New York Clarifies Position On Licensing Of Internet Based Money Transmitters

Apr 07, 2011   
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On March 31, 2011, the New York State Banking Department issued an Industry Letter clarifying its position on whether money transmitters with no physical presence in the state of New York are required to obtain a license to do business in the state. The New York Banking Department concluded that even those money transmitters with no physical location or office within the State of New York must obtain a license to do business with residents and persons located within New York. As a result, internet based money transmitters who do business with persons of New York must obtain a license from the state to continue doing business in New York. A copy of the Banking Departments Industry Letter can be viewed here.

New Yorks announcement is a reversal of prior Banking Department opinions which found that physical presence within the state was necessary in order for a money transmitter to be subject to New Yorks licensing requirements. The Department found that New York law contains no express physical presence requirement. Further, the Department cited numerous other states which currently require internet based money transmitters with no physical presence to obtain a license to conduct business as support for its decision. Additionally, the Department found that its prior physical presence requirement was outdated because “with the prevalence of the internet and the growth of a global economy, financial services businesses are no longer necessarily locally based.”

Internet based money transmitters that currently do business with residents or persons of New York have until September 30, 2011 to file to obtain a license from the Superintendent of the New York Department of Banking. Additionally, such money transmitters may continue to operate without a license until six months from the date their application is considered complete or until notified their application has been denied, whichever occurs first.

A special thank you to David Landsman of the National Money Transmitters Association for making this information available to us. Fuerst Ittleman is a correspondent member of the NMTA and will be presenting at the upcoming International Money Transmitters Conference in Los Angeles. For more information on the effect of this decision on your business, or how to ensure that your business maintains regulatory compliance at both the state and federal levels, please contact us at