released to the applicantfor a license or licensee only upon written
authorization of the [superintendent] or on the order of a court of competent jurisdiction.
Source: Arizona Money Transmitter Act Section 6-1205; Model Money Transmitter
Licensing and RegulationPresident's Commission Act Section 8.
Reporter's Note: Bonding or 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 a barrier to entry for
unstable companies. Alternatives, however, are provided to the bond requirement in the form of
cash or cash alternatives. Licensees may also be permitted to deposit specified liquid assets in the
amount of the bond. The Drafting Committee will need to strike a balance between the goals of
safety and soundness and also providing open access to businesses whom wish to enter the
money services market.
Some Observers have queried how claimants may obtain cash in the event of a problem with the
licensee meeting its obligations. The Drafting Committee may wish to consider whether
additional guidance should be provided concerning security devices.
SECTION 303. SECTION 203. ISSUANCE OF LICENSE.
(a) Upon the filing of a completean application under parts 2 of this [Act]this article, the
[superintendent] shall investigate the applicant's financial condition and responsibility, financial
and business experience, character, and general fitness of the applicant. fitness. The
[superintendent] may conduct an on-site investigation of the applicant, the reasonable cost,cost of
which shallmust be borne by the applicant. The [superintendent] may issue a license under this
article to an applicant if the [superintendent] finds that all of the following conditions are met:
(1) the appellant (1) the applicant has complied with section 301 and 302 of the
[Act].Sections 201 and 202;
(2) the competence and experience (2) the competence, experience, character, and
general fitness of the officers, directors, and controlling persons, and any proposed management
personnel indicate that it is in the interest of the public to permit such personeach of them to
participate in the activitiesmoney services business of the licensee; and
(3) the applicant has paid the required license fee.and application fees.
(b) The [superintendent] shall approve or deny an application for an original license within
[120] days afterthe date an application is filed and is complete. The
superintendent[superintendent] may extend thisthe period for good cause. The [superintendent]
shall notify the applicant of the date on which the application is determined to be complete.In the
absence of approval or denial of the application within [120] days after the date anapplication is
complete or any extended period ends, the application is considered approved. If the application
is not approved or denied within the period allowed for approval, the application is considered
approved,deemed approved and the [superintendent] shall issue the license effective as of the
first business day after the [120] dayexpiration of the period.
(c) Any (c) An applicant that is denied a license by the [superintendent] under part 2 may
request a hearingthis article may appeal the denial within [30] days ofafter receipt of the written
notice of the denial.
denial in a hearing before the [administrative law judge] pursuant to the [state administrative
procedure act].
Source: Arizona Revised State Section 6-1206(B); Tennessee Rev. Code Section 45-7-210.
Reporter'sReporter's Note: At the February 1998 Drafting Committee meeting, the Drafting
Committee inquired as to whether states had mandatory time frames in which the regulator must
respond to license applications. The Money MTRATransmitters' Regulators Association
representative supplied the Drafting Committee with sample statutory provisions that included
mandatory time frames for response to a license application. In Tennessee, the time period is 180
days rather than 120. The MTRA Model Legislation Outline recommends an 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 303 ALTERNATIVE 1.
SECTION 303. LICENSE RENEWAL. SECTION 204. 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 following that date.
(a) The [superintendent] shall, by rule, (b) The [superintendent], by rule, shall establish an
annual fee for renewal of a license under this [Act].article.
(b) The renewal fee shall be accompanied by (c) A licensee under this article shall submit
with the renewal fee a report, in a form prescribed by [the superintendent], which form shall be
sent by the [superintendent] to each licensee no later than three months immediately
proceedingthe [superintendent]. The [superintendent] shall send a copy of the form to each
licensee under this article [no the date established by the [superintendent]later than three months]
immediately before the date for license renewal. The licensee must include the following in its
annual renewal report:renewal report must contain:
(1) a copy of its (1) a copy of the licensee's most recent audited consolidated annual
financial statement, or in the case of a licensee that is a wholly-ownedstatement or, if the licensee
is a wholly owned subsidiary of another corporation, the consolidated audited annual financial
statement of the parent corporation or the licensee's annual audited financial statement;
(2) the number of payment instruments sold by the licensee in this State, the
dollarState that have not been previously included on a renewal report, the monetary amount of
those instruments, and the dollarmonetary amount of those instruments currently outstanding for
the most recent quarter for outstanding;
which data is available before the date of filing of the renewal application, but in no event more
than [120] days before the renewal date; Reporter's Note: One Observer has noted that
this information should be reported on a quarterly basis because timely response is critical with
respect to loss prevention. To the extent that an issuer of payment instruments is unable to meet
its obligations, the regulator needs to have quick access to such information. Therefore, the
Drafting Committee may want to consider shifting the requirement to quarterly rather than
annual reporting.
(3) any material changes to any (3) a description of each material change to information
submitted by the licensee on its original license application which havehas not been
previouslybeen reported to the [superintendent] on anyother report required to be filed report;
under this [Act];
(4) a list of the licensee's permissible investments, if applicable;investments; and
(5) a list of the locations within this State at whichbusiness regulated by this [Act] is
being conducted by either the licensee or its authorized delegate. an authorized delegate engage
in the business.
(c) A licensee (d) The [superintendent] shall notify in writing a licensee under this article
that has not filed a renewal report or paid its renewal fee by the renewal filing deadlinedate and
has not been granted an extension of time to do so by the [superintendent] shall be notified in
writingthat its license has been suspended. The licensee has [30] days after the date of receipt of
the notice of suspension to file a renewal report and to pay the renewal fee plus [$100] for each
day by the [superintendent] that a hearing is scheduled at which time the licensee will be required
to show cause why its license should not be suspended pending compliance with these
requirements.the renewal form and application are not received by the [superintendent]. If the
licensee does not so file and pay within [30] days after the date of receipt of the notice of
suspension, the license is permanently revoked.
Source: Model Act Regulating Money Transmitters, Section 11.
Reporter'sReporter's Note: The alternative to a provision which outlines the contents of an
annual renewal report is for the regulator to prescribe the contents of a renewal application by
regulation. The Model Money Transmitters Licensing and Regulation Act contains a provision
which takes this approach.
approach. The current renewal provisions in subparagraph c have been modified. Both the
Drafting Committee and Observers noted that it was too cumbersome
SECTION 305. LICENSE FEE.
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, shall have 30 days to cure its failure to renew its license. Additionally, some
Observers noted that Section 306(2) (Alternative 2) which was contained in the February 1998
draft was a useful provision. This Section included a penalty of $100 per day for late filing of a
renewal application. Current Section 203 has been modified to include such a penalty.
(a) Each application for a license must be accompanied by an SECTION 205.
APPLICATION LICENSE AND FEES. A non-refundable application fee of [$1,000] and a
license fee of [$3,000]. [$3,000] must accompany an application for a license under this article.
The license fee must be refunded if the application is denied. No application fee is denied.
refunded.
Source: Model Money Transmitter Licensing and Regulation Action Section 8. Source:
President's Commission Act Section 8.
Reporter'sReporter's Note: The Drafting Committee decided to omit any references to
license fees being placed in a separate fund for the exclusive use of the Superintendent for the
administration and enforcement of the [Act].
SECTION 306. SECTION 206. NET WORTH. A licensee mustunder this article shall
maintain a net worth thatin liquid assets of at least [$100,000] plus [$10,000] for each location at
which the licensee or an authorized delegate to a maximum of [$500,000].
engages in the business, not to exceed [$500,000].
Source: Model Money Transmitter Licensing and RegulationPresident's Commission Act
Section 8.
Reporter's Note: An alternative to a general net worth requirement is to provide varying net
worth requirements for different types of money services businesses. For example, Section
36a-604 of the Connecticut Money Order and Travelers Check Licensees Act requires that check
sellers and money transmitters requires that each licensee that issues money orders must have a
net worth of at least $100,000. Issuers of travelers checks must have a net worth of at least $1
million.
PART 4. ARTICLE 3
LICENSING OF CHECK CASHERS AND CURRENCY EXCHANGERS.
SECTION 401. APPLICATION FOR LICENSE. Reporter's Note: At the October 1998
Drafting Committee meeting, it was agreed that licensing under Article 4 (formerly Part 4) of the
Act would be limited to those check cashers and currency exchangers who are not authorized
delegates of licensees under Article 3 (formerly Part 3) of the Proposed Act. In other words,
check cashers who serve as authorized delegates of money transmitters or stored value providers
would not have to obtain a separate license for their check cashing activities.
