As fintech companies and others in the payments industry seek to improve the ways in which payments are made and value is transferred among and between individuals and businesses, compliance with state money transmission laws is a continuing challenge. To receive funds for transmission, issue or sell stored value products, or provide services in or through cryptocurrency, as many as 50 state money transmitter licenses may be required. Thanks to a new initiative by the Conference of State Bank Supervisors (CSBS) and a growing group of participating states, a measure of relief in the application process may soon be available.
As part of its Vision 2020 initiative, CSBS announced in February 2018 that a group of 7 states had agreed to streamline the money transmitter application process by accepting the findings of any of the other states with regard to certain sections of an application. In other words, if one of the participating states reviewed and approved those portions of the application, the other states would not separately review them. While no additional details have been published since the initial announcement, Venable recently learned new information on the status of the program and how it will work.
In terms of status, the program is still in development, and will not go live for another few months, but the number of participating states has grown to 21, and includes such major markets as California, Georgia, Illinois, North Carolina, and Texas. Once the program goes live, interested companies will need to apply for entry to the program.
Under the multi-state program, the application process is split into two "phases." In the first phase, the applicant will be assigned a Phase One state that will review its initial licensing submission. The applicant submits a list of Phase One information and supporting documentation through NMLS, only to its assigned Phase One state. At this time, the only fees required would be the application fee, background check fee(s), and credit report fee(s) for the Phase One state.
Once the initial requirements are met, the Phase One state will notify the applicant it can proceed to Phase Two, in which it will submit the additional requirements to complete an application with any of the participating states. These state-specific submissions will include financial statements to prove compliance with state net worth requirements, surety bonds, and secretary of state filings, among others. Presumably, none of the Phase Two states would review the materials submitted in Phase One. Although subject to change, CSBS previously announced that the participating states would accept the Phase One state's findings on IT, cybersecurity, business plan, background checks, and compliance with the federal Bank Secrecy Act.
Although state-specific materials will still be required as part of the application process, entry into the multi-state program should reduce the overall amount of time required to obtain licenses in the participating states.
For more information, including on application to the program and state-specific Phase Two requirements, please contact the authors.