Connecticut Banking Commission issues advisory on money transmission – Financial Services

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On July 20, 2022, the Connecticut Department of Banking (the “Department”) Posted a Notice to Consumers and Industry on Remittances (the “Notice”).

The Notice provides general guidance on the types of activities and entities that should be permitted. The notice states that a “money transmission” occurs when an individual engages “in the business of issuing or selling instruments of payment or stored value, receiving money or monetary value for present or future transmission or in the business of transmitting money or monetary value”. Accordingly, transmission can occur whenever “a person takes possession or control of a monetary value belonging to another person” and holds it for a period of time, or passes it on to a third party.” The notice lists the entities which traditionally provide transmission services such as bill payers, payroll processors and issuers and sellers of prepaid cards and money orders.

The notice also reminds entities that the definition of money encompasses transmission activities involving virtual currency – “such as Bitcoin and Ethereum, as well as stablecoins and any other digital assets used as a medium of exchange.” In addition, entities holding a virtual currency wallet or operating virtual currency ATMs and who may authorize the transmission of such virtual or fiat currency to a third party are deemed to engage in the transmission of money in accordance with the Guidelines.

put into practice: In the notice, the Department cited the recent “virtual currency explosion” as a reason to highlight some common activities requiring a money transfer license in Connecticut and provided guidance for those engaging in such activities or are considering obtaining a money transfer license in Connecticut.

Those engaged in the virtual currency industry in Connecticut should pay particular attention to this notice. The Department acknowledges that many consumers “do not realize or understand the regulatory landscape that applies” to the use of money transmitters. To that end, the Department reminds entities of their licensing requirements and the onerous penalties for operating a money transfer business without a license, which can result in a fine of $100,000 per violation and a felony charge. . Entities wishing to be licensed as a money transmitter in Connecticut should review
application guidelines through the National Mortgage Licensing System and Registry (NMLS).

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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