What Is a Kentucky Money Transmitter Bond?
Licensing is necessary for money transmitters in Kentucky as in most other states. It is obligatory to obtain a money transmitter bond as a part of the process.
Why do you need the bonding? State authorities impose this requirement in order to ensure that licensed transmitters will abide by all applicable rules and regulations.
Your money transmitter bond is, in practical terms, a contract between your money transmitting business as the principal and two more entities. The obligee is the Kentucky Department of Financial Institutions. The surety is the third party providing the bonding.
Questions about Money Transmitter Bonds in Kentucky
In which situations do I have to get this bond?
Obtaining a Kentucky money transmitter license entails posting a surety bond. This is one of the prerequisites you have to meet if you want to operate in the state.
The licensing procedure is conducted via the Nationwide Multistate Licensing System and Registry (NMLS). The licensing authority, however, is the Kentucky Department of Financial Institutions.
The minimum bond coverage it requires is $500,000. It ensures your compliance with the Kentucky Money Transmitters Act.
What is the cost of my Kentucky money transmitter bond?
The bond amount that you have to provide in order to get licensed as a money transmitter in Kentucky is $500,000.
The bond premium that you have to pay, however, is only a fraction of this required amount. The actual surety bond cost is typically between 1% and 5% for applicants with solid finances.
When a surety reviews an application for a money transmitter bond, it considers the business owner’s personal credit score as the most important factor. Your audited business financials may also be required, as the bond amount is considerable.
In some situations, you may also be asked to provide a personal financial statement and allow cash verification. The bond price you pay may also be influenced by the currency type you work with.
What if my credit is problematic?
Getting a money transmitter bond of $500,000 with problematic finances can be difficult. While it may be possible if you provide strong enough financials, the bonding decision will depend mostly on your audited business financials and any other assets and liquidity you can showcase. The stronger your application is, the more likely it is to be approved for bonding.
How do I apply for this bond?
We have prepared an in-depth resource about the bonding process. You can access it on our How to Get Bonded page for further details.
We are here to help you with your queries or bond application. Just call us at (877) 514-5146 to speak with our bonding specialists.
What is the process if I receive a claim against my bond?
If you fail to follow the law that governs your operations in Kentucky, you may end up with a claim against your surety bond. This is the protection mechanism for parties who have suffered damages due to your illegal or harmful actions as a money transmitter.
The claimants can demand a compensation up to the penal sum of your bond, which is $500,000. Whatever costs the surety covers on proven claims, you need to repay them fully. Thus, it’s best to avoid situations that can bring about claims, as they can be a heavy financial burden for your business.
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