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ARIZONA HOUSE OF REPRESENTATIVESFifty-fifth Legislature Second Regular Session |
Senate: FIN DPA 8-0-2-0 | 3rd Read 26-1-3-0House: COM DP 9-0-0-1 | 3rd Read 51-7-2-0Final Pass: 27-0-3-0 |
SB 1580: money transmission; money transmitter licensure
Sponsor: Senator Livingston, LD 22
Transmitted to the Governor
Overview
Repeals statute relating to transmitters of money and adopts the Conference of State Bank Supervisors (CSBS) Uniform Money Transmission Modernization Act.
History
CSBS supports state regulators in advancing the system of state financial supervision by ensuring safety and soundness; protecting consumers; promoting economic growth; and fostering innovation and responsive supervision. CSBS provides training, education and other resources to state banking industry professional. According to CSBS, the Money Transmitter Model Law implements clear and consistent standards across the various states.
A person must obtain a money transmitter license from the Department of Insurance and Financial Institutions (DIFI), or be an authorized delegate of a licensee, to provide money transmitter services. Statute allows a corporation or limited liability company that is in good standing under the laws of the state or country of its incorporation or formation, and is authorized to do business in Arizona, to apply for or be issued a money transmitter license. A licensed money transmitter may conduct money transmitter services at one or more locations in Arizona through an authorized delegate (A.R.S. §§ 6-1201 and 6-1202).
Provisions
Money Transmission Laws
1. Repeals laws relating to money transmission and adopts the CSBS Money Transmission Modernization Act. (Sec. 3, 4)
2. Specifies that applicable federal law governs if a state money transmission jurisdiction is conditioned on a federal law in the case of inconsistencies between state and federal law. (Sec. 4)
3. Allows the Director of DIFI (Director), if an inconsistency exists, to provide interpretative guidance that identifies the inconsistency and the appropriate means of complying with federal law. (Sec. 4)
4. Prohibits a person from engaging in the business of money transmission on behalf of an unlicensed or nonexempt person and deems a person that engages in unauthorized activities to be jointly and severally liable with the unlicensed or nonexempt person. (Sec. 4)
5. Requires each licensee to forward all money received for transmission in accordance with the terms of the agreement between the licensee and the sender unless the licensee has a reasonable belief or a reasonable basis to believe that the sender may be a victim of fraud or that a crime or violation of law has occurred, is occurring or may occur. (Sec. 4)
6. Requires a licensee who has failed to forward money received for transmission to respond to inquiries by the sender with the reason for the failure unless providing a response would violate a state or federal law. (Sec. 4)
7. Requires a licensee to refund a sender within 10 days of receipt of a sender's written request for a refund of money received for transmission unless specified conditions apply. (Sec. 4)
8. Excludes, from the refund requirements, money received for transmission that is: a) subject to the federal remittance rules; or b) pursuant to a written agreement between the licensee and payee to process payments for goods or services provided by the payee. (Sec. 4)
9. Requires a licensee or its authorized delegate to provide the sender a specified receipt for money received for transmission and provides requirements for electronic submission. (Sec. 4)
10. Outlines the contents that must be contained in a receipt. (Sec. 4)
11. Outlines exceptions from receipt requirements. (Sec. 4)
12. Instructs the Director to consider the need to promote uniformity among other state's laws on money transmission. (Sec. 4)
Implementation
13. Permits the Director to:
a) enter into agreements or relationships with other government officials or federal and state regulatory agencies in order to improve efficiencies and reduce regulatory burden by standardizing methods or procedures;
b) use, hire, contract or employ analytical systems, methods or software to examine or investigate any money transmission licensee;
c) accept licensing, examination or investigation reports made by other state or federal government agencies or officials; and
d) accept audit reports made by an independent certified public accountant for an applicant or licensee and incorporate the audit in any report of examination or investigation. (Sec. 4)
14. Requires the Director to adopt rules to implement money transmission regulations and allows the Director to impose fees for administration and enforcement. (Sec. 4)
Examinations & Investigations
15. Permits the Director to conduct an examination or investigation and take authorized actions to administer and enforce money transmission laws and other applicable law. (Sec. 4)
16. Requires regulated persons to provide all records the Director may reasonably require to conduct an examination or investigation. (Sec. 4)
17. Permits the Director to use multistate record production standards and examination procedures when the standards reasonably achieve specified requirements. (Sec. 4)
18. Prohibits the Director from waiving the authority to conduct an examination or investigation and take authorized actions to enforce compliance with state or federal law. (Sec. 4)
19. Specifies that a joint examination or investigation, or acceptance of either, does not waive an examination assessment. (Sec. 4)
Multistate Supervision
20. Allows the Director to participate in multistate supervisory processes established between states for all money transmission licensees that hold licenses in Arizona and other states and outlines certain participant responsibilities. (Sec. 4)
Licensure
