# Money Transmitter: Common Licensing Pitfalls & How to Avoid Them > This session addresses the complexities of state and federal licensing for money transmitters and money service businesses. It provides guidance on regulatory definitions, the licensing application process, and strategies for maintaining compliance. The webinar is designed for businesses navigating multi-state requirements or those looking to refine their compliance processes within the financial services industry. Recorded: 2026-08-17 | Runtime: 58 min ## Key takeaways - Definitions for money service businesses and money transmitters frequently differ between federal and state jurisdictions. - Federal registration for money transmitters is typically a registration process, whereas state requirements usually involve a more complex licensing application. - While a federal registration threshold of $1,000 per day exists for certain money services, many states do not have transaction thresholds for licensing. - The Conference of State Bank Supervisors has introduced a modernization act adopted by many states to help standardize money transmission laws. - Effective compliance programs require careful oversight of agents, third-party service providers, and consistent account reconciliation practices. - Because state laws vary significantly, firms often find it necessary to conduct a state-by-state analysis to determine specific licensing obligations. ## Transcript I'm Joel Blackburn with Cornerstone Licensing and today we'll be delving into licensing in the world of MSBs and money transmitters. Navigating the complex landscape of state-by-state licensing in the money transmitter and money service business industry can be daunting. In today's webinar, a panel of experts will share practical strategies to help you stay compliant, avoid costly mistakes, and manage licensing requirements effectively. Our panelists will discuss common licensing challenges, provide tips to avoid issues, discuss best practices, and answer your burning questions. Whether you're brand new in this space, expanding into new states, struggling to keep up with multi-state requirements, or simply looking to enhance your compliance process, this webinar will equip you with the tools and knowledge you need to succeed. Today, I'm delighted to be joined by Mark Franson and Tobias Moon of Chapman and Cutler LLP and our very own Christy Young Barger of Cornerstone Licensing. Mark Franson is a partner in the banking and financial services group at Chapman and Cutler leading the compliance regulatory and payments practice. He advises on consumer credit, deposit products, M&A, licensing, and compliance. Mark has managed major credit card deals, portfolio acquisitions, and securitizations. He also assists with technology contracting, payment processing, and fair lending, guiding clients through examinations and legislative activities. Tobias Moon is a partner in Chapman's banking and financial services department and compliance, regulatory, and payments group. He advises financial services clients from startups to major institutions on consumer and commercial lending, compliance, product innovation, and UDAP risks. Tobias also guides banks, credit unions, and fintechs in building compliance programs, navigating licensing, and shaping new financial products. With 19 years at Cornerstone, Christy Young Barger has built valuable client relationships, serving as a trusted adviser on licensing and regulatory compliance. She collaborates with industry leaders to guide clients through new requirements, corporate changes, and expansion. Her passion for client success drives her to stay current on regulations. A frequent speaker and author, Christy shares her expertise across the financial services industry. Due to the nature of the topics we'll be discussing today, let me read the following disclaimer. This information is not intended to be legal advice and may not be used as legal advice. Legal advice must be tailored to the specific circumstances of each case. Every effort has been made to assure this information is up to date. It is not intended to be a full and exhaustive explanation of the law in any area. However, nor should it be used to replace the advice of your own legal counsel. You are invited to share questions in the chat as we go and we hope to have a few minutes at the end to go over some of them. So, to start us off, let's kind of establish the lay of the land when it comes to MSB regulation. Starting on the federal level and Tobias and Mark I'll let you guys get us started today. Tobias Moon: Great. Thanks Joel. And as you can sort of see here on this overview slide, we are going to try to look at both the federal level and the state level because like many regulations there is a dual system. Exemptions are very important in both of these arenas. And so we'll talk about some of those. Some of the money transmitter statutes at the state level are being looked at and passed in a law that's been proposed by the conference of state bank examiners and regulators. And then we have some sort of current events, if you will, as to how these statutes and licensing apply to bank partnership lending and also to new forms of digital assets such as cryptocurrency. Christy Barger: So let's take a look first at just money transmission. It should be an easy concept, right? This is the facilitation of the transfer of money from one person to another. And as you can sort of see from this overview slide, there are usually three participants in this: the customer who provides money to the business, the money transmitter or money service business, and then that is sent on to a recipient. So that should be easy, right? It's a pretty straightforward process. But as we will see, the definitions of a money service business at the federal level and a money transmitter at the state level can be different. In fact, they vary from jurisdiction to jurisdiction. And you may not be, for instance, a money service business for federal purposes, but you could be a money transmitter for state purposes. And vice versa. So, it does get to be complex and we do suggest that folks entering in this arena or expanding operations in this arena do reach out to specialists, whether legal or licensing, in order to get some assistance on these particular issues. Christy Barger: So at the