How to Get a Money Transmitter License in California

Published: Sep 18, 2018
California money transmitter license guide

 

To do business as a money transmitter in California, you need to get a license from the state Department of Business Oversight (DBO). The application process for this license is handled by the Nationwide Multistate Licensing System and Registry (NMLS).

The application process is quite straightforward, though it requires that you prepare and complete a number of forms and documents. This also includes posting a money transmitter bond.

See below for a breakdown of the application process for a money transmitter license in California!

Who needs a money transmitter license in California?

Chapter 1 of the California Money Transmission Act defines money transmission as: selling or issuing payment instruments or stored value, or receiving money for transmission.

To do any of the above, you will need to get licensed as a money transmitter.

Pre-filing meeting

Applicants for a money transmitter license in California are advised to arrange a pre-filing meeting with staff at the Division of Financial Institutions. This meeting will help you clarify any questions regarding the license and the application process you may have. When arranging the meeting, you will also be provided with a number of pre-filing materials which you can study to prepare for the meeting and application.

The application fee for this license is $5,000 and is not refundable if your application is not complete. This is yet another reason why you should consider arranging this meeting!

California money transmitter license requirements

While it is the DBO that issues these licenses, you need to apply for your license through the NMLS. You will first need to register on the NMLS website to obtain an account. Once you have your account, you can log into the system and begin with your California money transmitter license application.

To apply, you will need to complete several forms within the system itself, upload others, as well as submit some outside of the NMLS by mailing them to the DBO. You can get a detailed breakdown of what all these must include from the applicant checklist provided by the NMLS.

Тhe following are the forms and documents you will need to complete or upload to the NMLS system:

  • Company Form MU1 (completed in NMLS) which includes information such as:
    • A list of your authorized agents (required after your application is approved)
    • Information on your registered agent, as well as primary and non-primary contact employees
    • Other trade name (if applicable)
    • FinCen Registration Confirmation Number (if applicable)
    • Bank account information
    • Individual form MU2
    • Responses to disclosure questions and detailed explanations for any questions you’ve answered with “yes”
  • An audited financial statement prepared in accordance with GAAP
  • A credit report authorization for individuals in a position of control
  • Your Anti-Money Laundering (AML) / Bank Secrecy Act (BSA) Policy that details how you will comply with these laws on a federal and state level
  • A detailed business plan (as detailed in NMLS)
  • A state-issued Certificate of Authority / Certificate of Good Standing
  • A “flow of funds structure” that details each type of transaction or service you will conduct
  • Sample documents such as receipts for transactions or payment instruments
  • Management and organizational charts
  • A California money transmitter surety bond in an amount that may vary between $250,000 to $7,000,000 (see the surety bond section below)

On top of the above, you will also need to provide several forms and documents to the Division of Financial Institutions directly. A number of the forms you will need to mail can be found here. These are the items you will need to mail:

  • DBO Form 5025
  • DBO Form 2
  • A copy of a resolution of the board of directors providing the applicant with a number of authorizations
  • At least two banking references
  • An estimate of the proposed branches and agents at the end of every year within the first three years
  • A detailed description of the policies and procedures that will be used to select and supervise agents
  • Pro forma financial statements
  • Financial statements that include audited financial statements, unconsolidated financial statements, current balance sheet income statement, statement of income and several others
  • A detailed explanation regarding your plans to comply with laws and regulations of the Office of Foreign Assets Control (OFAC)
  • Form FD-258 for a number of persons in the business
  • An investigative background report for any control persons residing in foreign jurisdictions
  • DBO Form 550
  • DBO Form 4030

As already mentioned, you will also need to pay a $5,000 non-refundable application fee. You will also need to pay an additional $15 fee for every credit report issued for a control person.

Once you are done with completing and submitting all of the above to the NMLS, you will need to wait for it to be reviewed and approved. If your application contains no mistakes, you will be notified once you are approved to get licensed as a California money transmitter.

Money transmitter surety bond requirement

To become licensed as a money transmitter in California, you will be asked to submit a surety bond. The amount of your bond is determined by the types of services you will be providing.

Licensees that sell or issue payment instruments or stored value are required to obtain a bond in the amount of at least $500,000 or equal to 50% the average daily outstanding payment instrument and stored value obligations in the state. Whichever is greater of these two is the amount of your bond, though not higher than $2,000,000.

Licensees that receive money for transmission must have a bond “in an amount greater than the average daily outstanding obligations for money received for transmission” though no less than $250,000 and not more than $7,000,000.

It is important to note that the amounts required in both of these cases are cumulative!

The amount of your bond is not the same as its cost, though. The cost of your bond is determined by your surety when you apply. The surety will use your personal credit score as its main point of reference when determining your rate. It may also request to review business and personal financial statements, as well as other relevant financial information to properly determine the cost.

Applicants who have a high credit score, one of 700 FICO or more, can expect to get bonded at the lowest possible rates for their bond. You can easily request a free and exact quote on your bond through our bond application form. If you have any questions about this bond, call us at 877.514.5146!

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Victor Lance is the founder and president of Lance Surety Bond Associates, Inc. He began his career as an officer in the U.S. Marine Corps, serving two combat tours. As president of Lance Surety, he now focuses on educating and assisting small businesses throughout the country with various license and bond requirements. Victor graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan's Ross School of Business.