NYSBL 641 &
Superintendent Reg. 406
September 4, 2007
Dear Ms. [---]
Your e-mail correspondence dated March 7, 2007 to Ms. Rosanne Notaro of the Banking Department has been referred to me for reply.
Your letter stated that your client, a broker-dealer (the "Client") proposes to offer its customers cashier's checks drawn on a national bank for the purpose of making payments to third parties. You indicated that the Client would facilitate the sale, production and delivery of the checks and you asked several questions related to whether 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 these business activities.
On the question of whether the Client would need to be licensed, the Department believes, for the reasons discussed below, that the Client would not have to be licensed as a money transmitter based upon the information you supplied. (Therefore, your other enumerated questions are essentially moot, but if you require specific answers to them, please let me know.)
As you know, 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. Banking Law, 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... (Emphasis Added.)
However, there are some exemptions to the licensing requirement. In particular, Section 406.2(k)(4) of the Superintendent's Regulations, which is dispositive of your question, provides:
(k) ... , no person who issues or delivers a check, draft or other instrument or document for the transmission or payment of money or which evidences an obligation for the transmission or payment of money, shall be deemed to have issued or sold such check, draft, instrument or document, within the meaning of section 653(6), (9) or 640(4) of the Banking Law if such check, draft instrument or document:
.... (4) evidences an obligation of a banking institution insured by a Federal insuring agency....
Since the Client will offer its customers cashier's checks drawn on a national bank and since a national bank is federally insured, the sale of the checks in question is exempt from the money transmission licensing requirement cited above.
The opinion rendered herein is based on the facts set forth in your correspondence and may not be applicable to any other situation.
I trust that this letter is responsive to your inquiry.
Very truly yours,