21. Requires a person to be licensed in order to engage in the business of money transmission or advertise or hold itself out as providing money transmission. (Sec. 4)
22. Specifies persons who may engage in the business of money transmission without a license. (Sec. 4)
23. Specifies a money transmission license is not transferable or assignable. (Sec. 4)
24. Permits the Director to take specified actions to establish consistent licensure between Arizona and other states. (Sec. 4)
25. Allows the Director to establish relationships or contracts with NMLS or other entities designated by NMLS to enable the Director to: a) collect and maintain records; b) coordinate multistate licensing processes and supervisions processes; c) process fees; and d) facilitate communication between Arizona and licenses or other persons subject to money transmission regulation. (Sec. 4)
26. Permits the Director to use NMLS for all aspects of licensure, including forms, processes and functionalities. (Sec. 4)
27. Allows the Director, for participation in the NMLS, to waive or modify, by rule or order, any or all requirements and establish new requirements as reasonably necessary. (Sec. 4)
28. Requires an applicant for licensure to apply to DIFI and pay all applicable nonrefundable fees and outlines the contents of the application. (Sec. 4)
29. Outlines additional requirements for applicants who are a corporation, limited liability company, partnership or other legal entity. (Sec. 4)
30. Permits the Director to waiver application requirements or allow an applicant to submit other information. (Sec. 4)
31. Outlines additional information requirements for specified individuals. (Sec. 4)
32. Allows a person presumed to exercise a controlling influence to rebut the presumption of control if the person is a passive investor. (Sec. 4)
33. Requires an individual, if they have resided outside the United States within the previous 10 years, to provide an investigative background report prepared by an independent search firm that meets outlined requirements. (Sec. 4)
34. Instructs the Director to promptly notify the applicant of the date on which the application is determined to be complete. (Sec. 4)
35. Requires the Director to approve or deny the application within 120 days after the completion date. (Sec. 4)
36. Stipulates if the application is not approved or denied within 120 days: 1) the application is approved; 2) the license is effective on the first business day after the 120-day period; and 3) the Director may extend the period for good cause. (Sec. 4)
37. Specifies the Director's determination that an application is complete and accepted means only that the application appears to include all of the required items and is not an assessment of the substance of the application. (Sec. 4)
38. Instructs the Director, upon considering an application complete, to investigate the applicant's financial condition, financial and business experience, character and general fitness. (Sec. 4)
39. Outlines the conditions that must be met for license issuance. (Sec. 4)
40. Allows the Director, if an applicant avails itself or is otherwise subject to a multistate licensing process, to either: 1) accept the applicant investigation results of a lead investigative state; or 2) investigate the applicant if Arizona is the lead investigative state. (Sec. 4)
41. Requires the Director to issue a formal written notice of application denial within 30 days after a denial decision is made and requires the notice to include specific reasons for denial along with appeal information. (Sec. 4)
42. Specifies the initial license term begins on the day the application is approved and expires on December 31 of the year in which the term began unless the initial date is between November 1 and December 31 then the term runs through to December 31 of the following year. (Sec. 4)
43. Requires a license to be annually renewed. (Sec. 4)
44. Requires applicable renewal fees be paid no more than 60 days before the license expires. (Sec. 4)
45. Sets the renewal term as one year, which begins on January 1 of each year after the initial license term and expires on December 31 of the year the renewal term begins. (Sec. 4)
46. Requires a licensee to submit a renewal report with the annual renewal fee and requires the report to specify information that is materially different from the original license application if the licensee has not previously reported the information to the Director. (Sec. 4)
47. Allows a licensee to renew an expired license by January 31 and subjects a licensee to a late fee of $500. (Sec. 4)
48. Permits the Director to use NMLS to process license renewals. (Sec. 4)
49. Requires a money transmission applicant to demonstrate that the applicant meets the net worth, surety bond and permissible investments requirements. (Sec. 4)
License Suspension and Revocation
50. Authorizes the Director to suspend or revoke a license if a licensee fails to continue to meet the qualifications or requirements for a new money transmission license. (Sec. 4)
51. Prescribes the conditions in which the Director may suspend or revoke a license and suspend or revoke the designation of an authorized delegate. (Sec. 4)
52. Allows the Director, in determining whether a licensee or authorized delegate is engaging in an unsafe or unsound practice, to consider the size and condition of the licensee's money transmission, the magnitude of the loss, the gravity of the violation and the previous conduct of the licensee or the authorized delegate. (Sec. 4)
53. Permits the licensee or delegate to appeal a suspension or revocation. (Sec. 4)
Acquisition of Control
54. Requires written approval from the Director prior to acquiring control of a licensee. (Sec. 4)
55. Specifies that an individual is not deemed to acquire control of a licensee and is not subject to acquisition of control requirements when the individual becomes a key individual in the ordinary course of business. (Sec. 4)
