Money transmitter license in the US and sponsorship program 

Getting a Money Services Business or Money Transmitter License in all 50+ US states is a difficult process. It not only costly but also highly nuanced, given the diverse regulatory environments across states. The process involves a multitude of steps and requirements. 

The application processing time may take from a few months to 3 years depending upon the state. States such as New York, California, and Texas cost and take much longer. The financial implications of obtaining an MTL across all states are significant. The process can cost around $1 million (not accounting for legal fees). 

The basic requirements you listed for applying for a Money Transmitter License are : 

• FinCEN registration: Mandatory for MSBs to comply with the Bank Secrecy Act​​​​.
• Background checks: Essential for all key personnel to ensure integrity and reliability​​.
• Application fees: Required by each state, varying in amount​​.
• Surety bond: Typically a minimum of $500,000 per state, dependent on credit history​​.
• Financial viability: Proof required through audited financials and capital reserves​​.
• Business plan: Must detail operational, financial, and strategic planning​​​​.
• Compliance framework: Implementation of AML and KYC guidelines is crucial​

While these are the basic requirements, the specific details and additional requirements can vary significantly from state to state.

Banking challenges for money service businesses

The other major challenge is to find an MSB-friendly Bank in the US that would provide the required depository and processing service to collect funds from end-users and agents and transfer them to multiple countries.

MSBs, including remittance companies, must navigate a stringent regulatory landscape that includes compliance with the Bank Secrecy Act (BSA), Anti-Money Laundering (AML) regulations, and the Patriot Act, among others.  Banks, wary of the heightened regulatory scrutiny and potential fines associated with servicing MSB accounts, have become increasingly risk-averse. Even if you find one, the setup and the monthly fees are too steep for a start-up. 

The "de-risking" trend has left many MSBs, especially new entrants to the remittance market, struggling to find banking partners willing to provide essential services such as depository and processing services for collecting and transferring funds internationally​​​​. For those MSBs that do manage to establish banking relationships, the financial burden can be significant. Setup and monthly fees can be prohibitively expensive for startups, with banks justifying these costs by pointing to the additional risks and compliance burdens associated with banking MSBs​

Additional hurdles after licensing

After obtaining a Money Transmitter License (MTL) and securing the necessary banking arrangements, companies in the remittance and broader financial services sector still face significant operational challenges. Setting up efficient compliance processes, implementing enhanced transaction monitoring and risk scoring, managing regulatory reporting, conducting sanctions list screening, and reducing operational costs are just a few of those. Effective management of these areas requires integrating sophisticated technology solutions to automate processes, ensure accuracy, and maintain compliance with regulatory standards. 

Exploring the Payment-as-a-Service model

For startups considering entering the US market without immediately committing to heavy investments in licenses or banking sponsorships, adopting a Payment-as-a-Service (PaaS) model could be an effective strategy. A PaaS provider offers a comprehensive, compliant infrastructure that allows businesses to bypass the complexities of legal and compliance requirements. This approach enables startups to shift their focus toward customer acquisition, ease the path to market entry and growth by minimizing operational burdens.

Get started with Machnet

If you're interested in exploring how the Machnet platform can help you develop a remittance product, initiate your journey by reaching out to us.