Money Transmitter License (MTL) for Money Transfer Companies
Money Service Businesses (MSB) that are classified as money transmitters are required to register for Money Transmitter License (MTLs). Having a Money Transfer License (MTL) allows money transfer companies (aka money transmitters) to legally provide money transfer services to customers. Such companies may be engaged in domestic or international money transfers. Companies that provide remittance services fall under this classification.
Examples of companies that are registered as MSB and licensed money transmitters
- Square and Venmo: peer-to-peer wallets that collect money and transfer money in the US only.
- Stripe and Paypal: online payment gateways for e-commerce, small businesses
- Transferwise, Moneygram, Remitly: companies that facilitate cross-border money transfer from US to other countries.
In certain cases, some businesses may not directly engage in transferring funds, but their programs are sponsored by banks or MTL providers. Though these businesses do not directly control or participate in the actual transfer of funds, they may still be required to register with FinCEN to comply with legal regulations.
Applying for Money Transmitter License (MTL)
It's important to note that Money Transmission laws can vary widely between states. Depending on state laws, there are also some exceptions to who is considered a money transmitter. Businesses should always consult with legal and regulatory experts to ensure compliance with all applicable laws and regulations.
In general applying for an MTL is a very complex and challenging process. It can very time consuming and expensive to say the least.
Here is how applying for MTL in the state of New York looks like:
New York is one of the most heavily regulated states for MSBs, and businesses must obtain a money transmitter license in order to operate legally. The New York State Department of Financial Services (NYDFS) plays a vital role in protecting consumers and supporting financial service providers. The department regulates various financial service providers, including banks, credit unions, money transmitters, etc. It's important to understand NYDFS regulations if you're in the business of money transfers.
The application process for a money transmitter license in New York includes several requirements, including
- Filing an application with the New York Department of Financial Services (NYDFS)
- Paying an application fee
- Submitting fingerprints and background checks for all control persons
- Providing financial statements and other documentation
- Maintaining a minimum net worth requirement
By requiring businesses to obtain a license, New York can monitor and regulate MSBs to ensure compliance with state and federal regulations.
State-wise information for MTL
If you're entering the money transfer industry, the table below provides valuable information on key states. For a more in-depth understanding, we recommend referring to Faisal Khan's blog.
Regulations and requirements for MSBs can change frequently and it's important for individuals to verify the most up-to-date information by checking the relevant state agency's website or consulting with a legal professional. The information provided in the table above is for informational purposes only and should not be considered legal advice.
Getting started
For start-ups and businesses that are looking to get into the money transfer business, applying for an MTL and getting MTL can be a cumbersome and lengthy process. The best approach for such companies would be to find a partner that can support your use case for money transfer and provide a fully compliant API stack.
This would allow companies to focus on brand building and customer acquisition right with speed rather than spend time and money on legal, compliance, and other operational overheads. Time-to-market is critical for startups, and partnering with a trusted provider can help accelerate the process.
Get in touch with our team to understand how you can build your money transfer product with Machnet’s Program.