The Drafting Committee should consider whether the current licensing regime set forth in Article
3 will create any material differences for check cashers who are authorized delegates as opposed
to check cashers who are not authorized delegates (and thus required to obtain a license) with
respect to the level of recordkeeping and reporting required of both entities.
As a general matter, the Drafting Committee should consider whether it might be useful to use a
different term for licensing under Article 4 that will differentiate between the two different
licensing schemes in the Proposed Act. Some Observers have suggested the term "license" for
money transmitters and stored value providers and the term "registration" for check cashers and
currency exchangers.
SECTION 301. APPLICATION FOR LICENSE.
No person shall engage in or in any manner advertise the business of cashing payment
instruments or the exchanging of currency (a) A person that is not an authorized delegate of
a licensee under Article 2 or that is not licensed under Article 2 may not engage for consideration
in check cashing or currency exchange without first obtaining a license under the provisions of
this part.this article.
A person licensed pursuant to this part may cash payment instruments or exchange currency. A
person registered under this part is prohibited from engaging directly in money transmission but
that person is not prohibited from acting (b) A person licensed under this article may not
engage directly in money transmission, or sell, issue, or provide payment instruments, but the
person may act as an authorized delegate withof a person licensed under part 2.
Article 2.
Each license application shall be in writing and under oath to the [superintendent in such form as
the [superintendent] may prescribe. The application shall (c) An applicant for a license under
this article must apply in writing, under oath, and in the form prescribed by the [superintendent].
The application must include the following:
(1) the legal name and residential and business addresses of the applicant, if the
applicant is a natural person, oran individual or, if the applicant is a partnership, association or
corporation,not an individual, the name of everyeach partner, executive officer orofficer, and
director;
(2) the location of he.the principal office of the applicant;
(3) the complete address of anyaddresses of other locations in this State at which the
applicant proposes to engage in check cashing or currency exchange including other limited
stations and mobile locations;
documents confirming that the net worth set forth in section 404 has or will be satisfied; and
other information as the department may reasonably require with respect to the applicant. The
[superintendent], however may not require more information than specified in Part 2 of this
[Act]. (4) a document confirming that the requirement for net worth as set forth in
Section 305 has been or will be satisfied;
(5) a description of the source of funds to be used for check cashing and currency
exchange; and
(6) other information the [superintendent] reasonably requires with respect to the
applicant, but not more than the [superintendent] may require under Article 2.
Source: Florida Money Transmitters' Code Sections 560.304 and 305.
Reporter'sReporter's Note: At the February Drafting1998 drafting meeting,
observersObservers noted that check cashers should be treated differently than money
transmitters with respect to licensing, bonding and net worth in particular. Check cashers and
currency exchangers provide customers with funds immediately ands therefore do not need the
same type of bond or security devices. Existing state legislation makes a distinction between
check cashers and money transmitters with respect to information provided to regulators (e.g.,
audited versus unaided financial statements) and the level of bond and net worth required for
check cashiers. The Drafting Committee decided to include separate licensing provisions in this
draft as an alternative to a unified licensing system as contained in the February 1998 draft.
Currency exchangers have also been included in this section.Section. As stated previously,
Florida and Maine are examples of states that have grouped check cashers and currency
exchangers together for purposes of licensing requirements.
A new provision has been added to require that check cashers provide regulators with
information about the source of their funds. This is a concern to regulators and to law
enforcement officials who want to ensure that the cash used in such a business are not derived
from money laundering or other illegal activity. If check cashers who are authorized delegates
are exempt from the licensing provisions of Article 3, the Drafting Committee should consider
whether the source of funds requirement should be moved to another Section of the Proposed Act
and applicable to all money services businesses.
SECTION 402. SECTION 302. ISSUANCE OF LICENSE.
(a) Upon the filing of a completean application under part 3 of this [Act]this article, the
[superintendent] shall investigate the applicant's financial condition and responsibility, financial
and business experience, character, and general fitness of the applicant. fitness. The
[superintendent] may conduct an on-site investigation of the applicant, the reasonable cost of
which shallmust be borne by the applicant. The [superintendent] may issue a license under this
article to an applicant if the [superintendent] finds that all of the following conditions are met:
(1) the appellant (1) the applicant has complied with section 401 and 405 of the
[Act].Section 301;
(2) the competence and experience (2) the competence, experience, character, and
general fitness of the officers, directors, and controlling persons, and any proposed management
personnel indicate that it is in the interest of the public to permit that personeach of them to
participate in the activitiesmoney services business of the licensee; and
(3) the applicant has paid the required license fee.
and application fees.
(b) The [superintendent] shall approve or deny an application for an original license within
[120] days afterthe date an application is filed and is complete. Thesuperintendent may extend
this period upon a showing of[superintendent] may extend the period for good cause. The
[superintendent] shall notify the applicant of the date on which the application is determined to
be complete.In the absence of approval or denial of the application within [120] days after the
datean application is complete or any extended period ends, the application is considered
approved. If the application is not approved or denied within the period allowed for approval, the
application is considered approved,deemed approved and the [superintendent] shall issue the
license effective as of the first business day after the [120] dayexpiration of the period.
(c) Any (c) An applicant that is denied a license by the [superintendent] under part 3 may
request a hearingthis article may appeal the denial within [30] days ofafter receipt of the written
notice if the denial.
of the denial in a hearing before the [administrative law judge] pursuant to the [state
administrative procedures act].
Source: Arizona Revised State Section 6-1206(B); Tennessee Rev. Code Section 45-7-210.
Reporter'sReporter's Note: At the February 1998 Drafting Committee meeting, the Drafting
Committee inquired as to whether states had mandatory time frames in which the regulator must
respond to license applications. The MTRA representative supplied the Drafting Committee with
sample statutory provisions, whichprovisions that included mandatory time frames for response
to a license application. In Tennessee, the time period is 180 days rather than 120. The MTRA
Model Legislation Outline recommends an 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 403. LICENSE RENEWAL. SECTION 303. 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 following that date.
(a) The [superintendent] shall, by rule, (b) The [superintendent], by rule, shall establish
an annual fee for renewal of a license under this [Act].article
(b) The renewal fee shall be accompanied by (c) A licensee shall pay an annual fee for the
renewal of a license. The licensee shall submit with the renewal fee a report, in a form prescribed
by [the superintendent], which form shall be sent by the [superintendent] to each licensee no later
than three months immediately proceedingthe [superintendent]. The [superintendent] shall send a
copy of the date established by the [superintendent]form to each licensee under this article no
later than [three months] immediately before the date for license renewal. The licensee must
include the following in its annual renewal report:renewal report must contain:
(1) any material changes to any (1) a description of each material change to information
submitted by the licensee on its original license application which havehas not been
previouslybeen reported to the [superintendent] on anyother report required to be filed report;
and
under this [Act];
(2) a list of the licensee's permissible investments, if applicable; and
(3) (2) a list of the locations within this State at which either the licensee or itsan
authorized delegate is conducting business regulated by this [Act]. of the licensee
engage in the business.
(c) A licensee (d) The [superintendent] shall notify in writing a licensee under this article
that has not filed a renewal report or paid its renewal fee by the renewal filing deadlinedate and
has not been granted an extension of time to do so by the [superintendent] shall be notified in
writingthat its license has been suspended. The licensee has [30] days after the date of receipt of
the notice of suspension to file a renewal report and to pay the renewal fee plus [$100] for each
day by the [superintendent] that a hearing is scheduled at which time the licensee will be required
to show cause why its license should not be suspended pending compliance with these
requirements,the renewal form and application are not received by the [superintendent]. If the
licensee does not so file and pay within [30] days after the date of receipt of the notice of
suspension, the license is permanently revoked.
Source: Model Act Regulating Money Transmitters, Section 11 (with modifications).
Reporter's Note: The license renewal provisions are slightly different for check cashers and
currency exchangers (as opposed to Part 2 licensees). The requirement of audited consolidated
financial statements and also information concerning payment instruments sold has been omitted.
It is anticipated, however, that the appropriate state regulator would prescribe what type of
information should be contained in a renewal report.
SECTION 404. LICENSE FEE.Reporter's Note: The alternative to a provision which
outlines the contents of an annual renewal report is for the regulator to prescribe the contents of a
renewal application by regulation. The Model Money Transmitters Licensing and Regulation Act
contains a provision which takes this approach. The current renewal provisions in subparagraph c
have been modified. Both the Drafting Committee and Observers noted 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, shall have 30 days to cure its failure to renew its license.
