There are several ways to create a successful business in financial services. In the past several years, entrepreneurs and finance professionals have taken hold of technology advances to develop and implement money transmission businesses. Individuals and businesses operating as money transmitters, including those in the virtual currency market, face some challenges in meeting the state and federal requirements to operate legally, however.
Being a money transmitter means that you are transmitting money from one location to the next, virtually or otherwise, for others. If this sounds like your business model or a part of it, you likely need a money transmitter license. There are specific guidelines you have to meet to get your money transmitter license, but you can speed up the process by understanding the following regulations surrounding money transmitters.
First and foremost, having knowledge of the state requirements that are relevant to your money transmitter business is crucial. Each state has its own set of guidelines money transmitters must meet in order to operate their business legally. You likely fall under these guidelines if you do any of the following:
In most states, performing these tasks in amounts totaling more than $1,000 per year means you are a money transmitter and need a license to run your business. The licensing process for each state is different, but most money transmitters are required to provide information about their business structure, its location, the owners of the business, financial documents, and criminal background check. Knowing these requirements in advance will help speed up the process of getting licensed.
In addition to state requirements, there are also federal guidelines for money transmitter businesses. Under federal law, those who act as money transmitters must register with the Financial Crimes Enforcement Network, or FinCEN, as well as have an anti-money laundering program in place. The good news is that the registration with FinCEN is often the easiest part of the process, as it can be done in a few minutes online.
One of the most time-consuming aspects of getting a money transmitter license is gathering the financial documentation needed to submit an application. While state licensing processes differ, most money transmitter applications require you to provide the following financial details:
Be sure these details are as organized and clear as possible, and take the time to ensure the numbers are accurate before submitting your license application to the state.
Most money transmitters licensed in their state must also carry a money transmitter bond. A surety bond works as a safeguard against bad business practices, protecting both the state and the customer interacting with the business. Should something go wrong, a claim can be made against the bond to help offset financial losses. A money transmitter bond required by the state may range in amount, from $10,000 up to $500,000. Fortunately, money transmitters only pay for a small percentage of the total bond in place, typically between 1 and 10%.
Finally, money transmitter guidelines may include minimum net worth requirements. These vary for each state, but typically a money transmitter business must have at least $10,000 as their net worth. In some cases, the net worth requirement is several hundred thousand dollars, though. It is helpful to know if you can meet this minimum before applying for your money transmitter license.
Having knowledge of each of these requirements and the steps to take to meet them will help you speed up the process of getting a money transmitter license.
Eric Weisbrot is the Chief Marketing Officer of JW Surety Bonds. With years of experience in the surety industry under several different roles within the company, he is also a contributing author to the surety bond blog.
Being a money transmitter means that you are transmitting money from one location to the next, virtually or otherwise, for others. If this sounds like your business model or a part of it, you likely need a money transmitter license. There are specific guidelines you have to meet to get your money transmitter license, but you can speed up the process by understanding the following regulations surrounding money transmitters.
Understand the State Requirements
First and foremost, having knowledge of the state requirements that are relevant to your money transmitter business is crucial. Each state has its own set of guidelines money transmitters must meet in order to operate their business legally. You likely fall under these guidelines if you do any of the following:
- Process money orders
- Provide traveler’s checks
- Cash checks as a business
- Exchanging or dealing currency, including virtual currencies in some states
- Completing money transfers
In most states, performing these tasks in amounts totaling more than $1,000 per year means you are a money transmitter and need a license to run your business. The licensing process for each state is different, but most money transmitters are required to provide information about their business structure, its location, the owners of the business, financial documents, and criminal background check. Knowing these requirements in advance will help speed up the process of getting licensed.
Know the Federal Regulations
In addition to state requirements, there are also federal guidelines for money transmitter businesses. Under federal law, those who act as money transmitters must register with the Financial Crimes Enforcement Network, or FinCEN, as well as have an anti-money laundering program in place. The good news is that the registration with FinCEN is often the easiest part of the process, as it can be done in a few minutes online.
Get Your Finances in Order
One of the most time-consuming aspects of getting a money transmitter license is gathering the financial documentation needed to submit an application. While state licensing processes differ, most money transmitter applications require you to provide the following financial details:
- The personal assets of the business owner and in some cases, shareholders of the business
- Business assets and liabilities
- Personal net worth
- Business income and cash flow statements, and balance sheet
Be sure these details are as organized and clear as possible, and take the time to ensure the numbers are accurate before submitting your license application to the state.
Secure Your Bond
Most money transmitters licensed in their state must also carry a money transmitter bond. A surety bond works as a safeguard against bad business practices, protecting both the state and the customer interacting with the business. Should something go wrong, a claim can be made against the bond to help offset financial losses. A money transmitter bond required by the state may range in amount, from $10,000 up to $500,000. Fortunately, money transmitters only pay for a small percentage of the total bond in place, typically between 1 and 10%.
Meet Net Worth Minimums
Finally, money transmitter guidelines may include minimum net worth requirements. These vary for each state, but typically a money transmitter business must have at least $10,000 as their net worth. In some cases, the net worth requirement is several hundred thousand dollars, though. It is helpful to know if you can meet this minimum before applying for your money transmitter license.
Having knowledge of each of these requirements and the steps to take to meet them will help you speed up the process of getting a money transmitter license.
Eric Weisbrot is the Chief Marketing Officer of JW Surety Bonds. With years of experience in the surety industry under several different roles within the company, he is also a contributing author to the surety bond blog.