AB 1116: Money Transmission Act.

The Money Transmission Act generally provides for the regulation of money transmission, as defined, by the Commissioner of Financial Protection and Innovation. The act provides for certain exemptions from the act, including an exemption for the United States or a department, agency, or instrumentality thereof, including a federal reserve bank and a federal home loan bank.

This bill would, among other things, additionally exempt from the act a person that acts as an intermediary by processing money transmission between an entity that has directly incurred an outstanding money transmission obligation to a sender and the senders designated recipient if the entity meets certain criteria, including that the entity is properly licensed or exempt from licensing requirements under the act. The bill would also exempt a registered futures commission merchant under the federal commodities laws to the extent of its operation as such a merchant.

The act requires a licensee to, not more than 45 days after the end of each calendar year quarter, file with the commissioner a report containing certain information, including the current address of each branch office of the licensee in this state, as specified, the name of each person who acted as an agent in this state of the licensee during the calendar year quarter, and the address for each agent branch office, as specified. The act makes a person that intentionally makes a false statement, misrepresentation, or false certification in a record filed or required to be maintained under the act, or that intentionally makes a false entry or omits a material entry in such a record, guilty of a felony.

This bill would instead require the report described above to be filed through the Nationwide Multistate Licensing System and Registry, as specified. The bill would require a licensee to include in that report additional information regarding a person who acted as an agent in this state of the licensee during the calendar year quarter, including the agents telephone number and email address. By expanding the scope of the crime described above, this bill would impose a state-mandated local program.

The act requires an applicant for a license to possess, and requires a licensee to maintain at all times, tangible shareholders equity of $250,000 to $500,000 depending on estimated or actual transaction volume, as determined by the commissioner, as prescribed.

This bill would delete that provision and would instead, subject to the commissioners discretion, require a licensee to maintain at all times a tangible net worth of the greater of $100,000 or 3 percent of total assets for the first $100,000,000, 2 percent of additional assets for $100,000,000 to $1,000,000,000, and one-half of 1 percent of additional assets for over $1,000,000,000.

The act requires a licensee to, at all times, own eligible securities having an aggregate market value computed in accordance with United States generally accepted accounting principles of not less than the aggregate amount of all of its outstanding payment instruments and stored value obligations issued or sold in the United States and all outstanding money received for transmission in the United States. The act defines eligible securities to mean any United States currency eligible security or foreign currency eligible security and defines United States currency eligible security and foreign currency eligible security to mean specific securities.

This bill would make various changes related to the determination of the value of eligible securities held by a licensee, including by revising the list of those securities. Among those revisions, the bill would include in the list of United States currency eligible securities the full drawable amount of an irrevocable standby letter of credit for which the stated beneficiary is the commissioner that stipulates that the beneficiary need only draw a sight draft under the letter of credit and present it to obtain funds up to the letter of credit amount within 7 days of presentation of certain items, including the original letter of credit.

This bill would also impose certain requirements on a licensee when adding or replacing a key individual, defined to mean a natural person ultimately responsible for establishing or directing policies and procedures of the licensee, including an executive officer, manager, director, or trustee. Among those requirements, the bill would require the licensee to provide notice to the commissioner within 15 days after the effective date of the key individuals appointment, as prescribed.

This bill would provide that, before January 1, 2025, a person licensed under the act to engage in the business of money transmission is not subject to a provision of the bill to the extent that the provision conflicts with the law in effect on December 31, 2023, or to the extent the provision establishes new requirements not imposed under the law in effect on December 31, 2023.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.