As cases of money laundering and other fraudulent financial business practices have increased in recent years, states are cracking down on financial institutions by enforcing stricter regulations. Recently, Connecticut and Utah passed bills targeting changes for money transmitter bonding requirements. Here is a quick breakdown of the new changes.
Utah Gov. Gary Herbert signed SB 24 into law on March 27 of this year. The bill established new bonding regulations for money transmitters operating in the state. The primary details of the requirements include the following:
- minimum $50,000 surety bond
- maintenance of surety bond for three years after licensee ceases money transmission operations in state
- expiration only takes effect if bond is canceled, which requires a 30-day notice to the commissioner
Utah money transmitters need to secure a surety bond to obtain a license and remain in compliance with the law. Other requirements Utah money transmitters must meet to receive their license include the following:
- financial statement proving net worth of at least $1,000,000
- $100 non-refundable licensing fee
- applicant name, principal address and location of business records
- history of applicant’s material litigation and criminal convictions during previous seven years
- description of business activities conducted by applicant
- description of business activities applicant plans to conduct in state
- list of applicant’s authorized agents in state
- sample authorized agent contract
- sample form of payment instrument
Prospective money transmitters in Utah can contact the state Department of Financial Institutions for more information. Licenses expire December 31 and must be renewed annually.
Connecticut HB 6800 addresses surety bond requirements for money transmitters dealing with virtual currencies. The bill allows the commissioner to determine the bond amount for money transmitters operating with virtual currencies, but that it is “calculated reasonably to address the current and prospective volatility of the market in such currencies.” The measure also authorizes the commissioner to require additional bonding for these transmitters. Money transmitters that do not engage with virtual currencies are required to file bonds of the following amounts:
- at least $300,000 if licensee has an average of less than $300,000 of weekly money transmissions for previous 12-month period (ending June 30)
- at least $500,000 if licensee has an average between $300,000 and $500,000 of weekly money transmissions for previous 12-month period (ending June 30)
- at least $1,000,000 if licensee has an average greater than $500,000 of weekly money transmissions for previous 12-month period (ending June 30)
The state defines virtual currency as any type of digital unit used as a medium of exchange or a form of digitally stored value. Virtual currency includes digital units of exchange that:
- have a centralized repository or administrator
- are decentralized and have no repository or administrator
- may be created or obtained by computing or manufacturing effort
Virtual currency does not include digital units that are used solely within online gaming platforms or exclusively as part of a consumer affinity or rewards program. For more information concerning money transmitters in Connecticut, check out the state’s Department of Banking.
In addition to Connecticut and Utah, Kansas recently revised its money transmitter laws. Kansas HB 2216 increased the maximum bond amount for money transmitters from $500,000 to $1 million, effective July 1, 2015.