Relating to money transmission services

The bill defines the terms “acting in concert”, “average daily money transmission liability”, “Bank Secrecy Act”, “closed loop stored value”, “eligible rating”, “eligible rating service”, “federally insured depository financial institution”, “in this state”, “individual”, “key individual”, “material litigation”, “MSB accredited state”, “nationwide multistate licensing system” (NMLS), “outstanding money transmission obligations”, “passive investor”, “payroll processing services”, “receipt”, “receiving money for transmission”, “remit”, and “tangible net worth”. The bill modifies the definitions for “control”, “money”, “money transmission”, “payment instrument”, “person”, and “stored-value”. The bill deletes various definitions. The bill provides that the superintendent may require a person to provide documentation demonstrating their exemption from licensing requirements. Under the bill, exemptions are expanded to include additional activities and entities, including certain persons that act as intermediaries by processing payments, a person appointed as an agent of the payee to collect and process payments from a payor to the payee provided certain requirements, an individual employed and supervised by an exempted entity, a third-party service provider or agent under certain conditions, and a person exempt by regulation. The bill authorizes a superintendent to enter into agreements or relationships with other regulatory entities to improve efficiencies, utilize software or other processes for investigation purposes, accept reports from other government entities, and accept audit reports. The superintendent has the authority to enforce the bill and promulgate related rules. The bill requires that certain financial, identification-related, investigation-related, and other relevant information remain confidential. Exceptions include sharing information for the public interest, where the superintendent may disclose otherwise confidential information. The release of nonconfidential information shall include specific limited identifying information. The bill allows for the superintendent to supervise and conduct examinations or investigations regarding the acquisition of a license for conducting money transmission services. A licensee or authorized delegate shall provide the superintendent with relevant documents regarding that examination or investigation. The bill provides that the superintendent shall coordinate and effectively participate in relevant multistate networks. The bill designates federal law to preempt state money transmission law where there are inconsistencies between the two. The bill prohibits a person from engaging in the business of money transmission or advertising, soliciting, or holding itself out as providing money transmission unless they are licensed under the provisions of the bill, an authorized delegate, or fall under an exception. The bill encourages consistent state licensing and utilization of NMLS. The superintendent is authorized and encouraged to implement licensing provisions in a manner that is consistent with other states or multistate licensing process, and participate in national licensing cooperation protocols. The superintendent is authorized and encouraged to build relationships or contracts with NMLS to help the superintendent maintain records, coordinate multistate efforts, process fees, and facilitate communication. The superintendent should use NMLS forms where available, and where unavailable, create forms that facilitate uniformity. The superintendent may waive or modify requirements to participate in the NMLS. The bill provides for an application for a license. The superintendent shall create an application form. An application for a license shall contain specified information, including criminal convictions, a description of previous money transmission services, a list of proposed authorized delegates and locations for money transmission, other states in which the applicant is currently engaging in money transmission, as well as disciplinary actions, and bankruptcy disclosure. If the applicant is a corporation, LLC, partnership, or other legal entity, additional information is required to be included on the application, including audits, dates of incorporations, parent and subsidiary companies, and trading information. An applicant shall be charged an application fee of $1,000 which shall be refunded upon rejection of an application. The bill establishes a license fee in the amount of $500 plus $10 per location in Iowa in which business is conducted, or set by the superintendent if there is no location, but not to exceed $5,000. No refund of a license fee shall be made upon a license suspension, revocation, or surrender. The bill provides that any individual in control of a licensee, applicant, or individual seeking to acquire control of a licensee, and each key individual shall provide the superintendent with information, including fingerprints, a credit report, and relevant litigation. The bill allows for different information based on an applicant’s residence. The bill provides for the issuance of licenses. An applicant must comply with provisions of the bill to be approved for a license. The superintendent may extend a 120-day period of application review for good cause. The superintendent can rely on other multistate license procedures for application purposes. The superintendent shall provide written notice of denial of an application and include specific reasons for the denial. The bill allows a license to be renewed annually. The cost of the renewal fee shall correspond to the initial licensure fee. No refund of a license fee shall be made upon a license suspension, revocation, or surrender. A renewal report created by the superintendent shall be filed annually with the licensee’s renewal fee. If the licensee does not file a renewal report by the set deadline, the superintendent may charge a $100 per day late fee. The bill provides for acquisition of control of a licensee. Individuals seeking to acquire control of a licensee shall obtain written approval of the superintendent prior to acquisition and complete an application in a form created by the superintendent. A person is presumed to exercise a controlling influence when the person holds the power to vote, directly or indirectly, at least percent of the outstanding voting shares or voting interests of a licensee or person in control of a licensee. Individuals seeking acquisition shall submit a $1,000 fee with an application for acquisition. The