Additionally, some Observers noted that Section 306(2) (alternative 2) which was contained in
the February 1998 draft was a useful provision. This Section included a penalty of $100 per day
for late filing of a renewal application. Current Section 302 has been modified to include such a
penalty.
(a) Each application for a license must be accompanied by an SECTION 304.
APPLICATION AND LICENSE FEE. A non-refundable application fee of [$1,000] and a
license fee of [$3,000]. [$3,000] must accompany an application for a license under this article.
The license fee must be refunded if the application is denied. No application fee is denied.
refunded.
Source: Model Money Transmitter Licensing and Regulation Action Section 8. Source:
President's Commission Act Section 8.
Reporter'sReporter's Note: The Drafting Committee decided to omit any references to
license fees being placed in a separate fund for the exclusive use of the Superintendent for the
administration and enforcement of the [Act].
SECTION 405. SECTION 305. NET WORTH. A licensee mustunder this article shall
maintain a net worth in liquid assets of at least [$10,000]in liquid assets for each location at
which the licensee or an authorized delegate of the licensee engages in check cashing or currency
exchangeor check cashing takes place and at least [$2,500] for each limited mobile location or
limited facility.
facility location specified in the application
Source: Connecticut Code Section 36a-581(e)(6).
Reporter's Note: As observersReporter's Note: As Observers noted at the February
1998 meeting, check cashers are required to have much lower net worth and bond requirements.
This is due primarily to the fact that check cashers and currency exchangers provide customers
with funds immediately whereasunlike money transmitters and payment instrument sellers.
Check cashers are required to maintain anywhere from $5,000 in liquid assets per location up to
$50,000 (New Jersey). Other states also require that the check casher maintain an "adequate"
bond (e.g., Massachusetts).
PART 5.
AUTHORIZED DELEGATES.ARTICLE 4
AUTHORIZED DELEGATES
SECTION 501. SECTION 401. RELATIONSHIP BETWEEN LICENSEES AND
AUTHORIZED DELEGATES.
(a) Each (a) A contract between a licensee and an authorized delegate shallmust require the
authorized delegate to operate in full compliance withthe law and shall contain an appendix copy
of this [Act]. The licensee shall provide each authorized delegate with written policies and
procedures sufficient to permit compliance with this [Act] and rules adopted under this [Act].
The licensee shall promptly update its policies and procedures to [Act].
permit compliance with those laws and rules.
(b) An authorized delegate shall remit all funds 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 [superintendent's] action. On receipt of thisthe notice,
an authorized delegate shall immediately cease to operateengage in the business as a delegate of
the licensee.
Source: Model Money Transmitter Licensing and Regulation Act Section 10. President's
Commission Act Section 10.
Reporter's Note: Section 501 (formerly Section 401 in the February Draft)contains
substantial revisions, theReporter's Note: Section 401 (formerly Section 501 in the
February 1998 draft) contains substantial revisions. The following provisions were omitted:
the requirement that the licensee maintain a specific net worth for each authorized delegate
which it uses;
the requirement that the superintendent must grant written authorization for the use of
sub-delegates;
the imposition of treble damages on an authorized delegate for failure to remit all money owing
to the licensee in a timely fashion; and
the statement that an authorized delegate is not liable for any obligation imposed on a licensee
with respect to business for which it is a delegate.
SECTION 502. SECTION 402. SCOPE OF AUTHORIZEDDELEGATE ACTIVITY.
(a)DELEGATE'S ACTIVITY. An authorized delegate may not conduct business for
which a license is required under this [Act] andknowingly engage in activity which is outside the
scope of activity conferred inpermissible under the contract between the authorized delegate and
the licensee. licensee, except as provided in Section 105(d). An authorized delegate of a licensee
holds in trust for the benefit of the licensee all moneys net of fees received from the sale and
deliverysale, delivery, or provision of the licensee's payment instruments or moneys received for
transmission. money received for transmission.
(b) An authorized delegate consents to the [superintendent's] inspection, with or without prior
notice to the licensee or authorized delegates, of the books and records of authorized delegates of
the licensee.
Source: Model Money Transmitter Licensing and Regulation Act Section 10.
Reporter's Note: Subsection (b) omits the requirement included in the previous draft that he
Superintendent have a "reasonable basis" to believe that the delegate has violated the Act before
inspecting its books and records.
SECTION 503. PROHIBITED TRANSACTIONS. SECTION 403.
UNAUTHORIZED ACTIVITIES. A person may not engage in conductrequiring a license
under this [Act] as an authorized delegate of a principal if the principalperson that is not licensed
under this [Act]. A person that engages in that conduct is engaging in the business who does so
shall be considered to be the principal seller, issuer, or actor rather than an authorized delegate
and is liable to the holder, remitter, or customer to the same extent as if the person were the
principal.
Source: Arizona Money Transmitter Act Section, Model Money Transmitter Licensing and
RegulationSection 6-1218; President's Commission Act Section 10.
Reporter's Note: It is important to clearly delineate the rights and duties of a licensee and
his or her authorized delegate. This sectionSection defines the relationship between the parties
and includes the imposition of a trust for the benefit of the licensee for moneys received by the
delegate from the sale of the licensee's products or services.
PART 6.ARTICLE 5.
EXAMINATIONS, REPORTS AND RECORDS.REPORTS, AND RECORDS
SECTION 601. SECTION 501. AUTHORITY TO CONDUCT EXAMINATIONS.
(a) The [superintendent] may conduct an annualon-site examination of a licensee or any of
its authorized delegates upon [45] days' written notice to the licensee. However, ifIf
the[superintendent] has reason tobelieve that a licensee or authorized delegate is engaging in an
unsafe or unsound practice,pr has violated or is violating a provision of the [Act], the
[superintendent] may examine the licensee or its authorized delegate without providing advance
notice. 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'slicensee's financial statements and past
history of operations inprevious conduct in this State that an on-site examination is unnecessary,
the on-site examination may be waived.[superintendent] may waive the on-site examination.
Source: Model Act Regulating Money Transmitters Section 14 and Florida Money
Transmitters' Code Section 560.118(1)(a).
Reporter'sReporter's Note: The previous subsection (b) has been merged into subsection (a)
with respect to the examination of authorized delegates.
delegates. In the February 1998 draft an additional modification has been made. Previously,
801(a) 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. Some Observers have noted
that this is an ambiguous term 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). Some Observers have 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. As with several
other provisions in this Proposed Act, the Drafting Committee and Observers need to further
consider the appropriate balance between industry concerns and the needs of the regulator and
law enforcement.
SECTION 602. SECTION 502. JOINT EXAMINATIONS.
(a) On-site examinations of records prescribed in this [Act] (a) An on-site examination of
books, records, accounts, and documents listed in Section 505 may be conducted in conjunction
with representatives of other stateState agencies or agencies of another state or of the federal
government as determined by the [superintendent]. In lieu of anon-site examination, the
[superintendent] may accept the examination report of an agency of this State or of another
Statestate or of the federal government or a report prepared by an independent licensed or
certified public accountant. JointA joint examination or an acceptance of an examination report
shallis notbe considered a waiver of the [superintendent's] authority to conduct an examination
assessment provided by law. Joint reports and reportsA joint report or a report accepted under
this subsection are consideredis an official reports of the [superintendent] for all purposes.
(b) Information obtained during examinationsan examination under this [Act] shall demay
be disclosed only as provided in Section 608.509.
Source: Model Act Regulating Money Transmitters Section 14.
Reporter's Note: The use of joint examinations is an important feature of the
ProposedNondepository Providers Act that will reduce some of the increased finance costs that
may be incurred as a result of licensing and regulation.
regulation.
SECTION 603.
SECTION 503. REPORTS.
(a) A licensee shall file with the [superintendent] within [45] days after the end of each
[fiscal quarter] a consolidated financial statement including a balance sheet, income and expense
statements, and a list of all authorized delegates,branch managers, responsible individuals, and
locations within this State which have been added or terminated by the licensee within the [fiscal
quarter]. The licensee shall include the name and street address of each location and authorized
delegate.