federal level we have a regulatory scheme through FinCEN, the Financial Crimes Enforcement Network. And to be a money transmitter merely requires a registration. And this differs from money transmission at the state level, which is actually a licensing process and requires the submission of an application and obtaining approval of that particular state regulator. And every state except Montana has money transmitter licensing statutes that require licensing. However, at the federal level it is merely a registration process. So we can look and see what kinds of businesses are subject to at least the federal definition of a money service business. The sort of old-fashioned currency exchange where someone brings in money and then it's transmitted to someone, usually in a different location, is part of the federal definition of what a money service business is that requires registration. Check cashing, issuing payment orders like money orders or travelers checks, prepaid access, prepaid cards, and so all of these things fit under the federal definition and require this registration process. Get into some of the little specifics here. So again, whether or not you meet some of these things can be very granular and in the case of the federal scheme this requires a threshold of $1,000 per day if you're a check cashier or currency exchange or seller of travelers checks or money orders. And the requirement does not become triggered for registration if you don't exceed this $1,000 per day threshold of doing those particular kinds of activity. And that's at the federal level. There are not necessarily thresholds at the state level for most money transmitters. So, and to sort of jump ahead for a moment, actually over 10 years ago, FinCEN put out guidance indicating that digital forms of currency, including cryptocurrency, were covered in terms of money service business registration. Christy Barger: So if you're in the innovation space and doing things with digital assets, digital currency, crypto, they are covered by the federal registration scheme. Next slide, Tobias, if you can put it on. So yeah, so again, as we say, this is merely a registration process. Most of us who deal with FinCEN can file these things and you then don't often hear from them for a long period of time or ever, you know, for that matter. So we wonder sometimes whether they exist or not. And again, it's unclear whether some businesses are money service businesses or not. We, for instance, wrote a letter on behalf of a client who is a payroll processor because the federal statute doesn't give guidance on whether a payroll processor is a money service business or not. And that's been a couple of years ago and we haven't heard a response from them. So again, depending upon what your business plan is, it may or may not be covered and sometimes some calculated analysis has to be done to try to make the determination of whether to register or not register. Christy Barger: Typically, if you're starting a business or engaged in the business, you've got a time period of 180 days there to get that registration in. And obviously it must be renewed periodically based upon a calendar year basis. Next slide. And obviously, like most regulatory schemes, if you don't do it, there are consequences. And in the case of MSB registration, there are civil and criminal penalties if you don't register: $5,000 for each violation. It's pretty hefty. And criminal penalties which could be a fine or imprisonment or both. And just as an aside, part of this is because much of the focus of not only money service business, but money transmission is in dealing with the federal anti-money laundering laws and know your customers to provide for anti-terrorist financing. And this really is the focus of much of the regulation on money service businesses that the registration and even the reporting that is required is in part to deter or limit the anti-terrorist financing and money laundering. That obviously is easy when you're dealing with cash or currency or other forms of digital assets. And I just, as long as we're on the subject of money service businesses, I think two of the main things at least from a reporting standpoint because the law does impose recordkeeping and reporting requirements. The sort of two that the regulators hone in on are the currency transaction report and the suspicious activity report. If any individual or business deals in cash of more than $10,000 in a given day, there must be a currency transaction report that is filed with FinCEN and again to deter money laundering and terrorist financing for the most part. And one little caveat on that is that if you have more than one location, it affects all of your locations. We had a client a couple of years ago, for instance, who had multiple locations in an urban area and an individual came into the money service business and let's say took $9,000, then went to another location, took another $9,000. They tripped the trigger of $10,000 because they did transactions at multiple locations. Unfortunately, this business did not have a real-time system where they could track that and so they actually violated this currency transaction report filing and were fined as a result. So your technology and your systems need to be up to date to look at the currency transactions across your entire business. So the federal penalties can be harsh in these areas. The other area that requires filing within 30 days is if there's suspicious activity. So, if someone thinks that there is fraud or identity theft or any sort of action with money that they think is suspicious, then the suspicious activity report needs to be filed at the FinCEN level. And they look into those things. But failure to file again can lead to some penalties. Someone asked here a question which I'll answer. And someone says that if you transmit less than $1,000 a day, do you need to register anywhere? Not at the federal level, but most likely at the state level because there are not thresholds in many of the states. So I hope that answers that. Well, but Mark, what about at the federal level for money transmission as opposed to one of the other things, right? So, yes, it does apply to some of those. Yes, it does apply to the currency, the check cashing, right checks, money orders, those kinds of things in this as pointed out in bullet