Pennsylvania Money Transmitter Bond: A Comprehensive Guide

August 17, 2021

This guide provides information for insurance agents to help their customers obtain Pennsylvania Money Transmitter Bonds

At a Glance:

• Average Cost: Between $15,000 to $75,000 per year based on the applicant’s credit
• Bond Amount: $1 million
• Who Needs it: All money transmitters operating in Pennsylvania
• Purpose: To ensure the public will receive compensation for any damages should the money transmitter violate licensing law
• Who Regulates Money Transmitters In Pennsylvania: The Pennsylvania Department of Banking and Securities

Background

The Pennsylvania Money Transmitter Act requires all money transmitters operating in the state to obtain a license with the Department of Banking and Securities. The Pennsylvania 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 $1 million surety bond to be eligible for licensure.

What is the Purpose of the Pennsylvania Money Transmitter Bond?

Pennsylvania 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 the Pennsylvania Money Transmitter Act. Specifically, the bond protects the public in the event the money transmitter engages in any acts of fraud or fails to transmit funds 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 Pennsylvania Money Transmitter Surety Bond?

BondExchange makes obtaining a Pennsylvania 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 Pennsylvania 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 Pennsylvania 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 Pennsylvania Money Transmitter Bond Cost?

The Pennsylvania Money Transmitter Bond can cost anywhere between $15,000 to $75,000 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 the $1 million bond requirement.

$1 Million Money Transmitter Bond Cost

How Does Pennsylvania Define “Money Transmitter?”

To paraphrase the Pennsylvania Money Transmitter Act, a money transmitter is any business entity who transmits money through a transmittal instrument on behalf of consumers.

How Do Money Transmitters Apply for a License in Pennsylvania

Money transmitters in Pennsylvania 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 Pennsylvania Money Transmitter License expires on December 31 of each year and must be renewed before the expiration date

Step 1 – Meet the Net Worth Requirements

Applicants for the Pennsylvania Money Transmitter License must have a company net worth (assets – liabilities) of at least $500,000. Applicants must submit audited company financial statements, prepared by a CPA, verifying their net worth when submitting their license application.

Step 2 – Purchase a Surety Bond

Money transmitters must purchase and maintain a $1 million surety bond

Step 3 – Request a NMLS Account

The Pennsylvania 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 4 – Complete the Application

All Pennsylvania 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 indicating a tangible net worth of at least $500,00
  • Locations of all company authorized agents
  • The following company contacts:
    • Primary
    • Primary consumer complaint
    • Exam Billing
    • Consumer Complaint (Regulator)
    • Pre-Exam Contact
  • Company’s FinCEN confirmation number and filing date
  • Account information for all company clearing accounts as well as depositories in Pennsylvania
  • Disclosure questions
  • Companies independently reviewed AML/BSA policy
  • Company business plan containing the following information:
    • Marketing strategies
    • Products
    • Target markets
    • Fee schedule
    • Operating structure
    • How money will be collected
    • Records collection and retention
    • Operating budget
  • Certificate of authority (if incorporated in a different state)
  • Company staffing and internal policies
  • Samples of all company forms and transmittal instruments used throughout the regular course of business
  • Flow of funds structure
  • Company formation documents
  • Company management and organizational charts
  • Policies and procedures used for agent review and training
  • Sample written agreement used with company agents
  • List of all money transmission business conducted in PA before licensure
  • Tax certification
  • Individual tax certifications for all control persons

Money transmitters must pay the following fees when submitting their license application.

• • $5,000 license fee
  • $22 background check fee (per person)
  • $15 credit report fee (per person)
  • $0.25 annual fee per authorized agent (the first 100 agents are exempt)

How Do Pennsylvania 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 Pennsylvania 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 Pennsylvania Money Transmitter License?

Pennsylvania 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 $1 million surety bond.

How Do Pennsylvania Money Transmitters File Their Bond?

Money transmitters should submit the completed bond form, including the power of attorney, electronically through the NMLS. 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, address, and phone number of entity/individual(s) buying the bond
• Surety company’s name, address, and phone number
• Bond amount
• Date the bond goes into effect
• Date the bond is signed

What Can Pennsylvania Money Transmitters Do to Avoid Claims Against Their Bond?

To avoid claims on their bond, money transmitters in Pennsylvania must ensure that they follow all license regulations in the state, including some of the most important issues below that tend to cause claims:

• Do not engage in any acts of fraud
• Do not breach any contracts made with consumers
• Pay all required taxes and fees

What Other Insurance Products Can Agents Offer Money Transmitters in Pennsylvania?

Pennsylvania 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 other types of 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 Pennsylvania Money Transmitter Customers?

The NMLS conveniently provides a public database to search for active money transmitters in Pennsylvania. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.