Skip to main content
Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations

Filter

Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.

  • DOJ files criminal charges against individual who operated bitcoin money laundering service

    Federal Issues

    On April 28, the DOJ announced the arrest of a dual Russian-Swedish national on criminal charges related to his alleged operation of a bitcoin money laundering service on the darknet. The DOJ referred to the individual’s money-laundering service as the “longest-running cryptocurrency ‘mixer,’” stating that it moved over 1.2 million bitcoin valued at approximately $335 million at the time of transactions over the course of 10 years. According to the DOJ, the majority of the cryptocurrency came from darknet marketplaces tied to illegal narcotics, computer fraud, and abuse activities. The individual is charged with (i) money laundering; (ii) operating an unlicensed money transmitting business; and (iii) money transmission without obtaining a license in the District of Columbia.

    Federal Issues Digital Assets Financial Crimes DOJ Cryptocurrency Fintech Anti-Money Laundering Of Interest to Non-US Persons Money Service / Money Transmitters

  • DOJ charges unlicensed money service business with AML violations

    Federal Issues

    On April 14, the DOJ unsealed an indictment charging two defendants with allegedly failing to maintain anti-money laundering (AML) controls, failing to file suspicious activity reports (SARs) with the Department of Treasury, and owning and operating an unlicensed, unregistered money transmitting business in violation of the Bank Secrecy Act (BSA). According to the DOJ, the defendants allegedly conducted high-risk transactions through their unlicensed money transmitting and money service business via a New York credit union, “caus[ing] the transfer of more than $1 billion in high-risk transactions, including hundreds of millions of dollars originating from foreign jurisdictions.” The DOJ alleged that while the defendants represented to financial institutions that they were aware of the risks associated with the high-risk business and would conduct the required, appropriate BSA/AML oversight, one of the defendants “willfully failed to implement and maintain the requisite [AML] programs or conduct oversight required to detect, identify, and report suspicious transactions.” The defendants have been charged with failure to maintain an AML program, failure to file SARs, and operating an unlicensed money transmitting business. The indictment seeks forfeiture of any property constituting, or derived from, proceeds obtained directly or indirectly as a result of the alleged offenses.

    Federal Issues Department of Justice Bank Secrecy Act Anti-Money Laundering Of Interest to Non-US Persons SARs Money Service / Money Transmitters Financial Crimes

  • Nebraska amends installment lender and money transmitter licensing requirements

    On March 17, the Nebraska governor signed LB 363, which amends certain licensing requirements for installment lenders and money transmitters. Among other things, LB 363 amends provisions of the Nebraska Installment Loan Act related to installment loan licenses and surety bonds to require “any person that holds or acquires any rights of ownership, servicing, or other forms of participation in a loan under the Nebraska Installment Loan Act or that engages with, or conducts loan activity with, an installment loan borrower in connection with a loan under the act” to obtain a license from the department. Additionally, licensees will be required to increase their surety bonds by $50,000 for each branch office licensed under the Nebraska Installment Sales Act. The act also provides that certain licensed persons that operate in the state as a collection agency, credit services organization, or that engage in debt management business are not required to be licensed under the Nebraska Money Transmitters Act. Additional amendments further address the expanded definition of a person engaged in money transmission, as well as investigation and examination authorities. The act takes effect immediately.

    Licensing State Issues State Legislation Money Service / Money Transmitters Installment Loans

  • Colorado further extends license expirations

    State Issues

    On January 11, the Colorado governor extended previous executive orders permitting numerous state regulatory agencies to issue emergency rules for extending the expiration of certificates and licenses (previous coverage here). Among other things, the extension permits the Division of Banking to extend the expiration date of licenses issued to money transmitters, and the Division of Real Estate to extend licenses issued to real estate brokers, for an addition 30 days.

    State Issues Covid-19 Colorado Licensing Money Service / Money Transmitters Real Estate Mortgages

  • DFPI addresses MTA licensing in new letter

    State Issues

    Recently, California’s Department of Financial Protection and Innovation (DFPI) released a new opinion letter covering aspects of the Money Transmission Act (MTA) related to the registered clearing house and payment processing service exemptions.

    The redacted opinion letter concluded that the company, a Delaware Corporation, is required to apply for and receive an MTA license to engage in the proposed activities in California, absent receiving an exemption. According to the letter, the company proposes to offer automated clearing house (ACH) services to merchants through an “integrated payment gateway” in order to “aid merchants with online and offline stores in collecting cross-border payments.” The ACH services would be a five-step process in which (i) a foreign customer purchases goods or services from a U.S.-based merchant; (ii) the merchant scans a quick response code using the company’s payment software; (iii) the company “withdraws a USD equivalent amount of payment in Chinese Renminbi (RMB) from the foreign customer’s” digital wallet; (iv) the company uses foreign exchange services “to convert the RMB amount into the correct corresponding USD amount” and remits the amount into the company’s U.S. bank account; and lastly (v) the company distributes the payment from its account to the merchant’s account. The company sought a clearing agency exemption and/or an excluded persons processing exemption, however, the DFPI concluded that the company did not supply evidence to show it qualified for either exemption. Thus, the company would need an MTA license to engage in the stated processing activity in California. 