56. Provides requirements to acquire control of a licensee. (Sec. 4)
57. Allows the Director, on request, to allow a licensee or the person or group of persons acting in concert seeking to acquire control of a licensee to submit some or all required information without using NMLS. (Sec. 4)
58. Deems an application for acquisition of control complete when it includes all required items. (Sec. 4)
59. Instructs the Director to promptly notify the applicant of the date on which the application was determined to be complete. (Sec. 4)
60. Requires the Director, upon determining the application for acquisition of control is complete, to approval or deny the application within 60 days. (Sec. 4)
61. Stipulates if the application is not approved or denied within 60 days: 1) the application is approved; 2) the person is not prohibited from acquiring control; and 3) the Director may extend the period for good cause. (Sec. 4)
62. Specifies the Director's determination that an application is complete and accepted means only that the application appears to include all of the required items and is not an assessment of the substance of the application. (Sec. 4)
63. Instructs the Director, upon considering an application complete, to investigate the person's financial condition, financial and business experience, character and general fitness. (Sec. 4)
64. Outlines the conditions that must be met for acquiring control. (Sec. 4)
65. Allows the Director, if an applicant participates in a multistate licensing process, to either: 1) accept the investigation results of a lead investigative state; or 2) investigate the applicant if Arizona is the lead investigative state. (Sec. 4)
66. Requires the Director to issue a formal written notice of application denial within 30 days after a denial decision is made and requires the notice to include specific reasons for denial along with appeal information. (Sec. 4)
67. Delineates persons for which the requirements for an application to acquire control do not apply. (Sec. 4)
68. Requires specified individuals to notify the Director within 15 days after the acquisition of control. (Sec. 4)
69. Specifies the requirements for an application to acquire control do not apply to a person that receives approval to engage in money transmission or is identified as a person in control in a prior application if specified conditions are met. (Sec. 4)
70. Allows a person to request a determination from the Director as to whether the person would be considered a person in control of a licensee. (Sec. 4)
71. Allows the Director, if a multistate licensing process includes a control determination, to either: 1) accept the determination of a lead investigative state; or 2) investigate the applicant if Arizona is the lead investigative state. (Sec. 4)
Key Individuals
72. Requires a licensee adding or replacing any key individual to provide: a) notice within 15 days after the effective date of the key individual's addition or replacement; and b) required information within 45 days after the effective date of the key individual's addition or replacement. (Sec. 4)
73. Allows the Director, within 90 days of the key individual's notice of addition or replacement, to issue a notice of disapproval of a key individual if the competence or experience of the individual is not in the best interest of the public or the customers of the licensee. (Sec. 4)
74. Requires a notice of disapproval to contain a statement of the basis for disapproval and to be sent to the licensee and the disapproved individual. (Sec. 4)
75. Allows a licensee to appeal a notice of disapproval. (Sec. 4)
76. Deems a key individual's application to be approved if the provided notice is not disapproved within 90 days of completion. (Sec. 4)
77. Stipulates if a multistate licensing process includes a key individual notice review and disapproval process the Director may: a) accept the determination of another state; or b) investigate the application if Arizona is the lead investigative state. (Sec. 4)
Reports and Audits
78. Requires each licensee to submit a report of condition within 45 days after the end of the calendar or within any extended time as the Director prescribes. (Sec. 4)
79. Outlines the contents of the report of condition. (Sec. 4)
80. Permits the Director to use NMLS for the submission of the report of condition and allows the Director to change or update the reporting requirements to maintain consistency with NMLS reporting. (Sec. 4)
81. Requires each licensee, within 90 days after the end of each fiscal year, to file an audited financial statement prepared by a public accountant and any other information reasonably required by the Director. (Sec. 4)
82. Allows the Director, if the certificate of opinion is qualified, to order the licensee to take any action found necessary to enable the public accountant to remove the qualification. (Sec. 4)
83. Directs each licensee to submit a report of authorized delegates within 45 days after the end of the calendar quarter and outlines information that must be included in the report. (Sec. 4)
84. Provides reporting requirements for a licensee regarding bankruptcy, receivership, revocation or suspension of a license, felony charges or convictions and the Bank Secrecy Act requirements. (Sec. 4)
85. Outlines specified records that must be maintained by a licensee for at least five years. (Sec. 4)
Authorized Delegates
86. Provides responsibilities for a licensee prior to conducting business through an authorized delegate. (Sec 4)
87. Specifies delegates must comply with money transmission laws. (Sec. 4)
88. Delineates the requirements for a written contract between the licensee and the delegate prior to conducting business. (Sec. 4)
89. Requires a licensee, within five days after the license is suspended, revoked, surrendered or expired, to provide documentation to the Director that the licensee has provided notice to all applicable authorized delegates whose names are in a record filed with the Director. (Sec. 4)
