Banking Issues Continue While Surety Bond Underwriters Embrace MSBs

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Authored by: Brian Nelson, Bond Manager at Alpha Surety Brokerage

Why are MSBs are locked out of the traditional banking sector while at the same time surety bonds are becoming cheaper and underwriting requirements continue to loosen? I know I’m oversimplifying this a bit, but surety bond underwriters understand that claims on MSB bonds are typically caused by a breach in compliance. Naturally, banks understand the same. However, as banks continue to close MSB accounts, surety underwriters are issuing approvals on lower underwriting requirements and at premiums that have previously been reserved for only the top revenue companies. It used to be that new money transmitters, check cashers and prepaid access companies would pay at least 3% for their bonds if they could even qualify based on verification of substantial personal assets or substantial cash in the business bank account. Things have changed. Recently, a company with neither a large amount of cash in the bank or a strong personal financial statement for the owner, received an approval for 1.5% on a multi-million dollar aggregate bond need. According to the underwriters, the reason for the low quote was because competition for these types of bonds has increased significantly. (For a state-by-state list of bond amount requirements, click State by State Bonds.)

Wouldn’t it be nice if banks felt the same way about competition? MSBs around the country are dying to find banking partners that will treat them fairly. I recently spoke to an MSB about a potential partnership that would have brought them a substantial amount of new business. After my presentation, I was told that their bank wouldn’t allow for them to partner with other MSBs. I’m still confused by the comment because both entities involved in the partnership would have been licensed money transmitters. Since when does a partnership between two licensed companies create a compliance risk for banks?

Unfortunately, it is the poor, underserved and deprived populations that suffer the most when MSBs are cutoff from serving them. Organizations like the NMTA, NBPCA and others have been fighting the banking battle for years with little to no progress. We can only hope that newer industries like the digital currency and the electronic payments industries will bring their resources, connections and energy to the fight. Without them, I’m afraid we’ll be talking about the same banking issues for many more years.

If you know of any groups or efforts focused on the non-banking issue, please share details in the comments section.

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Don’t Bite the Hand that Feeds Millions

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Amidst all of the regulatory oversight and compliance scrutiny MSBs are faced with in the United States, it is easy to lose sight of how noble our cause is. Many of the world’s nations rely on money remittances to support their citizens. Our job as industry participants is to provide our niche client base with simple and affordable ways to support the world economy through international money transfers. It doesn’t take long to see the value US money transmitters bring to the underdeveloped nations after spending time within their borders.

A few weeks ago I had the opportunity to visit an underdeveloped region on a trip to setup correspondent partnerships and bank accounts for a money remittance company I’m involved in. I couldn’t have been more impressed by the region and their willingness to work with us. I was also astounded by the genuine gratitude the business and government leaders showed us after discussing our business plan.

Never before had they been approached by a money transmitter focused solely on supporting and growing their economy. Both banks and government entities welcomed us with open arms. Not only were they excited about our partnership, but they wanted to know how they could further help us reach their citizens. Make no mistake, there are other US money transmitters sending funds into their countries, but it was apparent that the perception of these mega companies was that they were extracting more value than providing. It takes more than a capitalistic desire to make money in order to make a positive difference in the lives of others and our new friends saw the difference immediately.

The highlight of the trip was receiving an invitation to present our business at an upcoming banking and economic development association conference for the region. I know my story is not unique, as many of you launched your businesses with the purpose of serving your people, but this experience opened my eyes to the positive impact our industry is making throughout the world. Regulatory, compliance and banking concerns are not going away, but at least we can take pleasure in the service we are providing millions of people across the globe.

~ Brian Nelson

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As a quick plug, I’m the event coordinator for the upcoming Virtual Currency Compliance Conference (VC3 2014) being hosted by the NMTA in New York on August 13th. We’d love to see you there. We’ll have the event page up shortly on http://www.nmta.us

Upcoming Event: Industry Symposium for Legislative Action

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Members of the MSB industry are invited to participate in an industry symposium for legislative action. The event will be held in Washington DC on February 18th. The event and registration page can be found HERE.

The National Money Transmitters Association is hosting the event in an effort to create legislative change that would benefit the society and our industry. Below is a copy of the most recent email communication regarding ISLA. A great list of current attendees is found at the bottom of the page.

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January 16, 2014

Dear Colleague,

Usually, new regulatory legislation comes as a ‘crackdown,’ a reaction to some problem or abuse that has occurred, bringing stricter standards imposed from the outside, resisted by industry, and seen as bad for business.

