Minnesota Money Transmitter Bond: A Comprehensive Guide

June 30, 2021

This guide provides information for insurance agents to help their customers obtain Minnesota 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: Based on the number of business locations:
  • $50,000 for 3 to 6 business locations
  • An additional $50,000 for each business location after 6, to a maximum of $250,000
• Who Needs it: All money transmitters operating in Minnesota
• 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 Minnesota: The Minnesota Department of Commerce

Background

Minnesota statute 53B.02 requires all money transmitters operating in the state to obtain a license with the Department of Commerce. The Minnesota 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 Minnesota Money Transmitter Bond?

Minnesota 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 Minnesota statutes 82B.01-27. Specifically, the bond protects the public in the event the money transmitter engages in any acts of fraud or fails to transfer all funds 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 Minnesota Money Transmitter Surety Bond?

BondExchange makes obtaining a Minnesota 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 Minnesota Money Transmitter Bond?

Surety companies will run a credit check on the owner’s of the money transmission company to determine eligibility and pricing for the Minnesota 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 Minnesota Money Transmitter Bond Cost?

The Minnesota 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 a $50,000 bond requirement.

$50,000 Money Transmitter Bond Cost

How Does Minnesota Define “Money Transmitter?”

Minnesota statute 53B.03 defines a money transmitter as any business entity who performs one or more of the following services:

• Sells or issues payment instruments
• Engages in the business of receiving money for transmission
• Transmits money within the United States or to locations abroad by any and all means, including but not limited to payment instrument, wire, facsimile, or electronic transfer

How do Money Transmitters Apply for a License in Minnesota?

Money transmitters in Minnesota 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 Minnesota 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 Minnesota Money Transmitter License must have a company net worth (assets – liabilities) of at least the following amount:

• • $25,000 for applicants with 3 or fewer business locations
  • $50,000 for applicants with between 4 to 6 business locations
  • $100,000 for applicants with 7 business locations
  • An additional $50,000 per business location, in excess of 7, to a maximum requirement of $500,000

 Applicants must submit an audited financial statement, 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 surety bond with the following limit:

• • $50,000 for 3 to 6 business locations
  • An additional $50,000 for each business location after 6, to a maximum of $250,000

Step 3 – Purchase Workers’ Compensation Insurance

All money transmitter license applicants must purchase workers’ compensation insurance and submit proof of coverage with their license application

Step 4 – Request a NMLS Account

The Minnesota 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 5 – Complete the Application

All Minnesota 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
  • Bank account information for all accounts used to withdraw or deposit payment instruments
  • Company business plan (see the application guidelines for required information)
  • Certificate of Good Standing
  • The following document samples:
    • Payment instrument or instrument of stored value
    • Receipt provided to consumers
    • Contract used with authorized delegates (if applicable)
  • List of all authorized delegates or company owned locations
  • Company formation documents
  • Management chart showing the company’s hierarchy
  • Organizational chart showing the company’s ownership structure
  • Uniform Consent to Service of Process
  • Affidavit for official signing the application

Money transmitters must pay a $4,000 license fee when submitting their application.

How Do Minnesota 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 Minnesota 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 Minnesota Money Transmitter License?

Minnesota requires money transmitters to purchase workers’ compensation insurance as a prerequisite to obtaining a business license. Money transmitters must purchase and maintain a surety bond with the following limit:

• $50,000 for 3 to 6 business locations
• An additional $50,000 for each business location after 6, to a maximum of $250,000

How Do Minnesota 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:

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

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

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

• Pay all required taxes and fees
• Do not engage in any acts of fraud
• Transfer all funds owed to consumers

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

Minnesota requires money transmitters to purchase workers’ compensation insurance. 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 Minnesota Money Transmitter Customers?

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