July 11, 2007
Dear Mr. [---]
Your letter dated December 1, 2006, to the New York State Banking Department has been referred to me for reply. Please excuse the delay in responding.
In your letter, you asked whether your unidentified client (the "Client") is required to be licensed as a money transmitter under Article XIII-B of the New York Banking Law in order for it to engage in certain business activities. The answer is "no.”
Your letter states that the Client has no New York office and will provide back office support (technology, website, customer service, etc.) for a bank (the "Bank"), which has a US office but is also not located in New York. The Bank (and not the Client) will engage in money transmission by withdrawing funds by ACH debit from the accounts of customers at other financial institutions into an account held at the Bank for money remittance to India.
Inasmuch as your letter described the above activities occurring outside New York, the opinion of the Banking Department is that money transmission activity conducted with New York State residents does not require a money transmission license under New York's Banking Law where the money transmitter itself or through agents has no physical presence in New York State. In such a case, there is no money transmission activity in New York State over which the Banking Department could establish jurisdiction.
The business of money transmission in New York State, as contemplated under Article XIII-B of New York's Banking Law, requires that one apply for a license. However, under Section 641 of the Banking Law, it is clear that banks and foreign banks, inter alia, do not have to apply for a license to engage in the money transmission business. Section 641.1 provides that:
No person shall engage in the business of selling or issuing checks, or engage in the business of receiving money for transmission or transmitting the same, without a license therefor obtained from the superintendent as provided in this article, nor shall any person engage in such business as an agent, except as an agent of a licensee or as agent of a payee; provided, however, that nothing in this article shall apply to a bank, trust company, private banker, foreign banking corporation licensed pursuant to article two of this chapter or foreign banking company authorized to operate pursuant to the International Banking Act of 1978 (12 USC 3101 et seq.), as amended, savings bank, savings and loan association, an investment company, a national banking association, federal reserve bank, corporation organized under the provisions of section twenty-five-a of an act of congress entitled the "Federal Reserve Act", federal savings bank, federal savings and loan association or state or federal credit union. (Emphasis Added.)
Thus, the Bank, in the scenario you described, would not need to obtain a license to engage in the money transmission business because it is exempted pursuant to the proviso quoted above.
Furthermore, in the scenario you described, there is no receipt of funds by the Client within the meaning of the term "in the business of receiving money for transmission" as used in Section 641, quoted and highlighted above, and thus the Client also does not need to obtain a license under Section 641.I trust that this letter is responsive to your inquiry.
Very truly yours,
cc: R. Stone