Money transmitters are intermediaries who engage in the business of transferring funds. Whether cashing a small check or facilitating millions of mobile-based transfers, money transmitters are subject to strict governmental oversight and compliance, starting with obtaining a money transmitter license. 

A money transmitter license is not only required in most states for individuals or companies who perform such services, but it also helps to establish customer trust due to the extent of information and documentation that must be submitted in order to obtain one. 

This comprehensive guide on obtaining a money transmitter license covers who it applies to, the variations in regulations state by state, how the application process works and the necessary measures to maintain a license.

What is a Money Transmitter License?

A money transmitter license legally allows an individual or entity to transfer funds between parties as a service. Examples include electronic fund transfers (EFTs) such as wire transfers and ATM transactions, currency exchanges, the issuance of travelers checks and basic check cashing services. 

Anyone who engages as a business in the transfer of funds is technically a money transmitter. Businesses like PayPal, Square and Coinbase are large ones but so is your local check cashing company.

Money transmitters are a subset of money service businesses (MSBs) and, for those within the United States, are therefore are subject to comply with requirements set forth by the Bank Secrecy Act (BSA). One such requirement for most states is to register with the Financial Crimes Enforcement Network (FinCEN), a regulatory authority designed to safeguard the financial system from illicit use, combat money laundering and its related crimes including terrorism.

Why Do You Need a Money Transmitter License?

The biggest benefit of a money transmitter license is consumer confidence. Applying for and maintaining a license requires a significant amount of time, thoroughness (for compliance) and money, so the mere granting of a license helps to establish a significant amount of trust from customers that the transmission will be successful.

In order to be granted a license in most states, the individual or business must provide detailed information about the business (as well as its key personnel), comply with strict financial requirements including surety bond maintenance and capital reserves, submit to background checks and demonstrate the implementation of a robust compliance program.

There are ongoing requirements as well once a license is granted, which includes reporting, record-keeping, audits and continuing compliance.

While the application process may seem overwhelming, all of these measures are in place specifically to protect customers and ensure consumer confidence when transferring funds.

Operating without a money transmitter license is illegal and carries criminal penalties of a fine, imprisonment or both depending on the jurisdiction.

State-by-State Regulations

Each state has its own rules and regulations regarding money transmission licenses. While there are many differences, below are brief snapshots based on the fees, surety bond requirements and minimum reserve/capital requirements.

Arizona

  • Regulated by the Arizona Department of Financial Institutions
  • Application fee: $1,500 plus $25 for each branch office and authorized delegate up to a maximum of $4,500
  • Surety bond requirements (varies based on number of delegates and locations of money transmitter sites):
    • Transmitters with 5 or less delegates and locations: $25,000
      Transmitters with 6 – 20 delegates and locations: $100,000
      Transmitters with 21 – 200 delegates and locations: $5,000 extra for every delegate or location, not to exceed $250,000
      Transmitters with more than 201 or more delegates and locations: $5,000 extra for every delegate or location, not to exceed $500,000
  • Produce documents demonstrating a net worth of at least $100,000 plus $50,000 for each additional location or delegate (up to 10% of total transactions if they exceed $500,000 in transactions involving $1,000 or more)

Arkansas

  • Regulated by the Arkansas Securities Commissioner
  • Filing fee: $1,500
  • License fee: $750
  • Surety bond requirements:
    • $50,000 
    • $10,000 for each additional location (not exceeding $300,000)
    • May be increased to a maximum of $1,000,000 if the financial condition of the licensee so requires
  • Produce documents demonstrating a net worth of $250,000

California

  • Regulated by the California Department of Financial Institutions
  • Application fee: $5,000
  • Surety bond requirements: determined by the Commissioner on an individual basis, ranging from $250,000 to $7,000,000

Colorado

  • Regulated by the Colorado Division of Banking and Colorado State Banking Board
  • License fee: varies based on time of registration ($3,750 – $7,600)
  • Surety bond requirements: $1,000,000

Connecticut

  • Regulated by the Connecticut Department of Banking
  • License fee: varies based on time of registration ($1,250 – $2,250 plus a non-refundable investigation fee of $625)
  • Surety bond requirements (varies based on amount of money transferred):
    • $300,000 if weekly average is $150 or less
    • $500,000 if weekly average is between $150-$250
    • $1,000,000 if weekly average is greater than $250
  • Demonstrate minimum net worth of:
    • $100,000 if issuing money orders
    • $500,000 or more as determined by the Commissioner
    • $1,000,000 if issuing travelers checks or electronic payment instruments

Delaware

  • Regulated by the Delaware Office of the State Bank Commissioner
  • Investigation fee: $172.50 plus $230 for each location plus $4.60 for each extra agent
  • License fee: $1,000 if books and records are in state and $500 if books and records are outside state
  • Surety bond requirements:
    • $25,000 or irrevocable Letter of Credit
    • $5,000 for each additional location, not to exceed $250,000
  • Demonstrate minimum net worth of $100,000

Florida

  • Regulated by the Florida Financial Services Commission
  • Application fee: $376
  • Surety bond requirements (vary based on business projections of transmission volumes):
    • $50,000 for up to $50,000
    • Increases in $50,000 increments for every $50,000
  • Demonstrate minimum net worth of $100,000 plus $10,000 for each additional location, not amounting to more than $2,000,000

Georgia

  • Regulated by the Georgia Department of Banking and Finance
  • Application fee: $2,000 plus $250 investigation fee
  • Surety bond requirements:
    • $50,000 
    • $5,000 for each additional location up to $250,000
    • May be increased up to $1,500,000 based on average daily orders to transmit not yet paid

How to Apply for a Money Transmitter License

  • Provide detailed information about the business: Applicants must submit audited financial statements from a certified public accountant and personal financial records of its owners (or significant shareholders), officers and directors. They also may need to provide a detailed multi-year business plan.
  • Submit to financial requirements: In addition to providing audited financial statements of key personnel, applicants must maintain a surety bond (to protect customers against default) as well as maintain a minimum capital requirement in reserves.
  • Submit to background checks: A company’s owners, officers and directors are typically all subject to background checks, both criminal and civil, to uncover any past of a criminal record or regulatory violations or penalties. These checks usually require fingerprinting of these members as well. As part of the investigation, the regulatory agency typically assesses each member’s integrity, competence and financial standing (often referred to as a fit-and-proper test).
  • Demonstrate a well-developed internal compliance program: Companies must show they have a deep understanding of the regulatory framework with a strong focus on anti-money laundering (AML) policies and Know Your Customer (KYC) protocols. The implementation of these programs include policies for customer onboarding, transaction monitoring, whistleblowing and reporting of any suspicious activity.