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Money Transmitter Regulatory Developments

25 May

The controversy swirling around the application of state money transmitter laws to payments companies just won’t abate. The difficulty stems from state regulators grappling with applying old statutory language to the new world of payments. And it leaves payment companies struggling to keep up with those new interpretations.

Next week the Electronic Transactions Association (ETA) will be facilitating the conversation by hosting a Money Transmitter Policy Day in Washington, D.C. A state regulator and FinCEN representative will speak. I am looking forward to participating by presenting a talk there, on June 2nd, on where things stand in “The Changing Regulatory Landscape”. If you are concerned that the myriad of state money transmitter laws may apply to your business, I hope you will join us.

Historically, the states regulated money transmission companies to protect the “unbanked” – consumers that used non-banks for financial services such as check cashing and wire transfers. The goal was to provide oversight of companies holding consumer money. Regulated companies were required to obtain a state license. The regulated activity typically was defined as selling or issuing stored value or receiving monetary value for transmission. That wording is so broad that it arguably brings within its sweep unintended links in the payments chain, such as independent sales organizations.

Barely a week goes by without another state money transmitter development. Some state legislators are taking a fresh look at their statutes, amending the laws to apply to new technologies, such as virtual currencies. Other states are interpreting existing laws in new ways, focusing the application of the licensing requirements on payment processors. And others are recognizing that the purpose of the money transmitter laws was never to regulate the card processing business. Those regulators are publishing guidance indicating that various arguments support the interpretation that the money transmitter laws do not apply to payment processors.

It will be some time before the issue of the extent to which state money transmitter laws apply to payment processors is settled. A vigilant eye on developments is critical to the payments industry. The policy day organized by the ETA, and panel discussions at other industry conferences, is exactly what is needed to keep the conversation flowing and the industry informed.

–Holli Targan, Attorney and Partner, Jaffe, Raitt, Heuer & Weiss, P.C.

Holli Targan

Attorney & Partner

AML Program Tips

20 Feb

money launderingDeveloping an anti-money laundering program (AML) can prove challenging for card processing companies.  While not an exhaustive list, here are 9 areas that an AML program should be sure to include:

1.  Firm Policy – A general written AML policy reflecting fulfillment of the obligations set forth in the AML program.

 2.  AML Compliance Person – Designation of an AML compliance person along with a description of his or her duties. 

 3.  Merchant Identification Program A description of how merchants are identified and how their identities are verified. 

 4.  Merchant Due Diligence A description of the merchant due diligence process (this is in addition to merchant identification procedures). 

 5.  Record-KeepingA description of record-keeping procedures as they relate to merchant identification, merchant due diligence and any other AML program related records or documents (such as suspicious activity reports). 

 6.  Suspicious Activity A description of merchant activity monitoring and the steps taken when suspicious activity is detected. 

 7.  Employee Training A description of ongoing employee AML training and programs. 

 8.  Checking OFAC Listings An explanation of how all merchant accounts are checked against the specially designated nationals and blocked persons list issued by the U.S. Treasury’s Office of Foreign Assets Control (OFAC).

 9.  Audit ProcessA description of the independent testing function that will be used to assess AML program compliance.

Heather Maldegen-Long