point. That's right. But if you're engaging in pure money transmission, there's no activity threshold. So you would potentially have to, I think, register at the federal level as well. So if to maybe make it more clear. So if you're issuing travelers checks, let's say, or money orders, and you do less than $1,000 a day, and that's the only money transmission that you do, you would not have to file at the federal level. But most likely, and again, it depends on the state that you're in. It depends on where you're doing business. Most likely you may be subject to the money transmission license clause, right? And if you were just doing money transmission and that was it, meaning you, in our beginning slide, I'll scroll back to it. You're just taking money from somebody and then transmitting it to somebody else. Even if you didn't hit the thousand, just to make it crystal clear, you would have to have both a federal registration and potentially a state registration. And then the other thing to contemplate, right, Mark, is at the state level, as you mentioned, there may not be, and in fact many cases are not these transaction limits. So, even if you're doing some of these things like issuing, if you're taking currency in, if you're cashing checks, you're issuing sellers checks or travelers checks, etc., you still might be able to do it even if you're under the $1,000. So, bear that in mind as well. Just because you're exempt from the state requirement, I mean the federal requirement, doesn't mean you're exempt from the state, right? That's what makes this area complex is you've got this interplay between state and federal law and all of the state laws are not the same. They vary from place to place. So whether you meet the definition of being a money transmitter is crucial and that's why you have to look at the law of each particular state and as we're going to see in a second here I think look at the potential exemptions that apply or may apply in terms of how you choose to do your business. Christy Barger: Yeah. And I think I mean is this a fair statement Mark? I think in terms of when I think of this too on the federal side, you could be completely required to have a license or the MSB registration, sorry, but that doesn't exempt you from state licensure. It's probably one of the few things that if you have some sort of federal license or registration, you're not exempt under state law. It's kind of counter to what you would expect. Tobias Moon: Yeah. Yeah. And it's somewhat interesting because you may not be that money service business at the federal level, but sometimes when you apply for licenses at the state level, the state will say, "Well, show me your FinCEN registration." Yeah. Right. And that's one of their requirements. And if they can't check their box off, it becomes, you know, an issue. And you've got to go through explaining it. And you know, whether the state regulators accept that explanation or not. Some people do register just to avoid that at the state level. Right. And we should point out it's not exactly an onerous process. You fill out the form and send it in. But then of course the problem is you're subjecting yourself to the regulation of the federal government. And still in most places where you're you have state licenses, you still have those anti-money laundering and suspicious activity and currency transaction reporting schemes applicable, you know, to you as well. So you can't get out from underneath. That's right. Well, let's maybe turn to the and gentlemen, you'll see on the state. Tobias Moon: Sorry, Mark. As I say and on the checklist on the state level, a lot of those have that FinCEN registration. They want to see a copy of that. So that's kind of part of the state process as well. Christy Barger: Exactly. Yeah. I think that's a really good call out, Christie. So I guess Christie, in your experience, have you seen people who just don't want to get the FinCEN registration and how do they handle that situation? Because they might qualify as Mark's mentioning they're clearly meeting the definition of money transmission, but for the state perspective, but on the federal side, they're under that thousand threshold. So, how do you guys typically see that issue and how does it typically get resolved? Yeah. And that's something you kind of have to look at the big picture. The federal and the state that it matters. So, if it's a state regulation that you have to have it, you have to have it. So, it may not be that you know the feds say you need it, but yet again you have to have it for the license. So, we have found that, you know, if you don't meet all the requirements, of the state licensing, you're not going to get that approval. So, it's important to know that sometimes there's things that are asked for that may not be needed in one place, but it's definitely needed in another. Christy Barger: Yeah, I think that's a great point. Sometimes it's not necessarily needed for your business operations, but it's needed to get a license. And I think another good example of that could be right Christie, you don't necessarily need to get a foreign qualification in a particular state, but you're going to need it to get the license. Well, I haven't looked today. The Secretary of State is it's a prerequisite. So, I haven't looked today, but is FinCEN still in existence? I mean there's so many agencies going away at the federal level. It's harder to get the registration now, Mark. It's harder to get the registration today. There's nobody there to accept it. Yeah, exactly. There's nobody there to say confirmed receipt. Yeah. Well, let's switch gears and sort of look at state licensing. And again you know the law usually is behind what's happening in the real world and particularly when we have innovation and mobile apps and all sorts of things in this space. But it still goes down to what we talked about earlier, and that is do you meet the definition of a money transmitter or do you qualify under some of the exceptions? And then if you aren't accepted, what is the process that we go through to you know, obtain the licensing? And so, you know, as a general matter, and again, it varies from state to state. It's not true in all states. They don't have a common definition of money transmitter but typically if these things that are listed here sale selling or issuing