New York Money Transmitter Bond: A Comprehensive Guide
August 3, 2021
This guide provides information for insurance agents to help their customers obtain New York Money Transmitter Bonds
At a Glance:
- Average Cost: Between 1.5% to 7.5% of the bond amount per year based on the applicant’s credit
- Bond Amount:
- $500,000 for money transmitters who deal strictly in New York payment instruments
- $750,000 for money transmitters who deal in New York travelor’s checks
- Who Needs it: All money transmitters operating in New York
- Purpose: To ensure the public will receive compensation for any damages should the money transmitter violate licensing law
- Who Regulates Money Transmitters In New York: The New York Department of Financial Services
Background
New York statute 641 requires all money transmitters operating in the state to obtain a license with the Department of Financial Services. The New York legislature enacted the licensing laws and regulations to ensure that money transmitters engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, money transmitters must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the New York Money Transmitter Bond?
New York requires money transmitters to purchase a surety bond as part of the application process to obtain a business license. The bond ensures that the public will receive compensation for financial harm if the money transmitter fails to comply with the regulations set forth in New York Banking Code article 13-B. Specifically, the bond protects the public in the event the money transmitter engages in any acts of fraud or fails to transmit money owed to consumers. In short, the bond is a type of insurance that protects the public if the money transmitter breaks licensing laws.
How Can an Insurance Agent Obtain a New York Money Transmitter Surety Bond?
BondExchange makes obtaining a New York Money Transmitter Bond easy. Simply login to your account and use our keyword search to find the “money” bond in our database. Don’t have a login? Enroll now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email or chat from 7:30 AM to 7:00 PM EST to assist you.
At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.
Is a Credit Check Required for the New York Money Transmitter Bond?
Surety companies will run a credit check on the owners of the money transmission company to determine eligibility and pricing for the New York Money Transmitter bond. Owners with excellent credit and work experience can expect to receive the best rates. Owners with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the owner’s credit.
How Much Does the New York Money Transmitter Bond Cost?
The New York Money Transmitter Bond can cost anywhere between 1.5% to 7.5% of the bond amount per year. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. The chart below offers a quick reference for the approximate bond cost on both the $500,000 and $750,000 bond requirements.
$500,000 Money Transmitter Bond Cost
| Credit Score | Bond Cost (1 year) |
|---|---|
| 800+ | $7,500 |
| 650 – 799 | $10,000 |
| 600 – 649 | $20,000 |
| 550 – 599 | $37,500 |
$750,000 Money Transmitter Bond Cost
| Credit Score | Bond Cost (1 year) |
|---|---|
| 800+ | $11,250 |
| 650 – 799 | $15,000 |
| 600 – 649 | $30,000 |
| 550 – 599 | $56,250 |
How Does New York Define “Money Transmitter?”
New York statute 640 defines a money transmitter as any business entity who sells or issues checks or who receives money for transmission. Banking institutions are exempt from this definition.
How do Money Transmitters Apply For a License in New York?
Money transmitters in New York must navigate several steps to secure their license. Below are the general guidelines, but applicants should refer to the NMLS’s application guidelines for details on the process.
License Period – The New York Money Transmitter License expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
Money transmitters must purchase and maintain a surety bond with the following limit:
-
- $500,000 for money transmitters who deal strictly in New York payment instruments
- $750,000 for money transmitters who deal in New York travelor’s checks
Step 2 – Request a NMLS Account
The New York Money Transmitter License application is submitted electronically through the Nationwide Multistate Licensing System (NMLS). To submit a license application, applicants must first request to obtain an NMLS account.
Step 3 – Complete the Application
All New York Money Transmitter License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
-
- Audited company financial statements prepared by a CPA
- Names and locations of all company authorized agents
- The following company contacts:
- Primary
- Primary consumer complaint
- Accounting
- Licensing
- Consumer Complaint (Public)
- Consumer Complaint (Regulator)
- Legal
- Pre-Exam Contact
- Bank account information on all accounts that are used for money transmission purposes and to extend credit
- Disclosure questions
- Company’s FinCEN registration confirmation number and filing date
- Company’s AML/BSA policy
- Company’s IT policies and procedures
- Business plan the company intends to employ
- Certificate of Good Standing
- Agent and correspondent policies
- Samples of documents used when dealing with New York consumers
- Flow of funds structure
- Company formation documents
- Company formation documents
- Organizational chart detailing the company’s ownership structure
- List of all company permissible investments
- Personal financial statements of all individuals with a 10% ownership interest or higher
- Authority to release information form (per control person)
Money transmitters must pay the following fees when submitting their license application:
-
- $3,000 application fee
- $15 credit report fee (per person)
- $0.25 annual fee, to a maximum of $25,000, for all company authorized agents (the first 100 agents are exempt from this requirement)
How Do New York Money Transmitters Renew Their License?
Money transmitters can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The New York Money Transmitter License expires on December 31 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the New York Money Transmitter License?
New York does not require money transmitters to purchase any form of liability insurance as a prerequisite to obtaining a business license. Money transmitters must purchase and maintain a surety bond with the following limit:
- $500,000 for money transmitters who deal strictly in New York payment instruments
- $750,000 for money transmitters who deal in New York travelor’s checks
How Do New York Money Transmitters File Their Bond?
New York money transmitters should submit the completed bond form, including the power of attorney, electronically through the NMLS. Additionally, money transmitters will need to mail a physical copy of their completed surety bond to the following address:
New York State Department of Financial Services
1 State Street
New York, NY 10004-1511
The surety bond requires signatures from both the surety company that issues the bond and a representative from the money transmission company. The surety company should include the following information on the bond form:
- Name and address of entity/individual(s) buying the bond
- Surety company’s name and address
- Date the bond is signed
- Date the bond goes into effect
What Can New York Residential Money Transmitters Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, money transmitters in New York must follow all license regulations in the state, including some of the most important issues below that tend to cause claim
- Do not engage in any acts of fraud
- Do not breach any contracts made with consumers
- Transmit all money owed to consumers
What Other Insurance Products Can Agents Offer Money Transmitters in New York?
New York does not require money transmitters to purchase any form of liability insurance as a prerequisite to obtaining a business license. However, most reputable businesses will seek to obtain this insurance anyway. Bonds are our only business at BondExchange, so we do not issue liability insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.
How Can Insurance Agents Prospect for New York Money Transmitter Customers?
The NMLS conveniently provides a public database to search for active money transmitters in New York. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.
