DC Money Transmitter Bond: A Comprehensive Guide

This guide provides information for insurance agents to help money transmitters obtain DC Money Transmitter Bonds

At a Glance:

• Lowest Cost: $500 per year or $50 per month, based on the money transmitter’s credit
• Bond Amount: $50,000 plus an additional $10,000 per branch location not exceeding $250,000
• Who Needs it: All money transmitters seeking to obtain a license in the District of Columbia
• Purpose: To ensure the public will receive compensation for any damages should the money transmitter fail to comply with licensing law
• Who Regulates Money Transmitters in DC: The District of Columbia Department of Insurance, Securities and Banking

Background

DC Statute 26-1002 requires all money transmitters operating in the district to obtain a license with the Department of Insurance, Securities and Banking. The DC legislature enacted the licensing laws and regulations to ensure that money transmitters engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, money transmitters must purchase and maintain a surety bond to be eligible for licensure.

What is the Purpose of the DC Money Transmitter Bond?

DC requires money transmitters to purchase a surety bond as part of the application process to obtain a business license. The bond ensures that the public will receive compensation for financial harm if the money transmitter fails to comply with the licensing regulations. In short, the bond is a type of insurance that protects the public if the money transmitter breaks licensing laws.

How Can an Insurance Agent Obtain a DC Money Transmitter Surety Bond? 

BondExchange makes obtaining a DC Money Transmitter Bond easy. Simply login to your account and use our keyword search to find the “money” bond in our database. Don’t have a login? Gain access now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email or chat from 7:30 AM to 7:00 PM EST to assist you.

At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.

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Is a Credit Check Required for the DC Money Transmitter Bond?

Surety companies will run a credit check on the owners of the money transmission company to determine eligibility and pricing for the DC Money Transmitter bond. Owner’s with excellent credit and work experience can expect to receive the best rates. Owners with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the owner’s credit.

How Much Does the DC Money Transmitter Bond Cost?

The DC Money Transmitter surety bond can cost anywhere between 1% to 12.5% of the bond amount per year. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. The chart below offers a quick reference for the approximate bond cost on a $50,000 bond requirement.

$50,000 Money Transmitter Bond Cost

*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.

How Does DC Define “Money Transmitter?”

To paraphrase DC Statute 26-1001, a money transmitter is any business entity who engages in one or more of the following business activities:

• Sells or issues payment instruments
• Engages in the business of receiving money for transmission
• Transmits money within the United States, or to locations abroad, by any and all means, including but not limited to payment instrument, wire, facsimile, or electronic transfer

BondExchange now offers monthly pay-as-you-go subscriptions for surety bonds. Your customers are able to purchase their bonds on a monthly basis and cancel them anytime. Learn more here.

How do Money Transmitters Apply for a License in DC?

Money transmitters in DC must navigate several steps to secure their license. Below are the general guidelines, but license applicants should refer to the NMLS’s application guidelines for details on the process.

License Period – The DC Money Transmitter License is valid for one year from the date of issuance and must be renewed before the expiration date

Step 1 – Meet the Net Worth Requirements

Applicants for the DC Money Transmitter License must have a positive net worth (assets – liabilities) of at least $100,000 per licensed branch location. Money transmitters conducting business at more than one location, or through authorized delegates, must maintain a net worth of $50,000 per additional location or authorized delegate, with a maximum requirement of $500,000. Applicants must submit an audited financial statement verifying their net worth when submitting their license application.

Step 2 – Purchase a Surety Bond

Money transmitters must purchase and maintain a surety bond with a limit of $50,000 plus an additional $10,000 per branch location not exceeding $250,000.

Step 3 – Request NMLS Account

The DC Money Transmitter License application is submitted electronically through the Nationwide Multistate Licensing System (NMLS). To submit a license application, applicants must first request to obtain an NMLS account.

Step 4 – Complete the Application

All DC Money Transmitter License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:

• • Complete list of the company’s authorized agents
  • Audited company financial statements
  • Detailed description of the company’s business plan
  • Flow of funds structure
  • A Certificate of Registration obtained from the DCRA
  • Bank account information for all accounts the company will use to conduct money transmission transactions
  • All relevant document samples
  • Company formation documents
  • Management chart showing the company’s hierarchy
  • Organizational chart
  • Company’s anti-money laundering program
  • Company FinCen confirmation number and filing date

Applicants for the DC Money Transmitter License must pay a $500 licensing fee, plus an additional $25 per branch location not exceeding $2,500

How Do DC Money Transmitters Renew Their License?

Money transmitters can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The DC Money Transmitter License is valid for one year from the date of issuance and must be renewed before the expiration date.

What Are the Insurance Requirements for the DC Money Transmitter License?

The District of Columbia does not require money transmitters to obtain any form of liability insurance as a prerequisite to obtaining a business license. Money transmitters must purchase and maintain a surety bond with a limit of $50,000 plus an additional $10,000 per branch location not exceeding $250,000.

How Do DC Money Transmitters File Their Bond?

Money Transmitters should submit the completed bond form, including the power of attorney, electronically through the NMLS. The money transmitter surety bond requires signatures from both the surety company that issues the bond and a representative from the money transmission company. The surety company should include the following information on the bond form:

• License type (money transmitter)
• Legal name and address of entity/individual(s) buying the bond
• Surety company’s name
• Bond amount
• Date the bond goes into effect
• Date the bond is signed

What Can DC Money Transmitters Do to Avoid Claims Against Their Bond?

In order to avoid claims made against their bond, money transmitters in DC must follow all license regulations in the district. Including some of the most important issues below that tend to cause claims:

• Faithfully account for all funds received from customers
• Do not engage in any acts of fraud

What Other Insurance Products Can Agents Offer Money Transmitters in DC?

DC does not require money transmitters to purchase any form of liability insurance as a prerequisite to obtaining a license. However, most reputable money transmitters will seek to obtain this insurance anyway. Bonds are our only business at BondExchange, so we do not issue liability insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.

How Can Insurance Agents Prospect for DC Money Transmitter Customers?

The NMLS conveniently provides a public database to search for active money transmitters in DC. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.