payment instruments or stored value or receiving money for transmission these things all fall under the licensing regime. Next slide. So, we'll talk about some exemptions in a minute, but obviously if you need to apply for licenses, there's lots of requirements and that's what Christie and Cornerstone do a lot of. Christy Barger: So, Christie, sort of take us through the process and what's needed and some of the things that you see in the money transmission licensing application process. Absolutely. Thank you. So, we've kind of alluded to some of this where you have to have a certificate of authority that gives you authority to do business in the state. It's a prerequisite to the licensing. And it's required in every state. That's where those registered agents get pulled in. You have to have a ser someone for service of process in each state. So, that's the agent piece. The Secretary of State side, it's honestly it's a pretty straightforward process. They ask general information on the company address, federal tax numbers, those kind of things. When it gets into the licensing, that's where it's just a free-for-all almost. As Mark mentioned earlier, all the states except Montana have a license. Most of those are filed through a system called the NMLS. Which is good because there's multiple states on there, obviously, most of them where you can use some information for all states. However, each state is so different with the requirements. You have to look at each one individually. And so that's where this that there will be state specific things that the states will want to see in a business plan. They have different financial requirements. Christy Barger: Most of them I think a 100,000 is the minimum net worth in all of the states. But some of them do go up to half a million. And so that's a pretty big jump there. And when it comes to financial requirements of what's required to be reported it can be you know they want audited un-audited compiled reviewed again each state is different so you have to really understand what the states are looking for to submit applications as part of the process through the NMLS you have to list your control people and the NMLS is pretty specific on who those control people are and that's people who have control over the company as far as officers owners directors when it looks at ownership, they want to know anyone who owns 10% or more at the indirect level as well as the direct level. And so if you have multiple owners, even at an indirect level, they are subject to requirements of fingerprinting, personal history statements, background screenings that are all done as part of the process. Credit reporting is part of it as well. Anyone who is defined as a control person is going to have to do that credit report. That's part of the process. The two states that are not on the NMLS, Florida and New Jersey, they have very similar requirements. It's just you're filing them either on the state website or I think both of those still do take paper applications, believe it or not. Christy Barger: So, it's just so important to understand the requirements. Really understand that they're asking for it for a reason and you usually can't get around not giving them what they want. Processing times can be very long and so it's very important when you submit an application that you submit a complete application. A lot of the states have multiple levels of review and if you make it up to level three review and then level three has an issue with your application, you're going back down to the bottom. California is one of those states. I think they have several levels of review and it can take up to a year and a half there. And so it's so very important to make sure you give the states what they're looking for in the beginning so you're not adding to that processing time. One of the things that goes along with these, and I may be jumping ahead, I apologize if I am, are shy bonds. Those are pretty high as well, in value. Joel, do you want to kind of jump in and throw in some comments on the bonds there for us there? Tobias Moon: Yeah, I'd love to. Yeah, the shy bonds are going to, you know, range in amounts from, you know, the 5,000, 10,000 all the way up to, you know, multiple hundreds of thousands and into the millions in some cases. That's for the starting amount and then based on the amount of transmission that's occurring, you're going to start to see those amounts go up from there. And you're going to pay a premium similar to what you would on an insurance policy for those. And you know that premium could be anywhere from you know 1% up to 2% and even 3% for startups. You know, for the more well-established entities, you know, they may have the ability to lower those premiums but there's a, you know, there's an extensive underwriting process that happens for getting started with the shy bonds. And you know, again, jumping ahead a little bit, if you are dealing in cryptocurrency, the shy companies are going to view that underwriting process a little bit differently because of the lack of federal, kind of a unified federal regulation on crypto. They view that as a little more risky on their side. So, they underwrite those accounts a little more strictly. But you will find shy bond requirements with every application. Again, with the exception of Montana as previously discussed that doesn't have a licensing requirement. Hey Christie, quick question. Can you walk us through just real quick at a high level the fingerprint requirements and the background checks and the credit reports? I have found just talking to clients on several occasions that those tend to be the most confusing for clients in terms of, you know, they don't understand that for instance the credit reports they typically don't have to provide, they're pulled from NMLS. And then also in particular for the fingerprints and FBI checks because I noticed some of the people who are attending are maybe international. What happens if you're not a US resident? And sorry to put you on the spot for that question, but I did notice there was a few companies here that look like they're international. Christy Barger: No, that's a great question, Das. Thank you. Yes, you normally can get your fingerprints done outside of the US. The NMLS is pretty good about providing doits. And we've of course compiled some data as