    State Issues Money Service / Money Transmitters DFPI Licensing

  • Hawaii regulator extends authorization for reduced office hours, temporary closures

    State Issues

    On October 2, the Hawaii Division of Financial Institutions extended interim guidance allowing Hawaii-located financial institutions to reduce hours or close offices during Hawaii’s Covid-19 state of emergency (see here and here for previous coverage). Similar to previously issued guidance, financial institutions and escrow depositories are required to provide notice of closures or reductions in hours. While mortgage loan originators, mortgage servicers and money transmitters are not required to provide notice, the regulator requests a courtesy notification of any closure or reduction in hours.  The guidance is extended “in accordance with the county emergency orders found on each county website.”

    State Issues Covid-19 Hawaii Financial Institutions Escrow Mortgages Loan Origination Mortgage Origination Mortgage Servicing Money Service / Money Transmitters

  • CSBS announces first MSB Accreditation

    State Issues

    On September 28, the Conference of State Bank Supervisors (CSBS) announced that the Ohio Division of Financial Institutions received its first Money Service Business (MSB) Accreditation. According to the announcement, the MSB Accreditation—which is offered by CSBS together with the Money Transmitter Regulators Association—certifies that the “state has the resources and necessary processes in place to ensure MSBs in that state operate safely and soundly, follow BSA/AML standards and abide by state and federal consumer protection laws.”

    The Accreditation is part of the CSBS Vision 2020 program. Find continuing InfoBytes coverage on CSBS Vision 2020 here.

    State Issues Money Service / Money Transmitters State Regulators Vision 2020 Licensing CSBS Fintech

  • CSBS announces single exam for money transmitters

    State Issues

    On September 15, the Conference of State Bank Supervisors (CSBS) announced the launch of a single, streamlined examination for money transmitters operating nationwide (i.e., in 40 or more states), known as “MSB Networked Supervision.” The single exam—which will apply to “78 of the nation’s largest payments and cryptocurrency companies”—will be led by one state overseeing a group of examiners sourced from around the country. MSB Networked Supervision is a result of recommendations from the CSBS Fintech Industry Advisory Panel and CSBS Vision 2020 (covered by InfoBytes here).

    State Issues Money Service / Money Transmitters State Regulators Examination Supervision Vision 2020 Licensing CSBS Fintech

  • California DBO addresses MTA licensing exemptions

    State Issues

    Last month the California Department of Business Oversight (CDBO) released two new opinion letters covering aspects of the California Money Transmission Act (MTA) related to the sale of foreign currency and the agent of the payee exemption.

    • Sale of Foreign Currency. The redacted opinion letter concludes that the company’s banknote replenishment service does not trigger the licensing requirements of the MTA because the company does not engage in “selling  or receiving payment instruments, selling or receiving stored value, or receiving money for transmission.” Moreover, the CDBO determined that the company “does not issue anything to the business except for the foreign currency that was ordered, and does not receive money from the business for purpose of transmission.” 
    • Agent of Payee Exemption - Payment Processing Service. The redacted opinion letter concludes that neither the company’s pay-in services nor pay-out services are exempt from the MTA. According to the letter, the company provides payment processing services to online gaming operators (merchants), which allow the merchants’ customers to submit payments to engage in online gaming, such as sports betting and daily fantasy sports betting. The CDBO determined that the pay-in and pay-out services provided by the company “constitute ‘receiving money for transmission,’” as required for the MTA to apply, because the company “receives money from the [c]ustomers for transfer to the [m]erchants” for the pay-in service and “receives money from the [m]erchants for transfer to the [c]ustomers” for the pay-out service.  However, the agent of the payee exemption does not apply to the pay-in services, despite an agreement that establishes the company as the merchant’s agent, because the funds received by the company are not owed to the merchant when they are received by the company. Instead, such funds are retained in an account for the benefit of the merchant until a gambling debt is owed to the merchant. For the pay-out services, the exemption does not apply because the merchant’s customer does not provide any goods or services to the merchant for which the merchant’s payment to the customer is owed. The CDBO also advised that some of the proposed payments described in the company’s request may involve sports betting, which is an illegal activity in the state, and cautioned that the opinion “applies only to activities that are currently legal in California and does not relieve [the company] from its obligation to comply with other applicable state and federal laws.” Furthermore, the CDBO stated that MTA licenses cannot be issued to companies engaged in the transmission of money to facilitate unlawful activities.

    State Issues Licensing California Money Service / Money Transmitters State Regulators CDBO California Money Transmission Act DFPI

  • Kansas extends remote work guidance for certain licensees

    State Issues

    On August 27, the Kansas Office of the State Bank Commissioner extended its remote work guidance, previously covered here and here, for mortgage companies, mortgage loan originators, supervised loan licensees, credit services organizations, money transmitters, and credit notification registrants. Licensed or registered individuals and entities are permitted to work from their residences or a company designated location, provided certain requirements are met, through December 31, 2020.

    State Issues Covid-19 Kansas Licensing Mortgages Mortgage Origination Loan Origination Credit Services Business Money Service / Money Transmitters

Pages

Upcoming Events