California Moves to Amend Money Transmitter Law and Regulation

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The California Assembly’s Committee on Banking and Finance held a hearing to discuss several proposed amendments to California’s Money Transmission Act. According to the author of the bill, the amendments “provide[] for further clarification to the [M]oney [T]ransmission [A]ct through updating and revising its application as it relates to various payment platforms. The Act is California’s legal framework for the growing payments world and potential developments in “crypto-currency.” Of particular significance is a proposed amendment to the definition of “money transmission” that would clarify that money transmission does not include a transaction in which the recipient of the currency, funds, or other value is an agent of the payee, and delivery of the funds to the agent satisfies the payor’s obligation to the payee. Additionally, the amendments acknowledge and reflect the increased role of mobile and internet-based money transmission. For example, the amendments provide that in cases in which a licensee does not operate out of a branch office and instead uses the internet or a mobile application then the Commissioner of the California Department of Business Oversight may authorize alternative disclosures concerning rates, fees and other details about the licensee.

The Commissioner has already requested comments on proposed amendments to the regulations implementing the Act. The amendments included revisions to definitions (i.e., the definition of “receiving money for transmission”), exemptions from the Act (i.e., specifying that in addition to the persons exempt in the Act, the sale of a money transmission service or product of an exempt person is also exempt, and including certain standards that the Commissioner may consider in determining whether a person, transaction or class of persons or transaction is exempt from the Act), application requirements for a license, administrative standards and procedures relating to an application for a license, tangible shareholders’ equity, consumer disclosures, and eligible securities.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

 

Topics:  Money Transfer, Money Transmission Act

Published In: Finance & Banking Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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