(b) A licensee shall file with the [superintendent] within [15] days[one] day after its
occurrence a report of any of the following events:
(1) the licensee's filing (1) the filing of a petition under the United States Bankruptcy
Code for bankruptcy or reorganization by the licensee;
(2) the institution of license revocation proceedings in any Statea proceeding to revoke
or suspend its license in any state or country in which the licensee engages in business or is
licensed;
(3) the licensee's inability to pay its debts as they mature;
(4) the cancellation, interruption, or non-renewal of the licensee's bond, letter of credit;
or other security;
(3) a felony indictment (5) a felony [indictment], prosecution, or conviction of the
licensee or of an officer, director, controlling person,branch manger, responsible individual, or
authorized delegate of the licensee related to activities licensed activityregulated under this [Act]
or involvingconduct defined as money laundering or specified unlawful activity.unlawful activity
specified by the [superintendent] by rule.
(c) A licensee who fails to file any (c) A licensee that does not file a report required by this
section beforeby the time designated for filing the report, or fails to include anyreport or does not
include prescribed information in the report, shall pay a penalty of [$100] for each day that the
report is delayed ornot so filed or is incomplete, unless the [superintendent], for good cause
shown, reduces the amount to be paid, or unless the time to file the report was extended in
writing by the [superintendent].
Source: Model Money Transmitter Licensing and RegulationPresident'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 regulators and industry members alike. Certain significant events
must be reported immediately including a money launderingmoney-laundering allegation against
a delegate. At the February 1998 meeting, observersObservers noted that it would be difficult for
check cashers to produce detailed financial reports on a quarterly basis. Another time period may
be desirable. Alternatively, the Drafting Committee should consider whether the contents of
reports should be prescribed by regulation.
SECTION 604. SECTION 504. CHANGE OF CONTROL.
(a) Any person or group of persons who proposes to purchase or acquire a controlling interest in
a money service business shall provide written notice to the [superintendent].
(1) A licensee whose stock is traded on an organized stock exchange shall provide the
[superintendent] with written notice within [15] days after knowledge of a change in control.
(2) A licensee whose stock is not publicly traded shall provide the [superintendent] with written
notice not less than [30] days before the date of the proposed change of control.
After review of the written notice, the [superintendent] may require the licensee to provide
additional information concerning the proposed new owners or key shareholders of the licensee.
This information shall be of the same type required by the licensee as part of its original license
application or renewal application.
The [superintendent] may deny the person or group of persons who have acquired or who
propose to acquire control of the licensee, if after investigation, the [superintendent] determines
that the person or group of persons does not have the competence, experience or integrity or
financial capability to control or operate the licensee in a legal and proper manner and that the
interests of the public may be jeopardized by the change in ownership.
(d) This section does not apply to any of the following persons or transactions:
(1) a registered dealer who acts as an underwriter or member of a selling group in a public
offering of the voting securities of a licensee or the controlling person of a licensee;
(2) a person who acts as a proxy for the sole purpose of voting at a designated meeting of the
security holders of a licensee or controlling persons of a licensee;
(3) a person who acquires control of a licensee or controlling person of a licensee by devise or
descent;
(4) a person who acquires control of a licensee or controlling person as a personal representative,
custodial, guardian, conservator, trustee, or any other officer appointed by a court of competent
jurisdiction or by operation of law;
(5) a pledge of a voting security of a licensee or controlling person who does not have the right,
as pledge to vote that security; or
(6) a person or transaction that the [superintendent] by rule or order exempts in the public
interest.
(e) Before filing an application for approval to acquire control, a person may request in writing a
determination from the [superintendent] as to whether that person will be considered in control
upon consummation of a proposed transaction. If the [superintendent] determines that the person
will not be a controlling person within the meaning of this section, the [superintendent] shall
enter an order to that effect and the proposed transaction is not subject to the requirements of this
section.
Source: Florida Money Transmitters Code Section 560.127 (with modifications).
Reporter's Note: In February, the Drafting Committee objected to the previous section
dealing with change in control. The previous provision required prior written approval from the
superintendent before acquisition of a money service business. The current provision requires
notice rather than prior approval in all instances.
SECTION 605 ALTERNATIVE 1
SECTION 605. BOOKS AND RECORDS.
(a) Each licensee shall maintain books, accounts, records and documents necessary to determine
the registrant's compliance with the provisions of this [Act]. Books, accounts, records and
documents shall be retained for a period of at least [3] years.
(b) The items specified under subsection (a) may be maintained in paper, photographic,
electronic, or similar format.
(c) Records may be maintained at a location other than within this State so long as they are made
accessible to the [superintendent] on [7] days written notice.
Source: Florida money Transmitters Code Section 560.310. (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.
(b) A licensee whose shares are traded on a national securities exchange 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 shares are not traded on a national securities exchange 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] may deny a request for approval under subsection (a) if, after
investigation, the [superintendent] determines that the person or group of persons requesting
approval does not have 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
may 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 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 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, trustee, or other officer appointed by a court of competent jurisdiction or by
operation of law;
(5) a pledgee of a voting security of a licensee or controlling person that does not have
the right, as pledgee, to vote the security; 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 the proposed transaction. If the [superintendent]
determines that the person will not be a controlling person, the [superintendent] shall enter an
order to that effect and the proposed person and transaction are not subject to the requirements of
subsections (a) through (e).
Source: Florida Money Transmitters' Code Section 560.127 (with modifications).
Reporter's Note: In February 1998, the Drafting Committee objected to Section 504 dealing
with change in control. The previous provision required prior written approval from the
superintendent before acquisition of a money services business. The current provision requires
notice rather than prior approval in all instances (i.e., both for publicly held companies
and other entities).
SECTION 505. BOOKS, RECORDS, ACCOUNTS, AND DOCUMENTS.
(a) A licensee shall maintain books, records, accounts, and documents necessary to
determine the licensee's compliance with this [Act]. At a minimum, a licensee and authorized
delegate shall maintain the following for [three] years.
(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 assets, liability, capital,
income, and expense accounts;
(4) settlement sheets received from authorized delegates;
(5) bank statements and bank reconciliation records;
(6) records of outstanding payment instruments;
(7) records of each payment instrument paid within the [three]-year period;
(8) a list of the names and addresses of all of the licensee's authorized delegates; and
(9) any other books, records, accounts, and documents that may be prescribed by the
[superintendent] by rule.
(b) The items specified in subsection (a) may be maintained in paper, photographic,
electronic, optical, or similar medium.
(c) Books, records, accounts, and documents may be maintained outside of this State if they
are made accessible to the [superintendent] on [seven] days' written notice.
Source: Model Act Regulation Money Transmitters Section 15 (with modifications).
Reporter's Note: At the October 1998 Drafting Committee meeting, the Drafting Committee
decided to combine the more general reporting provision of Section 605 (Alternative 1 -- Florida
Money Transmitters' Code Section 560.310.) and the more detailed reporting requirements of
Section 605 (Alternative 2 which is Section 15 of the Model Act Regulating Money
Transmitters). Some Observers noted that regulators need guidance as to the types of books and
records which should be retained by licensees. Additionally, the Drafting Committee felt that the
statutory prescription for recordkeeping should merely be a minimum and that additional books
and records might be required by regulation if needed. Therefore, the current Section 605 is an
amalgamation of the previous two provisions.
Reporter's Note: MostAs noted in the September 1998 Draft, most check cashing and
currency exchange legislation simply states that the licensee must maintain books and records as
required by regulation. Unlike money transmission statutes, the actual details of the
recordkeeping are done through regulation. For check cashers, minimum books and records often
include:
a daily record of checks cashed, including for personal checks in excess of $500 and government
or business checks in excess of $1,000;
the date of the transaction, the date of the check, the check number, the name and location of the
payor bank;
the name of the drawer of the check, the name (and identification) of the person negotiating the
check; and
the amount of the check and the fee charged for cashing the check.
See, e.g., Georgia Code Chapter 80-3-1-0.5 Ohio also states in its Check Cashing
Act that relevant rules shall require check cashers to maintain a daily cash reconcilement that
summarizes daily activity, reconciles cash on hand, separately reflects cash received from the
sale of checks, and a general ledger, etc. See Ohio Check Cashing Act, Ohio Revised
Code Section 1315.27.
SECITON 605 ALTERNATIVE 2.
SECTION 605. BOOKS AND RECORDS.
(a) A licensee shall maintain the following books, accounts, and records for a period of [three]
years as applicable:
(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 assets, liability, capital, income, and
expense accounts;
(4) settlement sheets received from authorized delegates;
(5) bank statements and bank reconciliation records;
(6) records of outstanding payment instruments;
(7) records of each payment instrument paid within the [three] year period;
(8) a list of the names and addresses of all of the licensee's authorized delegates.
(b) The items specified under paragraph (a) may be maintained in paper, photographic,
electronic, or similar format.
(c) Records may be maintained at a location other than within this State so long as they are made
accessible to the [superintendent] on [7] days written notice.