90. Requires applicable authorized delegates, on suspension, revocation, surrender or expiration of a licensee's license, to immediately cease to provide money transmission as an authorized delegate of the license. (Sec. 4)
91. Specifies that an authorized delegate of a licensee holds in trust for the benefit of the licensee all money net of fees received from money transmission. (Sec. 4)
92. Requires, if an authorized delegate commingles money transmission monies and other money or property, all commingled money and other property to be considered held in trust in favor of the licensee in an amount equal to the amount of money net of fees received from money transmission. (Sec. 4)
93. Prohibits an authorized delegate from using a subdelegate to conduct money transmission on behalf of a licensee. (Sec. 4)
94. Authorizes the Director to issue an order against the licensee to cease and desist from providing money transmission through an authorized delegate that is in violation of money transmission laws. (Sec. 4)
Net worth, Surety Bond and Permissible Investments
95. Requires a licensee to maintain a tangible net worth of: a) the greater of $100,000 or 3% of total assets for the first $100,000,000; b) 2% of additional assets for $100,000,000 to $1,000,000,000; and c) .5% of additional assets for over $1,000,000,000. (Sec. 4)
96. Requires tangible net worth to be demonstrated at initial application by the applicant's most recent audited or unaudited financial statements. (Sec. 4)
97. Permits the Director to exempt a person from the net worth requirements. (Sec. 4)
98. Requires an applicant for a money transmission license to maintain a surety bond and specifies the requirements for bond amounts. (Sec. 4)
99. Requires a licensee to maintain permissible investments that have a market value of not less than the aggregate amount of all of its outstanding money transmission obligations. (Sec. 4)
100. Allows the Director to limit the extent to which a specific investment may be considered a permissible investment. (Sec. 4)
101. Specifies that permissible investments, even if commingled with other assets of the licensee, are held in trust for the benefit of the purchasers and holders of the licensee's outstanding money transmission obligations in the event of insolvency, bankruptcy, reorganization, receivership or any other judicial or administrative proceeding for its dissolution or reorganization. (Sec. 4)
102. Requires the Director, on the establishment of a statutory trust or when any money is drawn on a letter of credit, to notify the applicable regulator of each state in which the licensee is licensed of the establishment of the trust or the money drawn on the letter of credit. (Sec. 4)
103. Provides regulations for permissible investments held in trust. (Sec. 4)
104. Allows the Director to: a) allow other types of investments that the Director determines are of sufficient liquidity and quality to be a permissible investment; and b) participate in efforts with other state regulators to determine that other types of investments are of sufficient liquidity and quality to be a permissible investment. (Sec. 4)
105. Delineates the types of permissible investments. (Sec. 4)
106. Prescribes requirements for a notice of expiration or nonextension of a letter of credit. (Sec. 4)
107. Permits the Director to: a) designate an agent to serve on the Director's behalf as beneficiary to a letter of credit if the agent and letter of credit meet requirements established by the Director; and b) participate in multistate processes designed to facilitate issuing and administering letters of credit, including services provided by NMLS and a state regulatory registry. (Sec. 4)
Exception
108. Outlines specified individuals or entities who are exempt from money transmission laws. (Sec. 4)
109. Allows the Director to require any person claiming to be exempt from money transmission licensure to provide information and documentation demonstrating qualification for the exemption. (Sec. 4)
Miscellaneous
110. Permits the Deputy Director to require the following individuals to submit a full set of fingerprints and the associated fees to DIFI before receiving a license:
a) any individual in control of a licensee or applicant;
b) any individual seeking to acquire control of a licensee; or
c) each key individual. (Sec. 1)
111. Defines pertinent terms relating to money transmission statutes. (Sec. 4, 6)
112. Removes language relating to a requirement for a licensee, or an authorized delegate, to retain certain records. (Sec. 7)
113. Removes language relating to a requirement for an authorized delegate to maintain any customer identification records. (Sec. 7)
114. Removes the requirement that a notification relating to registering an advanced fee loan broker must be by mail. (Sec. 8)
115. Repeals statute requiring the name and addresses of all registered advanced fee loan brokers be recorded by DIFI. (Sec. 9)
116. Specifies the federal exemption from reporting requirements does not apply to persons who are engaged in the money accumulation business. (Sec. 10)
117. Defines pertinent terms relating to money laundering statutes. (Sec. 10)
118. Exempts a licensed money transmitter from new money transmission statutes if there are conflicts between existing money transmitter statutes until the person renews their license or until six months after the effective date, whichever is later. (Sec. 12)
119. Requires a licensed money transmitter to only amend authorized delegate contracts for contracts entered into or amended after the effective date or after completion of license renewal. (Sec. 12)
120. Makes technical and conforming changes. (Sec. 2, 5, 7, 10, 11)
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SB 1580
Initials PRB Page 0 Transmitted
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