superintendent shall approve or deny the application. The superintendent can rely on other multistate license procedures for application purposes. The superintendent shall provide written notice of denial of an application and include specific reasons for the denial. A person may request a determination from the superintendent regarding control prior to filing an application. The bill requires notice regarding a change of key individuals. The superintendent may issue a notice of disapproval within days of receiving the notice of the change and shall contain a statement on the basis of disapproval. The bill requires a licensee to conduct a background check, provide written policies, and comply with requirements of the bill before an authorized delegate can act on the licensee’s behalf. An authorized delegate shall act in full compliance with the bill’s provisions. An authorized delegate and licensee shall sign a written contract containing provisions related to the scope of the relationship and requirements of each party. If the licensee’s license is suspended, revoked, surrendered, or expired, the licensee shall provide documentation to the superintendent within five business days that the licensee has notified all applicable authorized delegates, and delegates shall immediately cease to provide money transmission as an authorized delegate of the licensee. The bill prohibits a person from engaging in money transmission on behalf of an unlicensed person. The bill requires a quarterly report by a licensee within days of the close of a quarter. The report shall include financial information, state and national transaction information, permissible investment information, and additional information. The bill requires an annual audited financial statement from a licensee within days of the end of each fiscal year. A licensee shall be required to file a quarterly report of authorized delegates within days of the close of a quarter. The bill requires a licensee to file a report and submit a payment of $1,000 within one business day regarding bankruptcy, receivership, dissolution, reorganization, revocation, or suspension events. A licensee is required to file a report within three business days in events regarding a felony charge or conviction of the licensee, a key individual or person in control of the licensee, or an authorized delegate. §5311. The bill requires licensees to maintain records, inside or outside of the state, for compliance determination. This includes ledgers, bank statements, records of obligations, lists of names, and information the superintendent requires. The bill includes prohibitions on disclosure and disclosure allowances. A superintendent’s records relating to examinations, supervision, or regulation of a licensed individual or authorized delegate are not considered public records and are not subject to disclosure. The bill provides for exceptions to when information may be disclosed to certain parties. The bill requires that a licensee transmit money in a timely manner unless there is a valid reason to abstain. The bill requires a licensee to refund the sender within days of receipt of a written request for a refund, unless an exception occurs, including belief that a crime or violation of law, rule, or regulation has occurred, is occurring, or may occur. The bill requires every licensee or authorized delegate to provide a sender a receipt for money received for transmission. The receipt shall be communicated in English or the language principally used by the licensee or authorized delegate. The receipt shall contain applicable information, including the name of sender, name of the recipient, the date, and the amount. The bill provides that a licensee providing payroll processing services shall issue reports to clients with details of client payroll obligations and make pay stubs available to workers. Certain licensees providing these services are exempt where the client designated the intended recipients to the licensee. The bill requires a licensee to maintain a tangible amount of net worth at all times.5 percent of additional assets for over $1 billion. Net worth may be demonstrated by the applicant’s most recent audit or unaudited financial statements. The superintendent may exempt any applicant or licensee for good cause. The bill requires an applicant for a money transmission license to maintain a surety bond of 100 percent of the licensee’s average daily money transmission liability for a three-month period, or $100,000, whichever is greater, with a maximum amount of $500,000. A licensee may exceed the maximum amount. The bill requires that a licensee maintain permissible investments of not less than the total amount of all of its outstanding money transmission obligations. Permissible investments shall be held in a trust for the benefit of the purchaser and holder of the licensee’s outstanding money transmission obligation in case of certain financial events. Funds drawn on a letter of credit shall cause a superintendent to notify applicable regulators under specific circumstances. The superintendent may expand the types of investments deemed to be permissible. The bill provides a list of permissible investments by a licensee that have a market value computed in accordance with United States generally accepted accounting principles of not less than the aggregate amount of all of a licensee’s outstanding money transmission obligations. The list of permissible investments includes a specific letter of credit for which the stated beneficiary is the superintendent subject to requirements. The letter of credit shall be irrevocable, unconditional, issued by a federally insured depository financial institution or an authorized foreign bank, not contain reference to other writings or entities, and contain an issue date, expiration date, and an automatic extension subject to change. Upon the expiration or lack of extension, a licensee shall be required to demonstrate sufficient permissible investment amounts. If the licensee cannot show acceptable permissible investments, the superintendent may draw on the letter of credit. The letter of credit shall provide that the issuer of the letter of credit will honor the letter and a written statement from the beneficiary stating that certain significant financial events have occurred. The superintendent may designate an agent to serve as beneficiary to a letter of credit. The bill provides limits for certain investments.904. The Code editor is directed to change the names of articles two through eight of Code chapter 533C.