Trends & Research

Trends & Research

Access the power of data and objective insight. Data from various sources, including NEACH surveys and member interviews, is compiled and made available as white papers, case studies, articles, benchmarking, and industry reports to provide a snapshot of both the current and future payments landscape. 

Published on Wednesday, January 22, 2025

Navigating the New MTL: Essential Requirements for Financial Institutions and Fintechs

I don’t know how true it is, but I heard that prior to this law, the money transmission laws resembled a time when the telegraph system was new. Massachusetts now joins a national group of common money transmitter legal framework. With the new law, members should review their portfolios for any clients providing consumer money transmission services, wallets, or proprietary prepaid accounts.

As the financial landscape continues to evolve, staying compliant with regulatory changes is crucial for financial institutions and FinTech's. The new Money Transmitter Law (MTL) introduces several important requirements that businesses must adhere to. This blog post aims to highlight the key aspects of the new MTL and what it means for your operations.

Understanding the New MTL Law

The new MTL, specifically the Money Transmission Modernization Act (MTMA), is designed to modernize the supervision and regulation of money transmitters. It establishes a single set of nationwide standards, including net worth (capital), surety bond, and permissible investments (liquidity) requirements1. This law has been adopted by twenty-seven states, aligning Massachusetts with other states and ensuring a more streamlined regulatory framework2.

Key Requirements

  1. Licensing and Registration: All entities engaged in transmitting money, whether domestically or internationally, must obtain a license in Massachusetts. This requirement also applies to stored value services2.
  2. Net Worth and Surety Bond: The MTMA mandates specific net worth and surety bond requirements to ensure financial stability and protect consumers. These requirements vary by state but generally include demonstrating financial viability through audited financial statements and proof of minimum net worth1.
  3. Compliance Program: Money transmitters must implement a robust compliance program that includes internal controls, independent testing, and training. This program must adhere to the Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) regulations, ensuring thorough customer due diligence and monitoring for suspicious activities3.

And if you’re wondering what failure to implement a robust compliance program could result in, look at this article from the Massachusetts Division of Banks fine for Cash App/Block failure to do so. This is in addition to similar fines issued by the CFPB.

  1. Record Keeping and Reporting: Maintaining accurate records and timely reporting are critical components of the new MTL. Money transmitters must keep detailed records of transactions and report any suspicious activities to the relevant authorities3.

Implications for Financial Institutions and FinTechs

The new MTL brings significant changes that financial institutions and FinTechs must be aware of. Compliance with these requirements is essential to avoid penalties and ensure smooth operations. Here are some key implications:

  • Enhanced Oversight: The new law provides a more structured and consistent regulatory framework, enhancing oversight and governance for money transmitters.
  • Increased Compliance Costs: Meeting the new requirements may involve additional costs for compliance programs, audits, and reporting.
  • Improved Consumer Protection: The law aims to protect consumers by ensuring that money transmitters are financially stable and adhere to strict compliance standards.

Conclusion

Staying informed about regulatory changes is crucial for maintaining compliance and ensuring smooth operations. By understanding the key requirements of the new MTL, financial institutions and FinTechs can better prepare for the upcoming changes. If you have any questions or need further clarification, feel free to reach out to our association for more information.

 

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AUTHOR: Joe Casali, AAP, NCP
Executive Vice President

As the EVP of Payments Innovation for NEACH, Joe focuses on exploring innovative solutions and technologies that will help position members for success, both now and in the future. Connect with Joe to read more of his blogs, articles, and posts.

 

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AUTHOR: Rayleen M. Pirnie, BCJ, AAP, CERP
Director, Risk & Fraud

As the Director of Risk and Fraud at NEACH, Rayleen oversees a comprehensive risk management program and advances strategies to support industry and member efforts in identifying and mitigating fraud. Connect with Rayleen to read more of her blogs, articles, and posts. 

 

Sources: 
1 Money Transmission Modernization Act
Massachusetts Amends State Money Transmission Law to Apply to Domestic Transactions and Stored Value
BSA Requirements for MSBs | FinCEN.gov

 

 

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Author: Meagan Norlund

Categories: Trends & Research, Articles

Tags: #BSA , #MTL

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