Source: Model Act Regulating money Transmitters, Section 15 (with modifications).
Reporter's Note: Several states have recordkeeping provisions that require licensees to
maintain more detailed records. Alternative 2 is an attempt to prescribe more detailed records.
The provision, however, is most applicable or relevant to money transmitters and check sellers
and issuers.
SECTION 606. TRANSACTION RECORDS.Selected Issue: For how long should a
licensee have to retain its books and records? At present, Section 605 suggests a period of three.
Some Observers who represent regulatory and law enforcement participants have suggested that
the retention period should be no shorter than the relevant criminal statute of limitations.
Additionally, some suggestion has been made that in states with racketeering statutes, it should
be no longer than the criminal or the civil racketeering statute of limitations.
SECTION 506. RECORDS OF TRANSACTIONS.
(a) 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 or
imprinted on thepayment instrument.
(b) For every (b) For each transaction involving the receipt of funds from a customer, thea
licensee or an authorized delegate whothat receives the money shall maintain a written
recordsrecord of the transaction. The record may be reduced to of the transaction. The records
may be reduced to computer or other electronic medium. The records collectively must contain
the namean electronic or optical medium. The record must contain the name of the licensee, the
street address of the location whereat which the money was received, the name and street address
of the customer if reported to the licensee or authorized delegate, and the approximate dateof the
transaction, the name or other information from which. of the transaction. The records
collectively must contain the name together with other contemporaneous records,or other
information from which the [superintendent] can determine the identity of those employees of
the licensee or authorized delegate who conducted thethat engaged in a transaction, and the
amount of the transaction. The information required by this section must be available
throughfrom the licensee or authorized delegate for at least [ ][three] years after the date of the
transaction.
Source: Model Money Transmitter Licensing and RegulationPresident's Commission Act
Section 15.
Reporter's Notes: The Style Committee has noted that Section 506 appears redundant with
the inclusion of Section 505. Section 505 is a general recordkeeping provision and Section 506
relates to transaction records. The Drafting Committee and Observers should consider whether
both sections are necessary or if modifications should be made to Section 506 to eliminate any
overlap. Both Sections have currently been retained because they serve different functions.
SECTION 607. SECTION 507. MONEY LAUNDERING REPORTS.
(a) Licensees (a) A licensee must comply with federal currency reporting, record keeping,
and suspicious transaction reporting requirements as set forth in 31 U.S.C Section [ ], 31 C.F.R.
Part 103, and otherrelevant federal and state laws pertaining to money laundering.
(b) The licensee shall file appropriate reports with the [appropriate state agency]
(c) The timely filing of reports required by 31 U.S.C. Section [ ] with the appropriate federal
agency is considered compliance with this section unless the reports are not regularly and
comprehensively transmitted by the federal agency to the [appropriate state agency].
Source: Abbreviated version of Florida Money Transmitter Code Section 560.128.
(b) The timely filing of a complete and accurate report required under subsection (a) with
the appropriate federal agency is deemed compliance with the reporting requirements of
subsection (a), unless 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: President's Commission Model Financial Transaction Reporting Act, Section 5
(Reports to the Attorney General).
Reporter's Note: Observers at the October 1998 Drafting Committee meeting suggested this
language. This Section permits licensees to comply with State reporting requirements by filing
the appropriate federal anti-money laundering reports. 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.
Another Observer has suggested that the Proposed Act should encapsulate all of the provisions of
the Model Financial Transaction Reporting Act, a complementary statute to the President's
Commission Model Law on Money Transmitters. A copy of this model act has been included as
an appendix to the Third Draft cover memo for the Drafting Committee's reference. As an
alternative, the Observer has also suggested that Section 507 be deleted entirely with reference
made to the Model Financial Transaction Reporting Act (with changes to reflect the federal
forms required and the data available to State and local authorities through shared databases).
Some of the suggested weaknesses with the current provision are that no specific violation is
created for non-compliance and that there is no violation for licensees or authorized delegates
who either evade currency/transaction reporting requirements or who structure transactions so as
to avoid reporting requirements. The Drafting Committee needs to consider whether structuring
and evasion of reporting requirements should be specific violations under the Proposed Act and
whether such violations will have civil and/or criminal liabilities attached to them.
Query:Selected Issue: Should the Draft NDP Act be more explicit and
detailed concerning the types of transactions for which money services businesses mistmust file
and maintain reports for stateState regulators (as opposed to federal reports)?
Discussion: Approximately 10ten states require that money service businessesa 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 legislation 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 stateFederal 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 states that each financial
institution shall keep a record of currency transactions in excess of $10,000 and that those reports
shall be filed with this State within 15 days of the transaction. The Georgia Department of
Banking and Finance, however "may promulgate regulations that permit currency transaction
reports filed by financial institutions with federal agencies pursuant to requirements of federal
law to satisfy the currency transaction filing requirements . . . provided that the department . . .
will have access to the currency transaction reports filed with the federal agencies." Georgia
Financial Institutions Code Section 7-1-912.
Query:Selected Issue: Should the Draft NDPproposed Act also include specific prohibitions
against evading currency-reporting requirements (under either federal or stateFederal or State
law) and also against the structuring of transactions? (i.e., the division of a transaction that would
trigger currency reporting or Bank Secrecy Act reporting requirements into two or more
transactions that are not reportable). Some states explicitly prohibit such actions as part of their
criminal code or as part of their moonymoney transmission regulations.
regulations.
Georgia, for example, prohibits the evasion of reporting requirements and also structuring.
It requires financial institutions (including money services businesses) to keep records of
currency transactions in excess of $10,000. In addition to recordkeeping requirements, Georgia
also has provisions relating to the evasion of reporting requirements. For example, it is a
misdemeanor for a person to:
cause or attempt to cause a financial institution to fail to file a currency transaction report;
cause or attempt to cause a financial institution to file a report that contains a material omission
or misstatement of fact; or
structure or assist in structuring, or attempt to structure or assist in structuring, any currency
transaction with one or more financial institutions
See Georgia Code 7-1-912(d), 7-1-915(a).
SECTION 508. ELECTRONIC 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] be filed electronically.
Source: Proposed addition to Florida Money Transmitters' Code (new Section 560.120).
Reporter's Note: 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 Committee meeting, there was a general sentiment that there needed to
be some provision for the submission of records electronically as well as in writing.
SECTION 608. SECTION 509. 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 documentsrecords and are not open to
inspection by the public. Neither the [superintendent] norany member of the [superintendent]'s
staffan employee of the [superintendent] may disclose information obtained in the discharge
ofhis or her official duties to a person not connected with the [name of appropriate state
department or regulatory agency]. employed by the [superintendent].
(b) The [superintendent] may disclose confidential information pertaining to thea licensee
or authorized delegate to the following persons:
(1) representatives of federal agencies (1) a representative of a federal agency insuring
accounts of the licensee or authorized delegate;
(2) representatives of federal or State agencies and foreign countries (2) a
representative of a federal or state agency of foreign country having regulatory or supervisory
authority ofover the activities of the licensee if those representatives areor authorized delegate if
the representative is permitted to and does, upon request of the [superintendent], disclose similar
information respecting those [licensees] under theirlicensees or authorized delegates under its
regulation or supervision or to those representatives who stateand who states in writing under
oath that the representative they shallwill maintain the confidentiality of that information.the
information;
(3) the attorney general of this State;
(4) to a federal, State or countystate, or [county] grand jury in response to a lawful
subpoena; and
(5) to the [auditor general] of this stateState for the purposes of conducting auditsan
audit authorized by law.
(c) The [superintendent] may:
(1) disclose the fact of a licensee'san applicant's filing of an application with the [name
of department][superintendent] under this [Act], give notice of a hearing, if any, regarding an
application, and announce his or herthe action taken on the application;
(2) disclose a final decisions in connection with proceedings for the suspension or
revocation of a licenses issued under this [Act]; and
(3) prepare and circulate reportsa report reflecting the assets and liabilities of
[licensees],licensees or authorized delegates, including other information considered pertinent to
the purpose of eachthe report for general statistical information.
(d) This section does not preventpreclude the disclosure of information that is admissible in
evidence in a civil or criminal action, suit, or proceeding brought by or at the request of the
[superintendent] of this State to enforce or prosecute violations of this [Act] or the rules or orders
issued or promulgated under this [Act].
Source: Model Money Transmitter Licensing and Regulation Act Section 24.
PART 7.
