In the legal code of the United States, a money transmitter or money transfer service is a business entity that provides money transfer services or payment instruments. Money Transmitters in the US are part of a larger group of entities called money service businesses or MSBs. Under federal law, 18 USC § 1960, businesses are required to register for a Money Transmitter license where their activity falls within the state definition of a money transmitter.
Forty-nine US states (sans Montana) regulate money transmitters although the laws vary from one state to the other. Most of the states require a money transmitter surety bond with widely ranging amounts from as little as $25,000 to over $1 million and maintaining a minimum capital requirement. There is an association of state regulators, the Money Transfer Regulators Association (MTRA) that seeks to create uniformity and common practices and efficient and effective regulation of money transmission industry in the United States of America. The MTRA membership consists of state regulatory authorities in charge of regulating money transmitters and sellers of traveler’s checks, money orders, drafts and other money instruments.
The money transmitters themselves have a separate association, the National Money Transmitters Association (NMTA) to have a voice in shaping and developing this industry. A related international association, the International Money Transfer Conferences (IMTC), brings together the money transfer industry once a year for the IMTC Miami conference. In 2012 the IMTC brought together close to 400 participants, 67% from the US.
The Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury Department requires MSBs to register. It is also a felony to engage in money transmission without a license in any state that requires a license to operate. Internet and mobile-based payment services are also required to seek a state money transmitter license to offer services to individuals residing in the state.
FINCEN has also ruled that Informal Value Transfer Systems (IVTS) are considered money transmitters for the purposes of registration and licensing. FINCEN defines an IVTS as “any system, mechanism, or network of people that receives money for the purpose of making the funds or an equivalent value payable to a third party in another geographic location, whether or not in the same form”. These are known as Hawala in the Middle East, Afghanistan and Pakistan, as “hundi” in India and ‘”fei ch’ien” in China.
In regulations enacted in 2012 under the Dodd-Frank Act the Consumer Financial Protection Bureau (CFPB) extended its regulation under a “Remittance Rule” that added some additional protection for US consumers who send money electronically to foreign countries. The rule targets any remittance institution defined as consumer-to-consumer transfers of low monetary value, made via money transmitters, banks or credit unions, through wire transfers or Automated Clearing House (ACH) transactions, to businesses as well as to individuals in foreign countries.
- ^“Illinois Compiled Statutes -FINANCIAL REGULATION Transmitters of Money Act”. January 1, 1995.
- ^“FinCEN – Am I an MSB”. Retrieved June 3, 2013.
- ^“18 UCS § 1960”. Retrieved May 20, 2014.
- ^Atlas, Adam (2010-01-28). “Money Transmitter Licensing”. Moneytransmitterlicense.blogspot.com. Retrieved 2013-06-03.
- ^“MTRA – Money Transmitter Regulators Association;”. Mtraweb.org. 2012-10-23. Retrieved 2013-06-03.
- ^“NMTA – The National Money Transmitters Association”. Nmta.us. Retrieved 2013-06-03.
- ^“International Money Transmitters Conference IMTC”. Imtconferences.com. Retrieved 2013-06-03.
- ^“IMTC Miami 2012 statistics”. Imtconferences.com. Retrieved 2013-06-03.
- ^“Money Services Business (MSB) Registration”. FinCEN. Retrieved 2013-06-03.
- ^Andrew Schout (2008). “Unlicensed Money Transmitting Businesses and Mens Rea under the USA PATRIOT Act” (PDF). 39. McGeorge Law Review. Retrieved 2013-06-03.
- ^“FinCEN Advisory – Informal Value Transfer Systems (IVTS)” (PDF). March 2003. Archived from the original (PDF) on 2014-06-30.
- ^“CFPB > Consumer Financial Protection Bureau”. Consumerfinance.gov. Retrieved 2013-06-03.
- ^“Remittance transfer rule (amendment to Regulation E)”. Consumer Financial Protection Bureau. Retrieved 2013-06-03.
Ofer Abarbanel is a 25 year securities lending broker and expert who has advised many Israeli regulators, among them the Israel Tax Authority, with respect to stock loans, repurchase agreements and credit derivatives. Founder of TBIL.co STATX Fund.