Massachusetts Division of Banks Issues Letter to Raise Awareness of Money Transfer Services Fraud

On April 8, the Massachusetts Division of Banks issued a letter to CEOs of licensed money transmitters regarding an increase in consumer scams related to the use of money transfer systems. The Division noted that “it is important that your employees and agents, as well as your customers, become familiar with warning signs of a scam and take appropriate action to avoid them.” To this end, the Division encouraged money transmitters to review existing programs regarding agent monitoring and anti-fraud to ensure, among other things, that (i) staff and agents are appropriately trained to monitor transactions and identify red flags; (ii) staff is authorized to terminate or place a hold on transfers which raise red flags for suspected fraud; and (iii) comprehensive policies, procedures, and training requirements for compliance with the BSA are in place.

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FinCEN Supplements 2011 FAQs Regarding Prepaid Access

On March 24, FinCEN issued FIN-2016-G002 to supplement guidance issued in 2011 regarding aspects of its Prepaid Access Final Rule. FIN-2016-G002 provides answers to a list of frequently asked questions related to the following areas: (i) the relationship between de minimis cash refund requirements under state law and the exemption in FinCEN’s regulations for closed loop prepaid access products; (ii) conditions under which the use of quick response codes and other technology would fall within the definition of closed loop prepaid access; (iii) whether the term “defined merchant” in the context of closed loop prepaid access is limited to a single merchant; (iv) policies and procedures reasonably adapted to avoid the threshold for being designated as a “seller” of prepaid access; and (v) listing sellers of prepaid access on the provider’s money services business (MSB) agent list.

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Washington Department of Financial Institutions Denies ETA’s Petition for Declaratory Order on Technical Grounds

On March 15, the Washington Department of Financial Institutions responded to the Electronic Transactions Association’s (ETA) December 2015 Petition for Declaratory Order, which sought clarification on the statutory definition of “money transmitter” under the Washington Uniform Money Services Act (WUMSA), RCW 19.230.020(9). Specifically, the ETA requested clarification that “money transmitter” excludes payment processors that do not have consumer-facing relationships or receive consumer payments for transmission to a third-party payee or other transferee. The ETA’s petition further requested that the Department issue a declaratory order that the payment processor exclusion in WUMSA “applies to payment processors that act on behalf of merchants, rather than consumers, to facilitate the merchant’s acceptance of credit and debit cards and that such payment processors are not subject to the Act.” The Department declined to issue such an order because the ETA’s petition failed to specifically identify any of its purported 500+ members “by name or as doing business in or having sufficient minimum contacts with Washington State to a degree that would presumptively make them subject to the Division’s authority under WUMSA.” The Department allowed that ETA could resubmit the petition, but also encouraged it to contact the Department’s staff and “have discussions about how best to resolve the alleged ‘uncertainty’ you have addressed.”

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New Mexico Passes Law Creating Framework for Licensure of Money Transmitters

Recently, the New Mexico Senate Chamber unanimously passed House Bill 250. The legislation creates a licensing framework for persons or businesses engaging in money transmissions, check cashing, and currency exchange, and delegates certain powers and duties to the Director of the Financial Institution’s Division of the Regulation and Licensing Department. The legislation is currently awaiting Governor Susana Martinez’s signature.

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Washington Proposes Amendments to Money Transmitters Rules

Recently, the Washington Department of Financial Institutions (DFI) announced that on March 29, 2016 it will hold a hearing regarding proposed amendments to the 2015 Uniform Money Services Act. New sections to the proposal include requiring that money services licensees establish and maintain (i) an effective cybersecurity program; (ii) a written customer information security program; and (iii) a written privacy policy that complies with Regulation P of the Gramm-Leach-Bliley Act.

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