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ComplianceJune 01, 2023

Money transmitter license compliance: Webinar Q&A

Money transmitters have become a modern necessity—but operating a money transmitter business requires complicated business license compliance at both the federal and state levels.

After our recent webinar titled "Money Transmitter License Compliance Explained," we received several inquiries. Our knowledgeable team member, Hans Howk, who serves as the Manager of Content Management at CT Corporation, has addressed those questions. We are pleased to share his insightful responses with you.

Q: How does one determine the territory a license has to cover? If a company operates as a marketplace facilitator (provides the platform and facilitates the sales of 3rd party products), receives the funds from payment service providers (like credit card processors, etc.) and is a money transmitter, would such a company need to be licensed in each state where (i) consumers are located or only in the states where (ii) sellers and payment service providers are located?

A: Usually it comes down to both where the consumer is located and where the transmission is occurring.  For instance, under Arkansas statute, those receiving compensation or expecting to receive compensation, directly or indirectly, for conducting money transmission for persons located in Arkansas or conducting money transmission from a physical location in Arkansas for persons located outside Arkansas must obtain a money transmitter license with the state.  So the answer is usually, yes, both!

Q: How many states are on NMLS (Nationwide Multistate Licensing System)?

A: At most recent count, 55 various state agencies utilize the NMLS system for non-mortgage related licensing, and by my count about 44 states use it specifically for Money Transmitter licensing.  That doesn’t mean that all of the states that utilize NMLS also participate in the multi-state licensing application which collects documentation and applies it across the board for all participating states – those states can be viewed here:

Related article: NMLS and mortgage lending licensing

Q: Alabama and Alaska require a minimum net worth for each state as $25,000. While applying through NML, will I require showing net worth of $25,000 or $50,000?

A: As it stands, Alabama still maintains the $25,000 net worth requirement.  If they adopt one or more provisions from the Money Transmitter Modernization Act, then that could increase, but as I stated in my presentation, states are by no means mandated to adopt the model law.  At the moment I don’t see any pending legislation for Alabama, so I don’t expect it to increase anytime soon. 

As for Alaska, $25,000 is the rule at the moment; HOWEVER, there is pending legislation working its way through the state senate which would increase the threshold.  Specifically, the bill states the following:

Sec. 06.55.510. Net worth. (a) A licensee shall maintain at all times a tangible 
        net worth of 
(1)  the greater of $35,000 or three percent of total assets for the first
(2)  two percent of additional assets for $100,000,001 to 
$1,000,000,000; and 
(3)  0.5 percent of additional assets for over $1,000,000,001. 
(b)  Tangible net worth must be demonstrated at initial application by the 
applicant's most recent audited or unaudited financial statements.

So, if this bill ends up passing as Alaska legislature, you could see the above threshold amounts take effect. 

Q: Where would we find the new threshold for AZ?

A: The best place to follow pending and enacted state legislative changes related to money transmitters is the CSBS website, specifically here:

For Arizona’s adopted bill specifically, check out this article which summarizes and links to the bill:

Q: Can you give an example of an exemption?

A: There are several published exemptions to money transmitter registration requirements – the most obvious exemption being banks – they are already extremely regulated in their own regard. The same goes for stock traders and persons registered with the SEC or futures traders – these are typically exempted from the MT definition and thus the requirement to register.

Another bit of wiggle room is that generally, the law allows you to move around money for clients as a business without registering as a money transmitter as long as you partner with someone who is licensed and registered as a money transmitter. Or if you do so on an “infrequent basis” and not as a standalone service for an obvious business gain or profit.

Subsequent rulings have also exempted creators and developers of money transmitter software or applications, as long as they themselves aren’t engaging in the ongoing business of money transmission.  Also, businesses that operate exclusively as “payment facilitators” can sometimes qualify for an exemption – and a payment facilitator is basically a person or business who acts as a payment processor to facilitate the purchase of a good or service through some sort of payment system by agreement with the creditor or seller.

For the codified definition and exemptions at the federal level:

Q: Where can I find the information for the exceptions for registering as Money Service Business?

A: For federal definitions and exemptions:

For additional guidance specific to report exemptions:

As for state exemption guidance, you’ll have to review the relevant section of each state’s code to determine if your activity is exempt.

Q: What is the typical best practice to figure out if our business model is exempted from federal & state money transmitter licenses?

A: Yes, reviewing state and federal exemptions with legal counsel or partnering with a license compliance firm is the best way to ensure that you’re complying with the laws on the books. As I mentioned in the webinar, assuming that a majority of states do adopt the Money Transmitter Modernization Act model, compliance should become easier, but for now, we really need to be good about knowing what each state considers to be exempt and not exempt.

Q: Do certain states consider payroll processing businesses as money transmitters?

A: In my experience, PEOs and payroll providers do not typically need to register with FinCEN as money services businesses; in fact, I’ve never come across one that has, but that’s not ironclad legal advice.  Most payroll providers seem to fall into one or more categories of an exempted business type.  See this page for more guidance:

Easily manage complex requirements

There are many different types of money service businesses that transfer, negotiate, and hold money. License requirements vary by the type of service provided.  

CT Corporation has experience with over 75,000 federal, state, and local jurisdictions.  We're the partner to research, secure, and maintain your money service licenses or permits.

