What is a Money Transmitter Bond?
A money transmitter bond is a surety bond which guarantees the honest and professional rendering of services by money transmitters, in compliance with state regulations.
This bond protects the public, and the state in which it is issued, from dishonest money transmitters who misuse, withhold or steal funds made available to them by customers. Some form of money transmitter bond is required by most states.
Money transmitter bond regulations are changing fast, due to the changing economic landscape as well as the diverging needs of new forms of businesses. Check with your Business Licensing Bureau or Department of Finance, to find out whether you need to obtain a bond when you apply for a license.
Surety bonds provide protection to the public and the state, by compensating them if a claim is filed against the bond. Bonds work like a three-part agreement, in which the sides are the obligee (the public and the state agency or bureau), the principal (the money transmitter) and the surety bond company that backs the bond.
When a legitimate claim is made against a money transmitter and their bond, the surety has the legal obligation to step in and compensate the obligees. The principal must then, in turn, reimburse the surety for its support and backing.
Questions about Money Transmitter Bonds
Who needs to obtain a money transmitter bond?
Businesses that may need a bond as part of their licensing procedure include all those who offer the service of transmitting or transferring money, or payments, from one person or business to another.
These include wire transfer services, online merchants, money services businesses, and others.
Are there different types of money transmitter bonds?
Yes and no. Different states may use other names for this bond, though they are, in effect, the same type of bond. The businesses to which these apply may also vary according to state.
For example, some states such as Connecticut, New York and North Carolina may recognize businesses that deal with ‘virtual currencies’ as money transmitter businesses and request that they get bonded, while others may not.
How much does a money transmitter bond cost?
The cost of obtaining your money transmitter bond is a fraction of the total amount of your bond. The total amount of your bond is determined by your state’s Department of Finance– or similar institution– and depends on a number of factors, such as the amount of transmissions you have performed over the course of a previous year, and the number of locations your business has in a state. The more transmissions or locations, the higher the bond amount.
In other words, there are no fixed amounts for these bonds, as with other license bonds, and their amounts vary depending on the applicant. Usually states have minimum and maximum amounts for these bonds. The minimum can be as low as $10,000 (in Alabama, Idaho, Nevada, and New Mexico, for example) and the maximum amounts can be as high as $5,000,000 (in Kentucky).
Your cost is a percentage of the bond’s total amount, determined by your surety. When calculating your cost, sureties will consider your personal credit score, among a number of factors. Other factors include personal and business financial statements, as well as your industry experience and your asset profile. Since money transmitter bonds are considered risky, sureties are very cautious and selective when underwriting them.
Applicants who have a high credit score can expect a rate that is between 1%-3% of the total bond amount. Those with a lower score can expect a rate upward of 4% of the total amount.
If you would like a free quote on your bond, simply follow the application link and submit your surety bond application. We will provide you with your free, no-obligations quote as soon as we have processed your application.
Can I get a money transmitter bond with bad credit?
It depends. It is possible to get a money transmitter bond with bad credit, but only under certain conditions. Since these bonds are considered high-risk, they are usually issued after careful scrutiny by sureties, and sometimes bad credit applicants get turned down in the process.
Our Bad Credit Surety Bonds program offers low-credit applicants a better chance of getting bonded, despite their credit score. To make this possible, we have an ongoing partnership with a number of the best sureties in the country, all of which are A-rated and T-listed.
Due to the nature of the bonds, and because of the applicants’ lower scores, rates under this program are higher than standard market rates.
Whether you have a high or low credit score, we at Lance Surety Bonds always do our best to ensure that all of our customers get bonded at the lowest possible rate by sourcing rates from a variety of markets.
How to get your money transmitter bond
Getting your bond is easy. Just apply online through our secure application tool and submit your form. We will get back to you with your free bond quote as soon as possible.
If you have any questions in the meantime or require assistance with your application, just call us at (877)-514-5146. Our surety bond professionals will be happy to provide you with additional information, and assist you if you need any help.
Money transmitter license renewal and requirements
There are particular requirements that you need to fulfill when applying for a money transmitter license in your state. Depending on state regulations, you will have to renew your license annually or bi-annually.
Along with your money transmitter license application, you will usually have to include some or all of the following:
- Your name and business address
- Your social security number
- Your tax identification number
- A certificate of good standing
- An application fee, a licensing fee (or a renewal fee, respectively)
- A criminal background check
- A money transmitter surety bond
- Maintenance of permissible investments
In addition, every money transmitter is also required to register at Financial Crimes Enforcement Network (FinCEN), through its BSA E-Filing System. The FinCEN is part of the U.S. Department of Treasury. Registration is valid for two years before it must be renewed.
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