Money Transmitter Licensing and Compliance- United States
Money laundering and terror funding through Money transmitters has become one of the biggest challenges in the money transmitter business. It is highly imperative to know the various regulations related to money transmitter compliance today and abide by them.
The Importance of Compliance Management in Money Transfer Sector
The compliance mandates in the money transmitter or money transfer services industry provide some security to protect customers and the state from bad business practices. The US money transmitters need to stay compliant with all the regulations, rules, laws, and compliance obligations to become a haven for their customers who perform financial transactions through them.
The Top Challenges in Money Transmitter Licensing and Compliance
Like other areas of compliance, money transmitter licensing and compliance is not devoid of challenges. Some of the difficulties that money transmitters face are:
- Lower cap by the state on the net worth of businesses interested in money transmitter licensing
- Customer transactions are not always devoid of malpractices. This can lead to data compromise.
- Organizations face the risk of money laundering and terror funding.
Consequences of Non Compliance in Money Transmitter Licensing
Civil money penalties of $5000 (on an average) for each violation.
Fines for misconduct and imprisonment for not more than five years.
Criminal prosecution against the organization.
Data Security & Accounting Principles
Set up internal controls to maintain permissible investments that have a market value computed in accordance with generally accepted accounting principles, and make sure to digitalize transactions with encryption to keep the customer data secure.
Continuous Internal Audit
The money transmitter needs to perform periodic checks using audits and controls throughout the organization. They need to check compliance with applicable state and federal laws and regulations and areas deemed likely to affect the safety and soundness of the licensee.
Periodic Risk Assessments
A 360-degree risk assessment should be mandated for every money transmitter. This is to ensure timely compliance and avoidance of non-compliance. It helps determine the potential impacts resulting from the interruption of time sensitive or critical business processes.
Third-Party Compliance Platforms
Money transmitters need to integrate with third-party compliance platforms well versed with all laws and regulations related to money transmitters. The platform should support controls and provides visibility for the effectiveness of management.