In a previous email, I listed the benefits reform would bring to society. But here is how we in the money transmitting industries would benefit from regulatory reform, and why we should advocate for change:

  1. To overcome an image problem
  2. To defend against unfair competition from less-compliant market participants
  3. To establish orderly, predictable business conditions
  4. To maintain a level competitive environment
  5. To enable reasonable access to banking services
  6. To forestall more onerous, misguided legislation from elsewhere
  7. To reduce redundancies that exist in the present system
  8. To establish common standards and credentials that certify compliance

The money transmitting industries have become so numerous, complex and varied, that intelligent regulation (and sustainable growth) is no longer possible without a permanent, centralized  agency, one that appropriately understands the industries and can establish consistent norms and recognized certifications.

These are just my opinions. I certainly do not claim any monopoly on wisdom.The Symposium is a place for many different points of view. Anyone can sound off on what they think is wrong with current regulation – or could be done better – and come up with suggestions on how to fix it. Of specific concern, is the banking problem.

Sticking to that theme – and time – are the only restrictions. I am asking people who wish to, to write a 1 or 2-page monograph, outlining their ideas, for collation and posting on the conference page.

If you would like to speak, please fill out our very short Speaker Request Form, indicating your desired topic and desired length of talk. This will help schedule the sessions and distinguish between people who would like to speak less than 5 minutes (your name will automatically be put on a list) from those who would like to speak more than 5 minutes (in which case, I will contact you to discuss.)

You do not have to prepare a paper or a presentation if you would like to speak. So far we have 44 people registered and more signing up every day (see list below). The Choate Room has a maximum capacity of 90 persons, so please do not delay, we are already halfway to capacity.

If you are interested in attending the ISLA, please visit our new website and click on “Events” to register. If  you have any questions, please respond to this email, or call me at (917) 921-9529. The ISLA wll be held at:

The Carnegie Endowment for International Peace
1779 Massachusetts Avenue NW
Washington, DC 20036

I look forward to seeing you in Washington!

Regards,

– David Landsman

* The AML Training is a separate event taking place the day before the ISLA, on February 17, 2014. This will be an all-day, “Total Immersion ” AML Compliance Crash Course, also covering state licensing issues. The registration for that day is $445. Please visit our new website and click on “Events” to register.

Attendees as of January 16, 2014

 Company or Agency First Name Last Name
A & B General USA, Inc. (Thailand) Thanyarat Nualsirisakul
AML Experts, Inc. Connie Fenchel
Baird Holm Terrence Maher
Banking Committee, US Senate Jeanette Quick
Bitcoin Solutions DC Darrell Duane
Bitcoinmagazine.com Dmitry Murashchik
Bryan Cave Judith Rinearson
Caribe Express Raquel Olivo
Chartered Forex Carmen De Jesus
Columbia University Portia Crowe
Consumer Financial Protection Bureau Rebecca Smullin
Dolex Laybaa Hernandez
Embassy of El Salvador Enilson Solano
Embassy of El Salvador Luis Aparicio
Federal Reserve Jennifer White
Federal Reserve Lee Davis
Financial Service Centers of America Scott McClain
GCC Exchange (Dubai) Joshua Suresh
GCC Exchange (Dubai) Maninadar Iyadurai
GCC Exchange (Hong Kong) Kishore Iyadurai
InteliSpend (Prepaid access) Wendy Lewis
Internal Revenue Service Sandra Stolt
Legislative Solutions Ann Vroom
LeveLup (MobilePayments App) Katie Alexander
Macfarlane Group Cary Chan
m-banco Mobile Money Randolph Kantorowicz
Mondato Julienne Lauler
National Money Transmitters Association David Landsman
Optima Compass Group Jorge Guerrero
Patton Boggs Carol Van Cleef
Pontual Money Transfer Fernando Fayzano
Qikcoin Stephen Sunderlin
Retail Grocers Association of Kansas City Jon McCormick
Skrill Elena Sabkova
Skrill Mary Lozada
The Law Office of Marilyn D. Barker Marilyn Barker
Transmit International Inc Mohammed M Islam
Unidos Financial Juan Llanos
United States General Accounting Office Toni Gillich
Washington DC Bitcoin Meetup Richard Weston
Western Union Meredith Cipriano
Western Union Susan Smith
Wilmer Hale Katrina Carroll
World Bank Alana Fook