Q: If I have a money transmitter license in New Jersey and clients use mobile apps/wallets that are online to remit money, what would prevent a person in Delaware from onboarding on the apps/wallets and remitting money?

A: This is sort of getting into the weeds of what constitutes “doing business” in each state – if a customer buys my product in NJ, but they live in DE, does that mean I am doing business in DE?  It usually boils down to where your revenue is coming from. When reviewing the receipts from your revenue, do you have customers purchasing/accessing/utilizing your service in Delaware? Then you may need the Delaware license. Most Money Transmitters who deal in e-wallets and mobile applications become licensed in all states because of the variability of client location.

To summarize in a more clinical way, usually those businesses receiving compensation or expecting to receive compensation, directly or indirectly, for conducting money transmission for persons located in a state or conducting money transmission from a physical location in that state for persons located outside that state must obtain a money transmitter license with the state.

Q: Any state law requirements that a foreign MSB have a physical presence in the US?

A: This is a tough one because, while most states don’t have a clear statute that states, “Businesses must have a physical presence in the United States,” there are some requirements that simply cannot be met without a physical presence of some sort – for instance, some states do require that a compliance officer be located in the United States and be a direct employee of the money transmitter company.  Some state applications require a U.S. mailing address, which can usually be solved through the hire of a registered agent for service of process, but whether or not every state will accept that solution is another matter.  All in all, this question would require custom research involving outreach to each state board to verify their existing stance on the question.

Q: Would crowdfunding platforms (including personal fundraising or charitable fundraising) need to register if they are using a third-party payment processor like Stripe or PayPal?  Maybe that's the exception you just mentioned about partnering with a licensed party?

A: Correct, usually entities that partner or contract with licensed money transmitters qualify for exemption and do not need to register as Money Services Businesses themselves; however it’s still important to check with each state in which you do business to be sure that you’re in compliance with regulations.

Q: What is the best way to obtain information regarding MTL process for states that are not part of the NMLS such as Florida?

A: For those states that are not on NMLS, the best way to research money transmitter licensing requirements is by visiting the website of the board that issues the license in that state or viewing their statutes directly. Usually you can simply google “Florida money transmitter law” and the correct result will turn up.

Since you mentioned Florida specifically, here is the website you should check out:

Q: Do the MTL license follow the client or the company providing the service?

A: Money Transmitter licensing is the responsibility of the company providing the service, but if you’re asking if you need to be licensed where the MT is located or where the client is located, the answer is almost always both.  Most states require the business to be licensed where they are originating the transmissions and most states also require the business to be licensed if transmitting to a client within their borders.

Q: Are online payment card services considered an MSB?

A: It sort of comes down to the exact nature of the online card services. If the business meets the definition of a payment processor as outlined in the federal exemptions, then no.  Perhaps the closest fit for an exemption is:

A business is not considered to be a Money Services Business if it… “Acts as a payment processor to facilitate the purchase of, or payment of a bill for, a good or service through a clearance and settlement system by agreement with the creditor or seller;”

If the business meets the above exemption, it is not considered an MSB.

Q: Is "mobile check cashing" considered money transmission under the new uniform act?

A: Per the Money Transmitter Modernization Act,

“Money transmission” means any of the following:
(1) Selling or issuing payment instruments to a person located in this state.
(2) Selling or issuing stored value to a person located in this state.
(3) Receiving money for transmission from a person located in this state.
“Payment instrument” means a written or electronic check, draft, money order, traveler's check, or other written or electronic instrument for the transmission or payment of money or monetary value, whether or not negotiable. The term does not include stored value or any instrument that (1) is redeemable by the issuer only for goods or services provided by the issuer or its affiliate or franchisees of the issuer or its affiliate, except to the extent required by applicable law to be redeemable in cash for its cash value; or (2) not sold to the public but issued and distributed as part of a loyalty, rewards, or promotional program.

Given the above, I would argue yes, it is considered money transmission, though it would depend on the specific activities of your business. 

You can view the full act here:

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Q: What is stopping a business from setting up entities in Montana and running operations out of Montana, but operating across all states?

A: Most states require money transmitter licenses regardless of the business’ presence there.  A company could form itself in Montana, but if it wanted to serve North Dakota customers, it would need to obtain a North Dakota Money Transmitter License.

Q: What is the license that NY created for virtual currencies, outside of MTLs?

A: That would be the Virtual Currency Business License. For more  information:

Q: Where can I find the detailed literature that defines who is exempt from registering for money service transmitter?

A: For federal definitions and exemptions:

For additional guidance specific to report exemptions:

As for state exemption guidance, you’ll have to review the relevant section of each state’s code to determine if your activity is exempt.

Q: Can CT Corporation provide advisory with an assessment if our business is exempt from registering as an MSB?

A: CT Corporation can provide research citing exemption language that most closely applies to your business in each state and federally; however, it is not to be considered legal advice, and ultimately the onus is on you to determine whether or not your business is exempt

Learn more

To learn more, listen to the on-demand webinar, Money Transmitter License Compliance Explained

For more information on CT Corporation services and how we can streamline your business licensing, please contact us, or call us at 844-878-1800.

Related article: Money transmitter business license requirements (smart chart)

Hans Howk
Manager, Content Management
Hans provides internal support to key members of the Business Licensing Team, assisting with understanding industry nuances, searching and synthesizing statutes and regulations relating to business law.
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