Massachusetts Foreign Transmittal Agency Bond: A Comprehensive Guide

May 24, 2021

This guide provides information for insurance agents to help their customers obtain Massachusetts Foreign Transmittal Agency Bonds

At a Glance:

• Average Cost: Between 1.5% to 7% of the bond amount per year based on the applicant’s credit
• Bond Amount: Minimum of $50,000 (more on this later)
• Who Needs it: All foreign transmittal agencies operating in Massachusetts
• Purpose: To ensure the public will receive compensation for any damages should the foreign transmittal agency fail to comply with licensing law
• Who Regulates Foregin Transmittal Agencies in Massachusetts: The Massachusetts Division of Banks

Background

Massachusetts General Law 45.01 requires all foreign transmittal agencies operating in the state to obtain a license with the Division of Banks. The Massachusetts legislature enacted the licensing laws and regulations to ensure that foreign transmittal agencies engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, foreign transmittal agencies must purchase and maintain a surety bond to be eligible for licensure.

What is the Purpose of the Massachusetts Foreign Transmittal Agency Bond?

Massachusetts requires foreign transmittal agencies 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 foreign transmittal agency fails to comply with the licensing regulations set forth in the Massachusetts money services businesses regulations. Specifically, the bond protects the public in the event the foreign transmittal agency fails to properly hold and transfer all funds received. In short, the bond is a type of insurance that protects the public if the foreign transmittal agency breaks licensing laws.

How Can an Insurance Agent Obtain a Massachusetts Foreign Transmittal Agency Surety Bond?

BondExchange makes obtaining a Massachusetts Foreign Transmittal Agency Bond easy. Simply login to your account and use our keyword search to find the “foreign” 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.

What is the Bond Amount?

Massachusetts general law c.169g s. 2 dictates that the limit on the Foreign Transmittal Agency Bond shall equal twice the average weekly funds deposited with the company by Massachusetts consumers for remittance to foreign countries. The bond limit shall not be less than $50,000, and first time license applicants will have a $50,000 bond requirement.

Is a Credit Check Required for the Massachusetts Foreign Transmittal Agency Bond?

Surety companies will run a credit check on the owner’s of the foreign transmittal agency to determine eligibility and pricing for the Massachusetts Foreign Transmittal Agency 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 Massachusetts Foreign Transmittal Agency Bond Cost?

The Massachusetts foreign transmittal agency surety bond can cost anywhere between 1.5% to 7% 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 a $50,000 bond requirement.

$50,000 Foreign Transmittal Agency 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 Massachusetts Define “Foreign Transmittal Agency?”

To paraphrase Massachusetts general law 45.02, a foreign transmittal agency is any business entity that receives funds and transmits them to foreign countries.

How do Foreign Transmittal Agencies Apply for a License in Massachusetts?

Foreign transmittal agencies in Massachusetts 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 Massachusetts Foreign Transmittal Agency 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 Massachusetts Foreign Transmittal Agency License must have a positive company net worth (assets – liabilities). Applicants must submit an audited or reviewed financial statement, prepared by a CPA, verifying their net worth when submitting their license application.

Step 2 – Purchase a Surety Bond

First time license applicants must purchase and maintain a $50,000 surety bond

Step 3 – Hire a Qualifying Individual

Applicants for the Massachusetts Foreign Transmittal Agency License must employ a qualified individual who is capable of managing the day to day operations of the foreign transmittal agency business. Agencies must hire a qualified individual for each branch location where the company services Massachusetts consumers.

Step 4 – Request a NMLS Account

The Massachusetts Foreign Transmittal Agency 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 5 – Complete the Application

All Massachusetts Foreign Transmittal Agency License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:

• • Audited or reviewed company financial statements indicating a positive net worth
  • Primary company contact and consumer complaint contact information
  • Information for the company’s primary trust bank account(s)
  • Company business plan containing the following information:
    • Marketing strategies
    • Products
    • Target markets
    • Fee Schedule & Receipt
    • Flow-of-funds chart and explanation
    • List of countries that the applicant intends to remit to
    • Description of the settlement process, reconciliation process, and reimbursement process
    • Complete list of correspondents and paying agents used in the deliverance of funds to foreign countries
    • Types of payment that will be accepted
    • Explanation of how the applicant will ensure agent oversight
    • Training programs
    • Description of targeted customer base
  • Company’s AML policy
  • Certificate of Good Standing
  • Company formation documents
  • W-9 Form
  • Management chart detailing the company’s hierarchy
  • Organizational chart detailing the company’s ownership structure
  • Financial statements for all company owners with an ownership stake of 10% or more (email to nmls@mass.gov)

Applicants for the Massachusetts Foreign Transmittal Agency License must pay the following fees when submitting their license application:

• • $1,000 license fee
  • $300 application fee
  • $36.25 background check fee (per person)
  • $15 credit report fee (per person)

How Do Massachusetts Foreign Transmittal Agencies Renew Their License?

Foreign transmittal agencies can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Massachusetts Foreign Transmittal Agency License expires on December 31 of each year and must be renewed before the expiration date.

What Are the Insurance Requirements for the Massachusetts Foreign Transmittal Agency License?

The State of Massachusetts does not require foreign transmittal agencies to obtain any form of liability insurance as a prerequisite to obtaining a business license. Foreign transmittal agencies must purchase and maintain a surety bond (limits outlined above)

How Do Massachusetts Foreign Transmittal Agencies File Their Bond?

Foreign transmittal agencies 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 foreign transmittal agency. The surety company should include the following information on the bond form:

• Legal name and NMLS number of entity/individual(s) buying the bond
• Surety company’s name and NAIC number
• Bond amount
• Date the bond is signed

What Can Massachusetts Foreign Transmittal Agencies Do to Avoid Claims Against Their Bond?

To avoid claims on their bond, foreign transmittal agencies in Massachusetts must ensure to properly hold and transfer all funds received from consumers.

What Other Insurance Products Can Agents Offer Foreign Transmittal Agencies in Massachusetts?

Massachusetts does not require foreign transmittal agencies to purchase any form of liability insurance as a prerequisite to obtaining a 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 Massachusetts Foreign Transmittal Agency Customers?

The NMLS conveniently provides a public database to search for active Foreign Transmittal Agencies in Massachusetts. The database can be accessed here. Contact BondExchange for help developing a marketing piece. Agents can also leverage our print-mail relationships for discounted mailing services.