Alaska Money Transmitter Bond: A Comprehensive Guide

February 25, 2021

This guide provides information for insurance agents to help businesses obtain Alaska Money Transmitter Bonds

At a Glance:

• Average Cost: Between 1.5% to 7.5% of the bond amount per year based on the transmitter’s credit
• Bond Amount: $25,000 plus an additional $5,000 for each branch location. The bond amount may not exceed $150,000.
• Who Needs It: All individuals and business entities seeking to obtain a money transmitter license in the State of Alaska
• Purpose: To ensure the public will receive compensation for any damages should the money transmitter fail to comply with licensing law
• Who Regulates Money Transmitters in Alaska: The Alaska Division of Banking and Securities

Background

Alaska Statute 06.55.101 requires money transmitters operating in the state to obtain a license with the Division of Banking and Securities. The Alaska 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 $25,000 money transmitter surety bond (with an additional $5,000 per location, not exceeding $150,000) to be eligible for licensure.

What is the Purpose of the Alaska Money Transmitter Bond?

Alaska requires businesses to purchase the Money Transmitter Bond as part of the application process to obtain a money transmitter license. The bond ensures that the public will receive compensation for financial harm if the transmitter fails to comply with the licensing regulations. In short, the bond is a type of insurance that protects the public if the transmitter breaks licensing laws.

How Can an Insurance Agent Obtain an Alaska Money Transmitter Surety Bond?

BondExchange makes obtaining an Alaska Money Transmitter Surety Bond easy. Simply login to your account and use our keyword search to find the “transmitter” 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 Alaska Money Transmitter Bond?

Surety companies will run a credit check on the owners of the money transmitting company to determine eligibility and pricing for the Alaska Money Transmitter bond. Transmitters with excellent credit and work experience can expect to receive the best rates. Transmitters 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 transmitter’s credit.

How Much Does the Alaska Money Transmitter Bond Cost?

The Alaska Money Transmitter surety 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 the $25,000 bond requirement.

$25,000 Money Transmitter Bond Cost

*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.

How Does Alaska Define “Money Transmission”?

To paraphrase Alaska Statute 06.55.990, money transmission is the act of collecting funds and transmitting them to a third party for payment.

How Do Money Transmitters Apply for a License in Alaska?

Businesses in Alaska must navigate several steps to secure their Money Transmitter license. Below are the general guidelines, but businesses should refer to the Application Form for details on the process.

License Period – The Alaska Money Transmitter License is valid for two years from the date of issuance and must be renewed before the expiration date

Step 1 – Meet the Net Worth Requirements

Applicants for the Alaska Money Transmitter License must first amass a company net worth (assets – liabilities) of at least $25,000. Businesses must submit financial statements verifying their net worth when submitting their license application.

Step 2 – Obtain a Business License

All businesses operating in the State of Alaska must obtain a business license with the Alaska Department of Commerce, Community, and Economic Development. Lenders can obtain a business license here.

Step 3 – Request a NMLS Account

The Alaska Money Transmitter License application is submitted electronically through the Nationwide Multistate Licensing System (NMLS). To submit a license application, lender’s must first request to obtain an NMLS account.

Step 4 – Purchase a Surety Bond

Transmitters must purchase and maintain a $25,000 (with an additional $5,000 per location, not exceeding $150,000) surety bond to be eligible for licensure

Step 5 – Complete the Application

All money transmitter license applications can be completed online through the NMLS. Transmitters must complete the application, including the following steps:

5.a Financial Statement – Transmitters must submit an audited financial statement that has been prepared by a certified public accountant

5.b Business Plan – License applicants are required to submit a business plan indicating the following information:

• • Marketing strategies
  • Products
  • Target markets
  • Fee schedule
  • Operating structure the applicant intends to employ

5.c Fees – Lenders must pay the following fees when submitting their license application:

• • $1,000 license fee plus an additional $200 per additional branch location and $1,000 per internet based location
  • $2,000 application plus an additional $200 per additional internet and physical location
  • $15 credit report fee per control person

5.d Authorized Agents – Transmitters must provide a list of all authorized agents who are permitted to conduct money transmission business on their behalf

5.e Affidavit – Transmitters must submit a completed Money Services Business Affidavit with their license application

How Does an Alaska Money Transmitter Renew Their License?

Money transmitters can renew their license online through the NMLS. Transmitters need to simply login to their account to access their renewal application. The Alaska Money Transmitter License is valid for two years from the date of issuance and must be renewed before the expiration date.

What Are the Insurance Requirements for the Alaska Money Transmitter License?

The State of Alaska does not require money transmitters to obtain any form of liability insurance. Transmitters must purchase and maintain a $25,000 (with an additional $5,000 per location, not exceeding $150,000) surety bond.

How Do Alaska Money Transmitters File Their Bond?

Transmitters should submit the completed bond form, including the power of attorney, electronically through the NMLS. The Money Transmitter surety bond requires signatures from both the surety company that issues the bond and the money transmitter. The surety company should include the following information on the bond form:

• Legal name of entity/individual(s) buying the bond
• Surety company’s name and state of residence
• Bond amount
• Date the bond is signed and goes into effect

If you have any questions regarding the filing process, read our article regarding the NMLS system here

What Can Businesses Do to Avoid Claims Against the Alaska Money Transmitter Bond?

To avoid claims on the Money Transmitter Bond, businesses must follow all license regulations in the state, including some of the most important issues below that tend to cause claims:

• Do not engage, or allow representatives of the business to engage, in any acts of fraud
• Pay taxes and fees on time and in full
• Do not engage in criminal activity such as money laundering
• Ensure the full payment of all funds to users of your service

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

Alaska does not require money transmitters to obtain any form of liability insurance. However, most reputable businesses will seek to obtain this insurance anyway. Bonds are our only business at BondExchange, so we do not issue liability or workers’ compensation 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 Alaska Money Transmitter Customers?

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

What other Financial Service Bonds are Required in Alaska?

Alaska requires businesses to purchase specific bonds correlating with their license type. Below are all the different financial services bonds required by the State of Alaska:

• Deferred Deposit Advance License: $25,000 bond limit
• Collection Agency: $5,000 bond limit
• Mortgage Licensee: $75,000 bond limit