Arizona Money Transmitter Bond: A Comprehensive Guide
March 9, 2021
This guide provides information for insurance agents to help money transmitters obtain Arizona Money Transmitter Bonds
At a Glance:
- Average Cost: Between 1% to 12.5% of the bond amount per year based on the money transmitter’s credit
- Bond Amount: Based on the money transmitter’s number of authorized delegates and Arizona locations:
Table 1.1
| Number of Authorized Delegates & Arizona Locations | Bond Amount |
|---|---|
| 0 – 5 | $25,000 |
| 6 – 20 | $100,000 |
| 21 – 200 | $100,000 + $5,000.00 for each delegate or location. Max of $250,000 |
| 200+ | $250,000 + $5,000.00 for each delegate or location. Max of $500,000 |
- Who Needs It: All individuals and business entities seeking to obtain a money transmitter license in the State of Arizona
- 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 Arizona: The Arizona Department of Insurance and Financial Institutions
Background
Arizona Statute 6-1202 requires money transmitters operating in the state to obtain a license with the Department of Insurance and Financial Institutions. The Arizona 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 money transmitter surety bond (limits outlined in Table 1.1) to be eligible for licensure.
What is the Purpose of the Arizona Money Transmitter Surety Bond?
Arizona requires money transmitters to purchase a surety 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 money transmitter fails to comply with the licensing regulations. 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 an Arizona Money Transmitter Surety Bond?
BondExchange makes obtaining an Arizona 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 Arizona Money Transmitter Bond?
Surety companies will run a credit check on the owners of the money transmission business to determine eligibility and pricing for the Arizona 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 Arizona Money Transmitter Bond Cost?
The Arizona Money Transmitter surety bond can cost anywhere between 1% to 12.5% 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 $100,000 bond requirement.
$100,000 Money Transmitter Surety Bond Cost
Table 1.2
| Credit Score | Bond Cost (1 year) |
|---|---|
| 720+ | $1,000 |
| 680 – 719 | $1,500 |
| 650 – 679 | $2,000 |
| 600 – 649 | $4,000 |
| 550 – 599 | $7,500 |
| 500 – 549 | $12,500 |
*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 Arizona Define “Money Transmitter”?
Arizona Statute 6-1201 defines a money transmitter as any business entity who engages in one or more of the following activities:
- Sells or issues payment instruments.
- Engages in the business of receiving money for the transmission of or transmitting money.
- Engages in the business of exchanging payment instruments or money into any form of money or payment instrument.
- Engages in the business of receiving money for obligors for the purpose of paying that obligor’s bills, invoices or accounts.
How Do Money Transmitters Apply for a License in Arizona?
Money transmitters in Arizona must navigate several steps to secure their money transmitter license. Below are the general guidelines, but applicants should refer to the licensing statutes for details on the process.
License Period – The Arizona Money Transmitter License expires on November 1 of each year and must be renewed before the expiration date
Step 1 – Meet the Net Worth Requirements
Applicants for the Arizona Money Transmitter License must first amass a company net worth (assets – liabilities) of at least $100,000. Money Transmitters must submit audited financial statements verifying their net worth when submitting their license application.
Step 2 – Purchase a Surety Bond
Money Transmitters must purchase and maintain a money transmitter surety bond (limits outlined in Table 1.1)
Step 3 – Request a NMLS Account
The Arizona 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 Arizona Money Transmitter License applications must be completed online through the NMLS. Applicants must complete entire the application, and submit the following items:
-
- Audited financial statements indicating a net worth of at least $100,000
- A list of all authorized agents and their locations
- FBI background check authorization
- A Certificate of Good Standing which can be obtained from the Arizona Corporation Commission
Step 5 – Pay Fees
Applicants for the Arizona Money Transmitter License must pay the following fees when submitting their license application:
-
- $1,500 application fee
- $36.25 background check fee
- A licensing fee dependent on the month the license is issued:
Table 1.3
| Month the License is Issued | Licensing Fee |
|---|---|
| Nov, Dec, Jan | $500 |
| Feb, Mar, Apr | $375 |
| May, Jun, Jul | $250 |
| Aug, Sep, Oct | $125 |
How Do Arizona 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 Arizona Money Transmitter License expires on November 1 of each year and must be renewed before the expiration date.
What Are the Insurance Requirements for the Arizona Money Transmitter License?
The State of Arizona does not require money transmitters to obtain any form of liability insurance as a prerequisite to obtaining a Money Transmitter License. Money transmitters must purchase and maintain a money transmitter surety bond.
How Do Arizona Money Transmitters File Their Bond?
Money 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
- Bond amount
- License Type (debt management)
- Date the bond goes into effect
What Can Businesses Do to Avoid Claims Against the Arizona 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
- 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 Arizona?
Arizona 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 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 Arizona Money Transmitter Customers?
Arizona 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.
