A money transmitter license is a state license that authorizes a business to receive money or monetary value for transmission, sell payment instruments or stored value, or conduct similar activity in that state. Licensing is state by state, and most states administer applications through the Nationwide Multistate Licensing System (NMLS). The Conference of State Bank Supervisors' Money Transmission Modernization Act (MTMA) is a model law that a growing number of states have enacted in full or in part, standardizing net worth, surety bond and permissible investment requirements. A typical application includes a business plan, financial statements, a surety bond, evidence of net worth, background checks on control persons and key individuals, and an anti-money laundering program. Separately, a money services business registers with FinCEN under 31 CFR 1022.380.
Money transmitter licensing is the state regulatory regime under which a business that transmits money on behalf of others must obtain a license from each state in which it conducts that activity. A money transmitter license authorizes the holder to engage in money transmission, which state statutes generally define to include receiving money or monetary value for transmission, selling or issuing payment instruments, and, in many states, selling or issuing stored value. Licensing is a state function; there is no single federal money transmitter license. A business engaged in money transmission is also a money services business under federal law and must register with the Financial Crimes Enforcement Network (FinCEN).
Who needs a license
Whether an activity requires a license is a question of each state's statute. The CSBS Money Transmission Modernization Act illustrates the common structure: it requires a license for any person engaged in money transmission (MTMA section 5.01), defines money transmission, and lists exemptions (section 3.01), which in the model act include, among others, banks and other depository institutions, and an agent of the payee arrangement under which a payment to the agent satisfies the payer's obligation to the payee. State versions differ, so the analysis is performed state by state against the enacted text.
Operating without a required license carries federal as well as state consequences. Under 18 U.S.C. 1960, operating a money transmitting business without an appropriate license in a state where unlicensed operation is punishable as a misdemeanor or felony, or without complying with federal registration under 31 U.S.C. 5330, is a federal crime (18 U.S.C. 1960(b)(1)(A) and (B)).
Businesses that move funds through a licensed or bank partner, or that operate in payment flows where they may qualify for an exemption, commonly obtain a written legal analysis of whether their model requires licensing in each state, and some states issue interpretive opinions on request.
NMLS and the multistate process
The Nationwide Multistate Licensing System (NMLS), operated by the State Regulatory Registry, a subsidiary of the Conference of State Bank Supervisors (CSBS), is the system through which most states accept money transmitter applications, renewals and amendments. A company files a company form (Form MU1) and each control person and key individual files an individual form (Form MU2); state-specific requirements are published as checklists on the NMLS Resource Center. Some states still require documents to be submitted outside the system.
State regulators have developed multistate programs on top of NMLS. Under the Multistate MSB Licensing Agreement (MMLA), participating states agree to rely on a review of core application components performed by other states. For supervision, CSBS announced MSB Networked Supervision in 2020, under which nationwide payments companies undergo one coordinated examination intended to satisfy the examination requirements of the participating states. Section 4.04 of the MTMA provides for networked supervision.
The Money Transmission Modernization Act
The MTMA is a model law developed by CSBS with industry input to replace inconsistent state requirements with a single set of standards. CSBS reports that a growing number of states have enacted it in full or in part and maintains a public tracker of enacted and pending legislation. Because adoption varies, and states that enact it may modify individual provisions, the enacted state statute, not the model text, governs any particular application. The model act's principal standards are:
| Standard | Model act provision |
|---|---|
| Tangible net worth | The greater of $100,000 or a percentage of total assets (3 percent of the first $100 million, 2 percent of additional assets up to $1 billion, and 0.5 percent above $1 billion) (section 10.01). |
| Surety bond | The greater of a bracketed floor ($100,000 in the model) or 100 percent of average daily money transmission liability in the state over the most recent three months, up to a bracketed cap ($500,000 in the model) (section 10.02). Bracketed figures are left to each state. |
| Permissible investments | Permissible investments with a market value at least equal to all outstanding money transmission obligations (section 10.03), of the types listed in section 10.04. |
| Audited financials | Audited annual financial statements filed within 90 days after fiscal year end (section 7.02). |
| Control and key individuals | Background information and fingerprints for persons in control and key individuals (section 5.04); approval before a change of control (section 6.01). |
Components of a typical application
Section 5.03 of the MTMA lists the contents of an application, and state checklists on NMLS set out the documents each state requires. Across states the core components are consistent:
- Business plan: the products, target markets, marketing approach, fee schedule, operating structure, funds flow, and the banks and other partners involved. The funds flow shows how customer money moves and where it is held at each step.
