Changes to Uniform Money Services Act Coming in May.
The bill also makes certain small changes to requirements for currency exchange licensees, allows for the use of different reporting standards, and repeals a section on savings and transitional provisions.
After being enacted, SB187 was added to existing Arkansas law and is now called Act 111. This act introduces amendments to the Uniform Money Services Act and, in particular, to several requirements for money transmitters. These are as follows.
Changes to surety bond amount requirement
Before Act 111, Arkansas money transmitters were required to submit a surety bond with a minimum amount of $50,000, along with $10,000 for every additional location the transmitter had in the state. The maximum amount of the bond was $300,000.
As of mid-May, money transmitters will need to post a bond of between $10,000 and $300,000. The exact amount will be determined by the licensee's money transmission dollar volume, payment instrument dollar volume and stored value dollar volume during the previous year.
The act also allows the state securities commissioner to set particular bond amounts by rule in certain instances.
Surety bonds are financial guarantee agreements that are obtained by the licensee as a form of protection for the public and the state. Money transmitters have various legal obligations they must comply with in conducting business, and the bond serves as a guarantee they will not violate such obligations. Particular violations may include fraud, misrepresentation, inaccurate accounting, and more.
In the case of a violation, anyone who suffers losses or damages as a result may file a claim against the transmitter's bond. The surety that backs the bond will investigate the claim and, if it finds the transmitter to have violated the bond agreement, will extend compensation to claimants. Such compensation will usually be in the amount of losses suffered though not higher than the amount of the bond obtained by the transmitter.
The transmitters, on the other hand, remain liable for any violations they commit and must repay the surety in full for any claims it covers.
Changes to net worth requirement
Previously, in order to be licensed, money transmitters in the Arkansas needed to maintain a minimum net worth of $250,000, determined in accordance with generally accepted accounting principles.
Now the net worth requirement will be calculated at $10,000 for every $1 million in money transmission, payment instrument and stored value dollar volume of the licensee for the previous year. Moreover, the minimum net worth which licensees need to maintain is set at $50,000.
The securities commissioner is also allowed to set specific net worth amounts by rule, if needed.
Changes to renewal dates, fees and reporting standards
Both money transmitters and currency exchange licensees will see their license renewal dates move to Dec. 31. (Previously the renewal date was Dec. 1.) Those applying for or renewing a currency exchange license will now pay a $375 fee rather than $750, though the licensing period for these licensees is reduced to one year from two.
Arkansas money transmitters will now also be allowed to use international financial reporting standards apart from GAAP when determining the market value of their permissible investments. The value of these investments itself remains the same as previously defined.
Finally, Act 111 also entirely repeals the "savings and transitional provisions" section of the Uniform Money Services Act.
Vic Lance is the founder and president of Lance Surety Bond Associates. Email him at Marketing@SuretyBonds.org.
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|Comment:||Changes to Uniform Money Services Act Coming in May.(Commentary)|
|Date:||Apr 8, 2019|
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