well that helps with that. It's usually like a live scan type situation where, you know, here in the US my local UPS office has a live scan station sitting there. So you go in and you do your fingerprinting. The state provides you with direction on how to do that. There's similar things like that in other countries as well. And then we've got some specific guidance that we've received in some of the places where it's a little bit harder to know what you have to do to get those done. And you're right, the background screenings, the FBI criminal background check and the credit report, that's done through the NMLS system. As part of the process, there's an MU2 that each control person has to complete. And as part of the attestation to that, there's questions of, can we run your background check? You have to say yes. So, you're going to, they're going to run your background check that way. You're not having to go pull something from, you know, one of the bureaus yourself and submit it. It's a process that's part of the process through the NMLS system to get that license approved is they do that piece themselves. And then last question for you because I've again I think Mark and I have found when you know clients talk to us about licensing. Is there a uniform standard for measuring net worth? Doesn't appear to be. That's a great question. Yeah, there doesn't appear to be right. But I just didn't Yeah, I don't know like if there's a general rule that your team follows for looking at that or analyzing that. Yeah, that's a great question. You know, the states want to see a positive net worth. Now, how does that positive net worth come into play? You take out Goodwill. You know, they really want to get down into the weeds. They look line by line and want to see if after all those different things are calculated, are you still positive? And in this case, a hundred thousand to five hundred thousand positive. And they not only do that in the initial phase, there's lot financial requirements at renewal time as well and throughout the process actually. There's some reporting that gets filed. So they're always keeping an eye on the fact that you're a positive net worth company that's doing business in their state. Yeah, thank you. And again, I know I put you on the spot a little bit there, but I think those are good call outs for people on the webinar. Yeah. No, you're right. Tobias Moon: Tobias fingerprinting always raises red flags with people and particularly if you have high net worth people financial statements and they have to be done if you want to get the license. And I guess we should mention here that at least so far and I suspect it'll be a continuing trend some states are actually engaging in separate licenses for virtual currencies cryptocurrency. I think what New York and Louisiana are the two states that sort of have their own license for some of this innovative technology. So I think we'll be seeing you know some of that come into the realm as well. One of the other things that's happening is that the conference of state bank supervisors has tried to put together a modernization act and I think that's on our next slide here. Which have now been adopted I think in 27 states. And again trying to modernize and to make somewhat uniform some of the money transmission laws that under the model act that the regulators have actually developed. And you know they are trying to make this more of a uniform national standard. It does have a few interesting things in it. One of which includes for instance payroll processors. And this stems from the fact that at the federal level, the money service business provides an exemption for someone collecting payments on behalf of a provider of goods or services, which has often been referred to as the agent of the payee exemption. And this exemption also exists in the modernization act that if you if all your business is doing is accepting payments on behalf of someone entitled to receive those payments, you are exempt from licensing laws, at least in those 27 states, and also exempt under the federal registration process. Now, in order to qualify for that exemption, you have to have a contract with that payee. You know, if I'm collecting money for the utility company, I have to have a contract to collect that money for the utility company, that I need to be sure and the law specifies that once a customer pays the money transmitter that they have no further liability. So if the money transmitter goes bankrupt, the debt is considered paid. The bill is considered paid and the payee cannot go after that customer again if it's given to their agent. So that's a very important thing. And this only works in those states and other states that may have recognized that exemption. It's not an across the board exemption and it does not apply to an agent of the payor. For instance, we've represented payroll processors who represent the payor, the employer who pays funds and transmits funds, but they are not exempted under these this modernization statute or under possibly the MSB registration. We don't know because FinCEN hasn't told us whether they are or not. So it doesn't work for an agent of the payor but it does work in these jurisdictions for an agent of the payee and it goes back to that definitional aspect which is so important to all of this you know what is money transmission. So if you never receive money to transmit for instance it's going to be very hard for you to be a money transmitter. So, one of the examples here, if you're just merely providing a piece of software to people to help facilitate the money transfer obligations, you're not going to be a money transmitter if all you're doing is licensing your particular piece of the software. We have seen and we've helped structure arrangements which we sort of generally called FBO arrangements because this deals with a for the benefit of account at financial institutions. So the business will actually, let's say, collect a file of payments that are coming into a bank account that they have no ownership interest of, no control over. But they have a listing of funds that come into the account and then they are going to generate a file that for the recipients of that particular money and hand it over usually to the financial institution who will then actually do the money transmission. And since