- Financial statements: audited financial statements for the most recent fiscal year (and, under MTMA section 5.03(b)(6), the preceding two-year period, or acceptable alternatives), recent unaudited interim statements, and in many states pro forma projections.
- Surety bond: a bond in the amount the state requires, often filed through the NMLS electronic surety bond feature.
- Net worth: evidence that tangible net worth meets the state minimum.
- Background checks: for each control person and key individual, fingerprints for a criminal history check, a credit report, and disclosure of regulatory actions and litigation (MTMA section 5.04), plus an independent investigative background report for individuals who have lived outside the United States in the past ten years.
- AML program: the board-approved BSA/AML policy and, in many states, the most recent independent review of the program. The federal rule for money services businesses requires a written AML program with internal controls, a designated compliance officer, training, and independent review (31 CFR 1022.210).
- Other policies and documents: information security, complaint handling, disclosures and receipts, authorized delegate contracts, formation documents, and a certificate of good standing.
Review, deficiencies and approval
After filing, the state regulator reviews the application and records deficiencies in NMLS, generally as "license items," identifying missing documents or information. The applicant responds by uploading documents or amending the filing; states set response periods and may treat an application as abandoned if items remain unresolved. Under MTMA section 5.05, once a regulator determines an application is complete, it approves or denies within 120 days, and completeness means only that the application on its face contains the required items, not an assessment of its substance. The regulator then investigates the applicant's financial condition, experience, character and general fitness, and may conduct an on-site investigation. State enactments vary in these timelines.
Approval does not end the process. Licensees file periodic reports of condition (MTMA section 7.01), renew on the cycle the state sets, maintain their bond and permissible investments, report changes of control and key individuals, and are examined. The money transmitter compliance reference covers those ongoing obligations.
Federal MSB registration
Federal registration is separate from state licensing and is required whether or not a state license is held. Under 31 CFR 1022.380, each money services business, other than a business that is an MSB solely as an agent of another MSB, must register with FinCEN within 180 days after the date the business is established (1022.380(b)(3)), and renew every two years. Re-registration is required after a change in ownership or control that requires re-licensing under state law, a transfer of more than 10 percent of voting power or equity interests, or an increase of more than 50 percent in the number of agents during a registration period (1022.380(b)(4)). A registered MSB maintains a list of its agents and revises it annually (1022.380(d)). The statutory basis for registration is 31 U.S.C. 5330.
Primary sources
- CSBS, Money Transmission Modernization Act (MTMA): The model law and CSBS's summary of its standards and adoption.
- CSBS, MTMA enacted and pending legislation tracker: CSBS's state-by-state record of MTMA enactments.
- CSBS Uniform Money Transmission Modernization Act (model text): Sections 3.01 (exemptions), 5.03 to 5.05 (application, individuals, issuance), 7.02 (audited financials), 10.01 to 10.04 (net worth, bond, permissible investments).
- CSBS, One Company, One Exam (MSB Networked Supervision): State regulators' coordinated examination program for multistate payments companies.
- 31 CFR 1022.380: FinCEN registration of money services businesses: 180-day deadline, two-year renewal, re-registration, agent lists.
- 31 CFR 1022.210: AML program requirements for money services businesses.
- 18 U.S.C. 1960: Federal prohibition of unlicensed money transmitting businesses.
- Alaska Division of Banking and Securities, Money Transmitter New Application Checklist: An example of a state NMLS checklist (business plan, AML policy and independent review, surety bond, financial statements).