PERMISSIBLE INVESTMENTS.
a violation of this [Act] or a rule adopted or an order issued under this [Act].
Source: President's Commission Act Section 24.
Reporter's Note: Some Observers have noted that this provision (which specifies which
agencies may receive information) is too restrictive for effective law enforcement. The Drafting
Committee should consider whether a more general confidentiality provision is appropriate.
ARTICLE 6
PERMISSIBLE INVESTMENTS
SECTION 701. SECTION 601. MAINTENANCE OF PERMISSIBLE INVESTMENTS.
(a) A licensee shall maintain at all times permissible investments that comply with either of the
following:
(1) 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, if the market value
of these permissible investments is at least 95% of the net carrying value in accordance with
generally-accepted accounting principles; or
(2) a net carrying value computed in accordance with generally accepted accounting principles of
not less than the aggregate amount of all its outstanding payment instruments.
(b) Notwithstanding any other provision of this [Act], the [superintendent], with respect to any
particular licensees, may limit the extent to which any class of permissible investments, may be
considered a permissible investment, except for money and certificates of deposit. The
[superintendent] may by rule prescribe or by order allow other types of investments which the
[superintendent] determines to have substantially equivalent safety as other permissible
investments.
Source: Model Money Transmitter Licensing and Regulation Act Section 14.
PART 8.
ENFORCEMENT.
SECTION 8001. CEASE AND DESIST ORDERS; SUSPENSION AND REVOCATION
POWERS.
(a) After notice and a hearing, the [superintendent] may issue a cease and desist order or removal
order, deny a license application, suspend or revoke a license previously issued under this [Act],
or order a licensee to revoke the designation of an authorized delegate whose conduct has
contributed to the following:
(1) the licensee fails to comply with this [Act] or any rule or order adopted under this [Act];
the licensee engages in fraud, misrepresentation, deceit, or gross negligence;
an authorized delegate has violated the Bank Secrecy Act or other State or federal anti-money
laundering statutes or has violated any rule adopted under this [Act] as a result of the licensee's
negligent failure to supervise or as a result of the willful misconduct of the licensee;
(4) the licensee is insolvent or has suspended payment of its obligations, has made an assignment
for the benefit of its creditors, or has admitted in writing its inability to pay its debts as they
become due;
(5) the licensee fails to remove an authorized delegate after the [appropriate State agency] has
issued and served upon the licensee a final order setting forth a finding that the authorized
delegate has violated this [Act].
(6) the competence, experience, integrity, or overall moral character of the licensee or authorized
delegate or any controlling persons of the licensee or authorized delegate indicates that it is not in
the public interest to permit that person to participate in the money service business; or
(7)the licensee fails to make any report required by this [Act].
Source: Florida Money Transmitters Code Section 560.11; Model Money Transmitter
Licensing and Regulation (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, sold,
or provided and funds 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. The [superintendent] by rule may prescribe or by order allow other types
of investments which the [superintendent] determines to have a safety substantially equivalent to
other permissible investments.
Source: President's Commission Act Section 14 (with modifications).
Reporter's Note: All references to net carrying value which were included in former Section
701 have been omitted. The Drafting Committee and Observers both felt that this term was
ambiguous.
(ALTERNATIVE 1)
SECTION 602. TYPES OF PERMISSIBLE INVESTMENTS. Without limitation, the
following investments are permissible under Section 601:
(1) cash, certificates of deposit, or other obligations of a domestic financial institution or
insured by the Federal Deposit Insurance Corporation;
(2) bills of exchange or time drafts drawn on and accepted by a commercial bank, otherwise
known as bankers' acceptances, which are 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 any department,
agency, or instrumentality thereof; an obligation that is guaranteed fully as to principal and
interest by the United States; or an obligation of a State or a governmental subdivision, agency,
or instrumentality thereof;
(5) a share in a money-market mutual fund; interest-bearing bill, note, or bond; debentures;
a share traded on a national securities exchange or a national over-the-counter-market; or a
mutual fund primarily composed of one or more investments as described in this section;
(6) a demand borrowing agreement made to a corporation or a subsidiary of a corporation
whose securities are listed on a national securities exchange; and
(7) a receivable that is due a licensee from its authorized delegate pursuant to a contract
which is not past due or doubtful of collection; and
(8) any other investment or security approved by the [superintendent].
Source: Model Act Regulating Money Transmitters Section 3.
Reporter's Note: the Drafting Committee previously noted that the investments listed under
(f) and (g) may be too risky to be included as permissible investments. More generally. Drafting
Committee members and Observers expressed concern about the broad nature of permissible
investments and the fact that there were no specific percentage limitations on any one type of
investment. Industry Observers noted, however, that the definition as provided is typical of what
is currently permitted in many states. A second alternative has been provided below.
(ALTERNATIVE 2)
SECTION 602. TYPES OF PERMISSIBLE INVESTMENTS.
(a) Without limitation, the following investments are permissible under Section 601:
(1) cash, certificates of deposit, or other obligations of a financial institution, as
defined in Section 3 of the Federal Deposit Insurance Act [12 U.S.C. Section 1813];
(2) bankers' acceptances and bills of exchange that are 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 its agencies or
instrumentalities or 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 governmental subdivision, agency,
or instrumentality thereof; and
(5) a share for 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 601, but only to the extent
specified:
(1) interest-bearing bills, notes, bonds, or debentures of a person the shares of which
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 over 10 percent of the licensee's total permissible
investments;
(2) shares of a person traded on a national securities exchange or a national
over-the-counter-market or shares for certificates 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 if the aggregate investment under this paragraph does not exceed 20
percent of the total permitted investments of a licensee and a licensee does not at one time have
investments under this paragraph in any one person aggregating over 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 permitted 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 over 10 percent of the
licensee's total permitted investments; or
(4) receivables that are due to a licensee from its authorized delegates pursuant to a
contract 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 permitted investments
of a licensee and a licensee does not at one time have investments in receivables under this
paragraph with any one person aggregating over 10 percent of the licensee's total permitted
investments; or
(5) 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 601.
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 Note: The Drafting Committee felt that the provisions were more substantive in
nature as to what constituted a permissible investment and therefore have been moved from the
definitions to Article 6.
At the October 1998 Drafting Committee meeting, Drafting Committee Members expressed
some concerns about former Subsections 1-102(a)(26)(e)--(g) which permitted investments --
without any limitations or caps on percentage of the licensee's portfolio invested in any of these
items -- in any of the following items:
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, 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 felt as did some Observers 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 legislation. In fact, the MTRA outline lists such investments as permissible though it
states that loans should not exceed 10% of the net worth of a licensee and the amount of such
laws as 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 current 602(b) (Alternative 2)
permit the type of investments that had previously raised concerns. The main difference in new
Section 602(b) is that the aggregate cap on such investments is at 20 percent of the licensee's
portfolio. Additionally, the license 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.
The Drafting Committee may wish to consider the permissible investment provisions contained
in states where money services businesses are engaged in higher volumes of business such as
California, New York, Florida, and Texas as a basis for comparison.
ARTICLE 7
ENFORCEMENT
SECTION 701. 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, or order a licensee to revoke the designation of an authorized
delegate if:
(1) the licensee fails to 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 negligent 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, makes an
assignment for the benefit of its creditors, or admits in writing its inability to pay its debts as they
become due;
(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;
(7) the licensee does not make a report required by this [Act]: or
(8) the licensee engages in any unsafe or unsound practice.
(b) In making the determination of whether a person is engaging in an unsafe or
unsound practice, the [superintendent] may consider the size and condition of the money services
business, the magnitude of the loss, the gravity of the violation, 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 Note: Suspension and revocation of a license may only occur after a hearing in
accordance with the state'sState's administrative procedure act. Licensee violation of state money
laundering prohibitions is specified on the list, as is delegate violations of money laundering
prohibitions done "as a result of a course of negligent failure to supervise or of the willful
misconduct 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. The order must be served on the licensee, the
licensee's board of directors and any offending principal. Texas Finance Code Section 153-407.
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), 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 8002. AUTHORIZED DELEGATES; CEASE AND DESIST ORDERS.
(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 conducting
its business through an authorized delegate and to take appropriate affirmative action if the
[superintendent] finds that:
(1) the authorized delegate is violating any applicable law or any order of the [superintendent];
(2) the authorized delegate has failed to cooperate with any examination or investigation by the
[superintendent];
(3) the competence, experience, or integrity of the authorized delegate or any controlling person
of the authorized delegate indicates that it is not in the public interest to permit that person to
participate in the money services business;
(4) the financial condition of the authorized delegate jeopardizes the interests of the public in the
conduct of money service business; or
(5) the authorized delegate is engaging in any unsafe or unsound practice.