financial institutions are exempt under the money transmitter licensing laws, they can do this without licensing. So the whole point is that if you yourself don't receive the money, if you yourself don't transmit the money, you may have possible exemptions from the money transmitter laws when this is all done through a financial institution. And the FBO account means that the funds in those accounts are the funds of people who put them into the account. It's a custodial account. It's a type of trust account until they are dispersed to the proper recipients. And so the titling and ownership of those accounts is important so that it's not into the, I'll call it the money transmitter's name or ownership or control that it has to. It's usually worked through an arrangement with the financial institution. Now, we've also seen some issues with FBO accounts, where, you know, for instance, you've got an app on your phone and you can put money into an account at a financial institution. And usually there are these third parties who are helping to manage that account at the financial institution. And it's been public knowledge, but a year or so ago, a company called Synapse was doing this for several financial institutions. And when business closed at the end of the day, they got into financial trouble. There were funds that were missing and people either got a delay in payment of their funds or they didn't actually receive their funds. And so there was a mismatch of the money coming into the account and the money going out of the account and there are all sorts of lawsuits and other things that have been filed after, you know, did they take the money? What happened to the money? But what it caused was the Federal Deposit Insurance Corporation, the FDIC has issued a rule, a proposed rule that would require the daily reconciliation of those FBO accounts. So if there is a third-party service provider to the financial institution sort of watching those funds and those funds can be FDIC insured if their recordkeeping requirements are satisfied at the federal level. But the rule would require a daily reconciliation so that we know that all the funds are there. Now, we know that there's a new administration, there's a new FDIC chair, it's only a proposed rule. Lots of these proposed rules are probably not going to make it into final rules. So, it's still out there, but may not likely, you know, go into effect, although sort of the theory behind it is not really all that bad. Particularly if you use those apps and put your money into those particular kinds of things. But that also merits sort of one other point that the FBO account underscores. And usually then a service provider to a financial institution is typically not subject to these laws if they are truly an agent of the financial institution and the financial institution accepts liability for the acts of its service provider. So if you are doing servicing on behalf of a financial institution and accept payments and put payments into accounts typically that would not require the kind of licensing we've been talking about here today if you meet those particular requirements. Tobias Moon: So Tobias what have I left out in that whole scheme of things? Well, the only thing I would add is, you know, the states get very creative in their definitions of money transmission. I think we've seen, right? So, for instance, picking on the software provider or the platform model where the platform itself doesn't move any money, any funds. It never receives any funds. It doesn't, you know, hit transmission or anything like that. Instead, it's merely the interface between the transmitter and the parties. What we've seen is there are states, for instance, Oregon comes to mind which is probably one of the crazier states out there that tries to creatively work how the definitions in that state work to cover the software provider in that example. So, I think, you know, even though we're saying there's no movement of funds and there's most likely an exemption available, just bear in mind that some states may, you know, get pretty creative with their rulings on whether a license is required or not. I think the key point is this last or second to last bullet that's highlighted here. Titling and ownership of the accounts is important in that scenario and also the actual receipt or lack of receipt of the funds is important. So when we've encountered those experiences, we've typically looked at it from the perspective of, well, the platform doesn't receive any funds and the platform is just merely there as a convenience for the parties. And so the only caveat is again when you're setting these things up, there's no real like bulletproof way to avoid lenture. There's certainly ways that work better than others and certainly ways that will, you know, have stronger arguments than others, but there's really no particular way. I think, the bottom line is if a state really wants you licensed, they're going to try to make reasons why you have to be licensed. And then from a business perspective, you have to decide what you want to do in terms of do you want to get the license or just not even bother with that state. Christy Barger: Christy, what do you sort of see in this area? You see questions and people you know, looking for advice on that or? Yeah, from time to time definitely. So, you know, we always say talk to an attorney. You need to have the statutes reviewed. They need to understand what you're doing, your business model, to help you make those decisions that, you know, those it's so important, to get what license you need and make sure it's get a civic completely. Attorneys, that's where they need those that legal advice. I think Mark you highlighted this but I think the key is right it has been nice that the modernization act and you know granted not all the 27 states have adopted it verbatim but generally speaking it's becoming a much more uniform standard. You know in the past before the modernization act states had all sorts of different requirements and different rules on whether you were exempt or not some of the requirements etc. And the thing is that you know in many instances it became really a state-by-state operation. So it put that compliance burden at a pretty high price for a lot of companies in terms of you know they had to do one thing in one state