Overview

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.

Regulation

Forty-nine US states (sans Montana) regulate (i.e., require licensure for) 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 maintain a minimum capital requirement. There is an association of state regulators, the Money Transfer Regulators Association (MTRA) that seeks to create uniformity, common practices, and efficient and effective regulation of the 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. In the Spring of 2019, the MTRA created the Industry Advisory Council (“IAC”) in order to consult, advise, and assist the MTRA Board of Directors on issues relating to money services business regulation.

Through their Vision 2020 program, US state regulators, as the primary regulators of non-bank and fintech firms committed to fostering innovation, are transforming the licensing process, harmonizing supervision, engaging fintech companies, assisting state banking departments, making it easier for banks to provide services to non-banks, and making supervision more efficient for third parties.

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.