(b) A licensee is responsible for any act of its authorized delegates if the license had knowledge
that the act violates this [Act] and the licensee willfully allowed the act to continue. The
responsibility is limited to conduct engaged in by the authorized delegate under the authority
granted to it in the contract between the licensee and the authorized delegate.
Source: Model Money Transmitter Licensing and Regulation Act Section 10.
Reporter's Note: Section 1002 and 1003 places responsibility on the licensee for the conduct
of the authorized delegate to the extent that the licensee knew of the delegate's misconduct or
allowed it to continue. The committee needs to consider whether scope of licensee liability
and/or responsibility for authorized delegate conduct needs to be extended to willful blindness or
recklessness. Additionally, the committee may consider further defining how licensee should
supervise authorized delegates.
SECTION 8003. CONSENT ORDERS.
(a) The [superintendent] may enter into consent orders at any time with any person to resolve any
matter arising under this [Act]. A consent order must be signed by the person to whom it is
issued or a dulySelected Issue: Should the cease and desist provisions include specific
reference to a licensee's books and records and also violations of the recordkeeping provisions of
the Proposed Act?
Reporter's Note: The Drafting Committee received comments from Observers who noted
that certain provisions of the October 1998 draft should not have been omitted from the February
1998 draft. These provisions (former Sections 1001(a)(3) and (5) in the October 1998 draft)
permitted the superintendent to issue a cease and desist order against the licensee in the event
that the licensee failed to "maintain, preserve and keep available for examination all books,
accounts or other documents required by the [Act] or any rules or orders adopted pursuant to the
[Act]" or if the "licensee has failed to comply with its recordkeeping and reporting requirements
under the Act." The Drafting Committee previously felt that these provisions were included in
current subparagraph (a)(1) which allows the Superintendent to issue a cease and desist order for
any violation of the Act. Failing to maintain records or violating recordkeeping requirements
would appear to constitute a violation of the Act. The Drafting Committee may want to consider,
however, whether these provisions should be specifically included in the next draft.
Selected Issue: Subsection (b) concerning the factors to be considered when determining if
an unsafe or unsound practice has occurred has been moved from the definition section of the
Proposed Act at the suggestion of the Style Committee because it is a substantive provision. The
Drafting Committee should consider whether such a provision properly belongs here or at some
other place in the act.
SECTION 702. 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 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.
Source: President's Commission Act Section 10 (with modifications).
(SUBSECTION (b) ALTERNATIVE 1)
(b) A licensee is responsible for conduct engaged in by an authorized delegate under the
authority granted to it in the contract between the licensee and the authorized delegate if the
licensee knew or should have known that the conduct violates this [Act] or a rule adopted or an
order issued under this [Act] and the licensee willfully allowed the conduct to continue.
Source: Model Act Regulating Money Transmitters Section 10.
Reporter's Note: Some criticism has been made about the limitations included in this
provision. First, the licensee's responsibility for conduct of the authorized delegate is limited to
actions relating to the contract between the license and its authorized delegates. Second, the
licensee is only responsible for wrongful conduct of the delegate which it had knowledge of.
Subparagraph (b) Alternative 2 is a proposed alternative which would eliminate these limitations.
The issue is to what extent the Licensee should have incentives to monitor its delegates and to
promote compliance with the Proposed Act.
Selected Issue: Subsection (b) concerning the factors to be considered when determining if
an unsafe or unsound practice has occurred has been moved from the definition section of the
Proposed Act at the suggestion of the Style Committee because it is a substantive provision. The
Drafting Committee should consider whether such a provision properly belongs here or at some
other place in the act.
(SUBSECTION (b) ALTERNATIVE 2)
(b) If an authorized delegate violates this [Act] or a rule adopted or an order issued under
this [Act] as a result of the licensee's negligent failure to supervise or as result of the willful
misconduct or willful blindness of the licensee, the licensee is responsible for the violation.
Source: President's Commission Model Act Section 11(f); see also A.R.S. Section
6-1210(5).
Reporter's Note: 702(b) Alternative 1 places responsibility on the licensee for the conduct of
the authorized delegate to the extent that the licensee knew of the delegate's misconduct or
allowed it to continue. The Drafting Committee needs to consider whether scope of licensee
liability and/or responsibility for authorized delegate conduct needs to be extended to willful
blindness or recklessness. Additionally, the Drafting Committee may consider further defining
how a licensee should supervise authorized delegates.
702(b) alternative 2 makes a licensee responsible for the actions of the authorized delegate that
are the result of the licensee's negligent failure to supervise and/or willful misconduct. One
Observer has made the following suggestion: "The President's Commission Model Act and the
Arizona statute makes the licensee responsible for the conduct of its authorized delegates if the
conduct occurred as a result of a course of negligent failure to supervise or as a result of the
willful misconduct of the licensee."
(c) In making the determination of whether a person is engaging in an unsafe or unsound
practice, the [superintendent] may consider the size and condition of the money services
business, the magnitude of the loss, the gravity of the violation, and the previous conduct of the
person involved.
Selected Issue: Subsection (c) concerning the factors to be considered when determining if
an unsafe or unsound practice has occurred has been moved from the definition section of the
Proposed Act at the suggestion of the Style Committee because it is a substantive provision. The
Drafting Committee should consider whether such a provision properly belongs here or at some
other place in the act.
SECTION 703. TEMPORARY ORDERS TO CEASE AND DESIST.
(a) Whenever the [superintendent] determines that a violation of this [Act] by a licensee or
authorized delegate is likely to: cause immediate and irreparable harm to the licensee, its
customers, or the public; cause insolvency or significant dissipation of assets of the licensee;
weaken the condition of the licensee; or otherwise prejudice the interests of consumers, the
[superintendent] may issue a temporary order requiring the licensee or authorized delegate to
cease and desist from the violation. The order shall become effective upon service upon
the licensee or authorized delegate.
(b) The temporary order shall remain effective and enforceable pending the completion of
an administrative proceeding pursuant to Section 701 or Section 702.
(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 apply to 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 701 or Section 702.
Source: This new provision is loosely based on Section 8(c) of the Federal Deposit
Insurance Act, 12 U.S.C.A. Section 1818(c).
Reporter's Note: Some Observers had expressed concern at the October 1998 meeting, that
the Proposed Act did not provide the superintendent with sufficient authority to deal with exigent
situations through the use of expedited procedures. New Section 703 attempts to provide the
superintendent with limited authority to issue temporary orders to cease and desist without first
going through notice and hearing procedures. Drafting Committee members should
consider whether such a provision should be included separately or as part of the cease and desist
provisions which are found in Sections 701 and 702.
Selected Issue: Should there be a similar provision which allows the superintendent to
suspend a license prior to a hearing if he or she determines that such an action is in the public
interest?
SECTION 704. 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 that 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 authorized representative, and must
indicate agreement with the terms contained therein. A consent order need not constitute an
admission by any person that this [Act], or any rule or orderorder issued under this [Act] has
been violated.
Source: Model Act Regulating Money Transmitters Section 24.
SECTION 8004. SECTION 705. CIVIL PENALTIES.
SUBSECTION (a) ALTERNATIVE 1
(a) The [superintendent] may initiate a proceeding under [the state administrative procedure act]
to impose a civil penalty against any person found to have violated any provision of the [Act] or
a cease and desist order or consent agreement. No fine shall accrue until after a person has been
notified in writing of the nature of the violation and has been afforded a reasonable period of
time, as set forth in the notice, to correct the violation and has failed to do so. Except as provided
in this section, a fine may not exceed [$100] per day for each violation.
SUBSECTION (a) ALTERNATIVE 2
(a) A person whothat violates this [Act] may be assessed a civil penalty by [the
superintendent] in an amount equal to [$1,000] per day plus the State'san amount equal to the
gross businessconducted in connection with the violation plus the state's costs and expenses for
the investigation and prosecution of the matter, including reasonable attorney's fees.
(b) The [superintendent] may impose a fine not to exceed [$1,000] per day for each day a person
engages in money services business activities without a license.
Source: Florida Money Transmitters' Code Section 560.117.
Reporter's Note: The current Section 804 was the second of two alternative subparagraphs
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 felt that such a "cure" provision eliminated much of the
effectiveness of the civil money penalty provision. The second alternative, which was retained in
this draft, has been modified. Previously, there was a reference to a fine equaling an amount
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 has been suggested. Additionally, former Section 804(b) has been eliminated.