and another thing in another state. But what's your takeaway on that Mark in terms of you know just the impact of the modernization act? Well, you know, it cuts a little bit both ways. Like we said, it adds some people into the mix like payroll processors. It gives you the agent of the pay exemption. It does say which I think a lot of people I mean we know and I'm sure Christie you know people come in and say how long is this going to take me right? You know can I get this next week? And of course the answer is no. But what the modernization act also puts in is an 120-day period for applications to be approved. Now the key because we see this at in a lot of other federal banking legislation and regulation that it's 120 days from the time of a completed application. So, state regulators as well as federal regulators are really good at asking more questions, saying your application is not complete. So, it's still, I think, a little bit of a longer runway, but at least this 120-day standard is, you know, in that particular modernization statute. And I think that's a good thing on balance. As Christie mentioned compared to what some of the older laws were, there's a much higher net worth requirement. And it's sort of tiered. As your business increases, the amount of net worth increases. So you know, that's not necessarily a great piece of it, but maybe makes some sense from a consumer protection standpoint. And Mark, I see we have another quick question here. Another thing Oh, sorry, Christie. Christy Barger: Go ahead. No, I apologize. I was going to say about the modernization act, you know, it's not it doesn't appear that it's going to that it's taking licensing away or changing the requirements. It's, you know, it's still going to need every state's going to need to look at licensing to see if that states need it. I don't think it's going to come out and say you don't need a license in, you know, all these states based on the fact that you have one license or anything like that. It's more about the compliance requirements of the course of business that modernization acts kind of touching. That's a great point. It doesn't uniformly give you know a clear answer just because in one state you're covered that you're covered in all or just because you're exempt that you're exempt in all. So yeah, I think that's a great call out Christie. I agree. Christy Barger: And as we lawyers know, not every state adopts the model act verbatim. You know, they do make changes and so you always have to look at what each state has done. And as what one of our attendees has, I think aptly noted is that so really the only way to be safe is to get licensed everywhere. And you know, I don't know that we tell everybody that because if there's a clear exemption, you know, we wouldn't want you to pay the fees and do all of that. But certainly that's a risk posture that one could take in terms of this. But the other thing is that obviously licensing brings other burdens as well, some reporting requirements, renewal requirements. And so you really do have to have a compliance system in place and people to deal with all of these things as they come up. And Christie, as you well know, you know that you may if you change officers or directors, you may need to send in a new form or there's all sorts of things that might have to be done as a part of that. So, you know, minimizing those requirements can also be a decent business strategy as well. Tobias Moon: Yeah. Because there's also right examination requirements which are quite burdensome too in terms of just taking away people who are otherwise working for your company to respond to regulatory requests. So it's certainly not a bad strategy. I think what I would probably say is that is the only ultimate way to safeguard yourself. However, if you did an analysis, there might be instances as Mark mentioned, states where one state has a particular exemption that applies to your business and you can rely on that exemption and then not get licensed in that state. So, even though there is the modernization act, it is a little bit more of a state-by-state analysis. And at the end of the day, I think the person's question is probably right that, you know, the only absolute way to be safe is to get the licenses, but it certainly it might also be overkill. So, you kind of have to figure out the fine line to walk down. Tobias Moon: Yeah. And regulatory, you know, enforcement. I think some of what we have seen as of late is not so much going after the people who are licensed but going after the people who are not licensed. So I think one of the big risks is that you know if you're in this business and are not licensed that's a pretty big risk to be taking. Regulators are particularly looking at larger entities, people with deep pockets that receive money and pay out and you know again you know the consumers too and if they see apps that are taking money and transmitting they're going to you know they're going to work that over into their business world and take a look at these kinds of things. We've seen that you know in terms of that. So with this innovation even though sometimes the law lags behind innovation the law is being applied to innovative products and services as well in this entire arena. Yeah. Tobias, you want to speak to the sort of last I think this may be one of our last points anyway. Tobias Moon: Yeah. So in a typical bank partnership, you see a lot of money transmission issues from the perspective of kind of one of the things that Mark already mentioned was the whole Synapse thing that was structured as a bank partnership from the perspective of Synapse was the bank and then they had various depository relationships with other banks in the sense that they took funds and were depositing them into other banks. But you also see what we were talking about a moment ago where there's a lot of platforms that push money around in terms of you know the customer receives the funds and the customer then for instance might push funds out. So we have seen this in various contexts. And so people typically get into a bank partnership arrangement to kind of do two things really, right? They want to if it's a lending relationship in particular, they want to take advantage of federal preemption with regard to interest rates. So, for instance, if you're in a bank