Foreign money transmitters face state-by-state regs in the US
Some European money transmitter companies are learning what insurance carriers from outside the US. learned years ago — the country is a nightmare of financial regulations that can differ sharply from state to state. And European companies that are doing business in individual states probably need a license from that state, writes Tom Groenfeldt.
Texas recently issued an opinion on outside firms needing licenses to operate in Texas, said Stephanie Newberg, deputy commissioner at the Texas Department of Banking, speaking at Money 2020 in Las Vegas.
“If you are outside the US but doing business with people in Texas, you need a license in Texas, and other states are doing the same thing. If you have agreements in any language other than English, they need to be translated,” she said
A company moving money from Africans living in the US back to family in Africa would need a license to operate in each US state where it has a presence.
“They need a license,” said Judith Rinearson, partner at Bryan Cave and moderator of the panel. “They would need to bring their records to the US and translate them.”
US companies going to Europe have it easier, panelists said, because the EU has an e-money license that works across the European Union, perhaps with a few minor adjustments.
Members of the panel, which had the imposing title “Money Transmitter Licensing: Kafka Revisited,” said that becoming a money transmitter can cost $300,000 annually in licensing, bonding costs, and registration in different states. Transmitters coming to the US are shocked at the individual requirements from the states.
Newberg said new companies that want to get into the business should obtain a license in a big state like Texas, New York or Florida and then use some of that work to apply in other states.
Working through a bank can help sometimes, but in most states regulators want to be assured the bank has the responsibility for holding and transferring the money flowing through the transmitter. Even if the transmitter can persuade regulators that the responsibility for funds resides with the bank, the transmitter will often need a regulatory exclusion.
“We look at who is responsible to the consumer if there is a loss,” said Newberg of Texas. “We go with the company that is ultimately responsible for the funds. I am not sure all states do it that way.”