Money Transmitters – Your Definitive Guide to US Money Transmitter Licensing
Money makes the World go round. While that is a lyric to a famous song, it holds a lot of truth; money, as a transmitter of energy, powers our personal economic lives and enables the global economy. Through its transfer between individuals and entities, we can deliver that economic energy almost anywhere on the planet.
Besides banks, major players for sending money in the US are money transmitters , who fall under the larger sector of Money Service Businesses (MSBs). US Money Transmitters play a significant role in the world economy; more than one-quarter of U.S. households use non-bank financial institutions, such as money transmitters, and they process (outgoing) remittances of US$ 130.851 Billion (2014).
There are 456 consolidated money transmitters operating in the US, of which 243 operate in multiple states. In terms of licensing requirements, they require both federal and state licenses. A federal license requires registering with FinCEN (Financial Crimes Enforcement Network) and following AML (anti-money laundering), KYC (know your customer) and BSA (Bank Secrecy Act) rules. Each state that the money transmitter wants to operate in requires its own license, which is a costly and time-consuming process, taking up to two years to register in all fifty states.
One alternative to actually registering as a separate money transmitter in each state is setting up an FBO (For Benefit Of) account from a licensed, nationwide, chartered US Bank, as those banks are exempt. Another possible alternative is getting a National Charter — recently announced (December 2016) by the OCC (Office of the Comptroller of the Currency) — but the details of this are still being worked out.
Developments in technology are also shaking up the money transmitter industry. For example, in February (2016), Western Union teamed up with the messaging app Viber to allow money transfers through the app. Not to be left behind, Facebook announced in April that users can use its Facebook Messenger app to send and receive money. And, of course, there are Bitcoin and other digital money payment systems. These innovations are still in the early phases and are either not in wide-spread use, or anchored to traditional processes that limit their potential. However, the writing is on the wall and the next few years, we can expect to see dramatic changes to the whole model of money transmission.
Here’s an infographic that outlines where the US money transmitter industry is at: