Money transmitter licensing tips for FinTechs

July 27, 2022

Obtaining a large number of money transmitter licenses can be a daunting feat to achieve. We have worked with multiple teams over the last several years, all teams wanted to acquire multiple money transmitter licenses as quickly as possible. We learned that certain actions resulted in smoother application processing than others.  In this blog, we will share the top 5 areas that if focused on will contribute to a streamlined, faster, and more cost-effective application experience for your team,  

1. MMLA is the fastest Route

The Multistate MSB Licensing Agreement Program was established to create a more streamlined and efficient MSB licensing process among state regulators. To feel the maximum benefit of this program, the program is recommended for those interested in pursuing 5 or more licenses at one time.  Although the program does not cover all US jurisdictions, it does cover well over 50% and is worth checking into if you would like to add more than 5 licenses over a 6-month time period. For more information view the NMLS - Multistate MSB Licensing Agreement Program FAQ.

2. A Comprehensive Business Plan = faster application review

We have worked with teams that made the mistake of drafting very narrow-focused business plans with little to no elaboration of key concepts included. The reality is, that if you don’t provide the state with adequate information within the business plan, the state will request more details. These back-and-forth communications can quickly add weeks and in worst cases months to your application approval timeline.  When drafting your business plan ensure you capture adequate details in these key areas (1) flow of funds, (2) marketing strategy, (3) any co-branding or joint service agreements, (4) management/organization structure, (5) product/service parameters, and (6) the fee schedule. 

3. Know Your Control Person (s) (KYC.P)

All control persons are required to be disclosed within the licensing application. Although each jurisdiction has a bit of variance in how the control person is defined; a general rule of thumb that works for all US jurisdictions is, if the person owns 10% or more equity (directly or indirectly), holds an officer title within the company, or has the power to make strategic decisions such as entering into contracts on behalf of the licensee, that person is likely a control person. 

If applying for licenses using the MMLA track, all control persons will be required to complete the MU2 form. Control persons should be prepared to disclose their 10-year work history, 10-year residential history, submit fingerprints, credit checks, background checks, and complete financial disclosure questions. 

4. Use a Combo Foreign Registration and Registered Agent Service

Obtaining a registered agent and completing a foreign entity registration in each jurisdiction you are seeking a license is a prerequisite to the licensing application. To save time and expense we recommend working with an agency that specializes in full US jurisdiction registered agent and business entity formation services. Working with a law firm to complete this step is often unnecessarily expensive and produces slower results than business registration agencies.

5. Be prepared with Financial Statements

Most jurisdictions only require internally prepared financial statements (P/L and BS), however, there are a handful of jurisdictions that require audited financials, even for start-ups under one-year-old. From start to finish financial audits typically take three months to complete, but if not considered prior to assembling the licensing applications, this deliverable can become a major roadblock. 

Final Thoughts 

Licensing requires a significant investment of time, capital, and work hours to achieve. We have only covered the top 5 areas that if not addressed properly can derail your license approval timeline by months. There are additional areas to consider such as IT audit and risk assessment requirements in states like Texas, Surety Bond requirements in over 70% of jurisdictions, and Compliance Policies and Consumer disclosures. 

Before you make the leap into a licensing exercise, we recommend you consult with a team that has in-depth experience with your business model, product type (fiat or crypto), and will partner with you to craft a custom strategy that aligns with your operational milestones. If you need assistance developing your licensing strategy our team is ready to take your call.