In the legal code of the

United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...

, 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 business A money services business (MSB) is a legal term used by financial regulators to describe businesses that transmit or convert money. The definition was created to encompass more than just banks which normally provide these services to include non-b ...

es 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 Montana () is a state in the Mountain West division of the Western United States. It is bordered by Idaho to the west, North Dakota and South Dakota to the east, Wyoming to the south, and the Canadian provinces of Alberta, British Columb ...

) 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 maintaining a minimum

capital requirement A capital requirement (also known as regulatory capital, capital adequacy or capital base) is the amount of capital a bank or other financial institution has to have as required by its financial regulator. This is usually expressed as a capital ...

. 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 A money order is a directive to pay a pre-specified amount of money from prepaid funds, making it a more trusted method of payment than a cheque. History The money order system was established by a private firm in Great Britain in 1792 and was ...

, 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 make supervision more efficient for third parties. Money transmitters created an association with other MSBs, the Money Services Business Association (MSBA) which was launched in October 2015 as an industry led organization that supports the non-bank financial services industry in the United States and encourages the continued innovation and development in the payments industry while promoting the education and communication with US federal and state regulators. As of September 5, 2018, the MSBA integrated into its operation the services and capabilities of the National Money Transmitters Association (NMTA). Together with the MSBA and other industry associations, the International Money Transfer Conferences (IMTC), brings together the global money transfer industry once a year for the IMTC WORLD conference, in Miami, Florida. In 2017 the IMTC brought together more than 450 participants, 67% from the US. The

Financial Crimes Enforcement Network The Financial Crimes Enforcement Network (FinCEN) is a bureau of the United States Department of the Treasury that collects and analyzes information about financial transactions in order to combat domestic and international money laundering, terr ...

(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 An informal value transfer system (IVTS) is 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 s ...

(IVTS) are considered money transmitters for the purposes of registration and licensing.

FINCEN The Financial Crimes Enforcement Network (FinCEN) is a bureau of the United States Department of the Treasury that collects and analyzes information about financial transactions in order to combat domestic and international money laundering, terr ...

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 Hawala or hewala ( ar, حِوالة , meaning ''transfer'' or sometimes ''trust''), also known as in Persian, and or in Somali, is a popular and informal value transfer system based on the performance and honour of a huge network of money ...

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 The Consumer Financial Protection Bureau (CFPB) is an agency of the United States government responsible for consumer protection in the financial sector. CFPB's jurisdiction includes banks, credit unions, securities firms, payday lenders, mo ...

(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 A remittance is a non-commercial transfer of money by a foreign worker, a member of a diaspora community, or a citizen with familial ties abroad, for household income in their home country or homeland. Money sent home by migrants competes wi ...

institution defined as consumer-to-consumer transfers of low monetary value, made via money transmitters,

bank A bank is a financial institution that accepts Deposit account, deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital m ...

s or

credit union A credit union, a type of financial institution similar to a commercial bank, is a member-owned nonprofit financial cooperative. Credit unions generally provide services to members similar to retail banks, including deposit accounts, provis ...

s, through

wire transfer Wire transfer, bank transfer, or credit transfer, is a method of electronic funds transfer from one person or entity to another. A wire transfer can be made from one bank account to another bank account, or through a transfer of cash at a cash ...

s or

Automated Clearing House An automated clearing house (ACH) is a computer-based electronic network for processing transactions, usually domestic low value payments, between participating financial institutions. It may support both credit transfers and direct debits. T ...

(ACH) transactions, to businesses as well as to individuals in foreign countries.

References

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External links

FINCEN's information on MSBs
Payment systems

Regulation

See also

References

External links