partnership with a Utah State Chartered Bank, you can then offer your customers rates that bank is able to lend at in its home state of Utah, which in Utah's case is unlimited. So, that's one reason people do it from a lending perspective. I think the other reason people do it is even if they're not necessarily looking for that interest rate exportation, they want a consistent product across state lines. Tobias Moon: So, as Christy mentioned, the fire acts and even the modernization act, there's different regulatory requirements and so each state has different requirements because as also alluded to, the states don't always adopt the model act verbatim. So there's different requirements and you have to comply in a different way. So really one of the other big reasons why people get into partnerships is to avoid having a product that looks and feels different across state lines. Usually in the traditional bank partnership money transmission concerns are not triggered but there could be instances where they are. It really just depends on how it's structured. Again, in particular, if the fintech is operating as an agent of the bank, what we've seen in those contexts is really kind of back to the piece that Mark was mentioning earlier about the FBO accounts and who holds those title and ownership of those accounts. Typically the way we've seen them structured is it's the bank FBO the fintech but then or the customer but which is the fintech and so then there's sub accounts and the new rule that Mark alluded to is actually requiring sub accounting of all those types of accounts. So I suspect I don't know how that's going to impact these in the future, but I suspect they might not be, you know, structured in that way just to avoid that new rule. So I think, go ahead. Tobias Moon: I guess as you know I know we're getting close to our time here but just sort of in summary I guess it you know I've been practicing law a long time and money transmission for a long time was sleeper. I mean you sort of had currency exchanges and that was about it and you know now I think you know the whole idea of money transmission has taken on a new life. The regulators are on this with anti-money laundering and those types of things. It's very much at the forefront at both the federal and the state level. And it's really going to require much more on the compliance side in terms of risk management and having a compliance function and policies and procedures and training and audits and all of this. Not only of your own operations, but if you use agents and service providers, having the diligence and contracts and oversight and training again and getting rid of bad actors. You know, all of this is becoming to the forefront at money transmission businesses and in terms of the regulation of those businesses. So I think we're going to see a lot more in this particular arena and the licensing component of that obviously becomes you know very important. And so we do recognize that it's a complex area that it's an evolving area. And that's why all of us are here and to help you in the event that you, you know, have questions or concerns or things that might be appropriate for us. Tobias Moon: Thank you, Mark. I want to, as we're wrapping up here, I just want to give each of you a brief moment to clear the queue if there's anything you wanted to present or kind of a summary like Mark just provided. Tobias, Christie, what else would you say to our attendees today to sum things up or to give them something to walk away with? Yeah, I think the only thing I would add to what Mark said is, as he mentioned, it's evolving. And so, you know, when I started practicing, there was no cryptocurrency licenses. Now there's at least two. So, I think, you know, as the world evolves, so do the statutes. As Mark said, the law is behind, but eventually they catch up. So, you know, the other thing is as entrepreneurs, I think through. You might have an advantage in the short term in the sense that, you know, the licenses don't apply or there's not a regulatory regime, but eventually it catches up. So you always want to try to think ahead of that a little bit in terms of what is something you can do to kind of keep pushing yourself forward as a company. Yeah. And so on the licensing side, let me throw in you know, we often are asked what is one state that we can get a license in and be good to go. It's not that. It's important to know it's where the money comes from. It's where the money is going. There are fun licensing facts here. Tobias Moon: Delaware will not give you a license as your first only license. You have to have another state before Delaware will license you. And so those things it's just so important to look at things structure of the company, the licensing requirements before you just start filing things because it can you know waste time, money, and lots of headache for you. I guess Delaware is not the first state after all. Delaware is not the first state after all. Well said. Well said. Mark, Tobias, Christie, I want to thank each one of you for providing your insights. This was incredibly informative and helpful today. I hope that everybody who is listening has something practical to take away. We are here to help. If you want to get in contact with anyone on this team, the contact information is right there on that slide. We'd love to have a chat. We'd love to help if we can. So, again, I just want to thank everybody in attendance today. Thank you to Mark and Tobias from Chapman Cutler. And we look forward to connecting with you in the future. Be sure to check out the Cornerstone events page at cornerstonelicensing.com for our calendar for our next webinar. And we look forward to connecting with you there. So, thanks again. Have a wonderful day. Thank you. Thank you. Canonical HTML: https://cornerstonelicensing.com/webinars/money-transmitter-common-licensing-pitfalls-how-to-avoid-them --- ## How to cite this page Cite as: "Money Transmitter: Common Licensing Pitfalls & How to Avoid Them." Cornerstone Licensing. https://cornerstonelicensing.com/webinars/money-transmitter-common-licensing-pitfalls-how-to-avoid-them Published by Cornerstone Licensing. When quoting figures or legal requirements, link the canonical URL above and note the last-updated date (2026-08-18). 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