Banking Interpretations

NYBL 640 & 641

March 30, 2010


Re: Money Transmitter Product


Your letter dated March 4, 2010, to the attention of Ms. Marjorie Gross, Deputy Superintendent and Counsel, has been referred to me for a response. In your letter, you requested a written non-objection from the New York State Banking Department ("Banking Department") regarding a product that your client,  [---] ("Money Transmitter"), proposes to offer ("MT Product"), which will allow customers to purchase a money transfer from the Money Transmitter at various merchant locations.

Based on the details of the MT Product described at length in your letter, the MT Product proposed to be offered by the Money Transmitter would be packaged in branded materials of the Money Transmitter and would be offered at retailers that you state are agents of the Money Transmitter ("Retailers"). The MT Product will be an instruction sheet that includes "designation of the principal amount of funds transmission to be purchased, fee information, terms and conditions" for the use of the MT Product along with information to contact the Money Transmitter in order to effect the money transfer. The MT Product is going to be sold in "pre-denominated amounts" that can only be used once for a money transfer. In addition, the MT Product can only be used to instruct the Money Transmitter to execute the money transfer. The process of the MT Product would begin when a consumer purchases the MT Product at the Retailer. The consumer would pay the service fee and the face amount of the MT Product. The components of the amount paid by consumers will be clearly identified on the MT Product. In addition, you stated that "Retailers will remit funds tendered by consumers for the MT Product to [the Money Transmitter]". This fund remittance is to "be processed through systems/procedures established directly between the Retailers and [the Money Transmitter] or, in the alternative, may be facilitated through a relationship between [the Money Transmitter] and certain national card program aggregation partners that have existing relationships with the Retailers." The face amount of the MT Product will be held by the Money Transmitter until the consumer completes the transfer by contacting the Money Transmitter and following the procedures on the MT Product. According to your letter, the Money Transmitter, as well as Retailers, as agents of the Money Transmitter, will follow its standard Bank Secrecy Act and Anti-Money Laundering procedures in connection with the MT Product. After the transfer is complete, the Money Transmitter will send the consumer a receipt which will include information about the transaction.

Section 641(1) of the New York Banking Law ("Banking Law") 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 therefore 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 pursuant to the International Banking Act of l978 (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.)

Section 640(10) of the Banking Law defines "Agent" as "any person designated or appointed by the licensee pursuant to a written agency contract to engage in money transmission activities at locations other than a duly authorized office of the licensee as provided in section six hundred forty-eight of this article." (Emphasis Added.) Any person, other than a licensee, acting as an agent by engaging in money transmission activities without a written agency contract is in violation of Section 641 of the Banking Law and is subject to criminal prosecution.

Based on the description of the MT Product and the existence of a written agency agreement with each Retailer, the Banking Department has no objection to the MT Product.

If you have any questions, please do not hesitate to contact me at (212) 709-1653.

Very truly yours,

Monique E. Holmes
Assistant Counsel