This provision included a separate fine of $1,000 per day for engaging in money services
business without a license. It was decided that this was a per se violation of the Proposed Act and
therefore did not need to be the subject of a new act.
(c) (b) The [superintendent] may bring and 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 section[Act] is alleged to have occurred or in any other
county[county] in which venue is permitted under [reference to Statethis State's venue statutes
and rules] in the same manner as the filing of other civil actions.
Source: Model Money Transmitter Licensing and RegulationPresident's Commission Act
Section 23.
Reporter's Note: As discussed at the first meeting of the Drafting Committee, civil penalties
were a preferred enforcement mechanisms due to the commercial nature of the Proposed Act.
Selected Issue:Should subsection (b) eliminated and subsection (a) amended to provide that
a civil penalty may be assessed after the licensee if provided with notice and an opportunity for a
hearing?
SECTION 8005. SECTION 706. CRIMINAL PENALTIES.
(a) A person who directly or through another person violates or attempts to violate provision of
this [Act] for which a different penalty is not specifically provided is guilty of a [reference to
state classification] felony. Each transaction in violation of this [Act] and each day that a
violation continues is a separate offense.
A person who (a) A person that knowingly makes a false statement, misrepresentation, or
false certification in an application, financial statement, accountbook, record, account, customer
receipt, report, or other document filed or required to be maintained under this [Act] or whothat
knowingly makes a false entry or omits a material entry in such a document is guilty of a
[reference to state classification] felony.
(b) A person whothat refuses to permit a lawful examination or investigation by the
[superintendent] is guilty of a [reference to state classification] felony.
(c) A person whothat knowingly and willfully engages in the business of money
transmission without a licenseany 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: Model Money Transmitter Licensing and RegulationPresident'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.
SECTION 8006. SECTION 707. UNAUTHORIZED ACTIVITIES.
(a) A person (a) A person, other than a licensee or an authorized delegate, may not engage in
a money services businessactivities in this state unless the person is exempted from the licensing
requirements of this [Act].excluded under Section 104.
(b) No person shall act (b) A person may not engage in conduct as an authorized delegate of
a money services business when the money service business isperson required to obtain a license
under this [Act] but has failed to do so. who is not so licensed. The person that engages in that
conduct becomes the principal and is no longermerely acts as an authorized delegate. The person
is also liable to the holder or remitter as a principal money transmitter.of a money services
business.
(c) The superintendent (c) The [superintendent] may issue a complaint against any person
who engages in money service business activities without a license and seek aand issue an order
to cease and desist order. against a person that engages in the business without a license. The
[superintendent] may also impose a civil monetary penalty under Section 8005.705.
Source: Florida Money Transmitters' Code Section 560.125 (with modifications).
Reporter'sReporter's Note: The MTRA has observed that stateState regulators need
authority to deal with money services businesses that operate without a license.
license. The Style Committee has pointed out that Section 707 may be redundant
SECTION 8007. INJUNCTIONS. If it appears that any person has committed or
is about to commit a violation of any provision of this [Act] or of any rule or order of the
[superintendent], the [superintendent] may apply to the [name of appropriate court] got an order
enjoining the person from violating or continuing to violate this [Act], rule, or order, and for
injunctive or other relief.
Source: Model Act Regulating Money Transmitters Section 24(A).
Reporter's Note: The MTRA members requested that state regulators be given the ability to
seek injunctive relief with respect to violations of the act.
PART 9.
ADMINSITRATIVE PROCEDURES.given the prohibitions against unlicensed activity in
the Proposed Act.
ARTICLE 8
ADMINISTRATIVE PROCEDURES
SECTION 901. SECTION 801. ADMINISTRATIVE PROCEDURES. All
administrative proceedings under this [Act] shall be conducedmust be conducted in accordance
with the [state administrative procedure act].
Administrative Procedure Act].
Source: Florida Money Transmitters' Code Section 560.108(2) (with modifications).
Reporter'sReporter's Note: The Drafting Committee noted that the Act should generally
conform to the provisions of the Model StateAdministrate Procedure Administrative Procedure
Act. MTRA members also expressed concern that the Act conforms to stateState administrative
procedure laws.
SECTION 901. SECTION 802. HEARINGS.
(a) The [superintendent] may not suspend or revoke a license,or issue an order to cease and
desist orderdesist, revoke the designation of an authorized delegate, or assess a civil penalty
without holding a hearing.
The Source: Model Money Transmitter Licensing and Regulation Act Section 12.
PART 10.
MISCELLANEOUS PROVISONS.
[superintendent] shall also hold a hearing when requested to do so by an applicant whose
application is denied.
(b) The [superintendent] shall give a licensee or an applicant at least [10] days written
notice of the time and place of a hearing by registered or certified mail, addressed to the licensee
or applicant at its last-known address.
Source: President's Commission Act Section 12 (with modifications).
Reporter's Note: Except for the issuance of temporary orders pursuant to Section 703, 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 extended
further to include cease and desist authority and also the ability to assess civil penalties. Part of
the President's Commission Act text has been omitted:
Any order of the [superintendent] suspending, revoking or denying a license shall state the
grounds it is based on and shall not be effective until ten (10) days after written notice of the
order has been sent by registered mail or certified mail to the licensee or applicant at its
last-known address. Any hearing required by this Section shall be conducted on the record.
Witnesses shall be sworn and evidence presented to the [superintendent] shall be appropriately
identified and preserved. The [superintendent] is hereby granted subpoena powers to compel the
production of physical items and the attendance of witnesses. Any notice required under this
Section shall be deemed served on the third business day after the [superintendent] mails it. A
licensee may seek court review of the [superintendent's] findings and order.
SECTION 1001. CONSUMER DISCLOSURE. EveryReporter's Note: The
Former Section 1001 on Consumer Disclosure has been eliminated. This provision previously
required that "Every licensee and authorized delegate shall provide each consumer of a money
services business transaction a toll-free telephone number for the purpose of consumer inquiries.
In lieu of a toll-freetoll free number, the licensee or authorized delegate may provide the address
and telephone number of the [superintendent].
Source: Florida Money Transmitters Code Section 560.128
Reporter's Note: MTRA members suggested that the act should include a provision for a
toll-free number which consumers may call. The Draft NDP Act does not address the regulation
of consumer fees for money services businesses (e.g., the fee for cashing checks) because the
scope of the act deals with the licensing of money service businesses as it relates to the
prevention of money laundering. The Draft NDP Act therefore does not address consumer issues.
[superintendent]."
The Drafting Committee decided to omit this provision as it placed a heavy regulatory burden on
the superintendent or regulator with respect to referrals from licensees. Additionally, the Drafting
Committee felt that this provision might overlap with existing consumer protection legislation
provisions. The Proposed Act is not meant to repeal any existing consumer legislation.
ARTICLE 9
MISCELLANEOUS PROVISIONS
SECTION 1002. SECTION 901. APPOINTMENT OF [SUPERINTENDENT] AS AGENT
FOR SERVICE OF PROCESS.
(a) A licensee, an authorized delegate or person who engages in business activities that are
regulated under this [Act] without filing an application for a license is considered (a) A
licensee or a person that engages in the business without being licensed is deemed to have done
both of the following:
(1) consented to the jurisdiction of the courts of this State for all actions, suits, and
proceedings arising under this [Act]; and
(2) appointed the [superintendent] as his or herits lawful agent for the purpose of
accepting service of process in any action, suit, or proceeding that may arisearising under this
[Act].
(b) Within [ ][three] business days after service of process upon the [superintendent], the
[superintendent] shall transmitsend by certified mail copies of all lawful process accepted by the
[superintendent] as ana person's agent to thatthe person at its last knownlast-known address.
Service of process shall be consideredis complete [ ][three] business days afarafter the
[superintendent] deposits the copies of the documentsprocess in the United States mail.]
Source: Model Act Regulating Money Transmitters Section 28.
Reporter's Note: This Section is bracketed because some states do not allow the secretary of
state to accept service of process.
SECTION 1003. SECTION 902. UNIFORMITY OF APPLICATION AND
CONSTRUCTION. In applying and construing this [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.
Source: USL Drafting Manual.
SECTION 1103. SECTION 903. SEVERABILITY. 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.
Source: USL Drafting Manual.
SECTION 1104. SECTION 904. EFFECTIVE DATE.
Source:
SECTION 1105. SECTION 905. SAVINGS AND TRANSITIONAL PROVISIONS.
Source: