Maryland Money Transmitter Bond: A Comprehensive Guide

This guide provides information for insurance agents to help their customers obtain Maryland Money Transmitter Bonds

At a Glance:

• Lowest Cost: $2,250 per year or $225 per month based on the applicant’s credit
• Bond Amount: $150,000
• Who Needs it: All money transmitters operating in Maryland
• 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 Maryland: The Maryland Commissioner of Financial Regulation

Background

Maryland statute 12-405 requires all money transmitters operating in the state to obtain a license with the Commissioner of Financial Regulation. The Maryland 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 $150,000 surety bond to be eligible for licensure.

What is the Purpose of the Maryland Money Transmitter Bond?

Maryland 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 set forth in Maryland statutes 12-401-431. Specifically, the bond protects the public in the event the money transmitter engages in any acts of fraud or fails to transfer funds received to the appropriate parties. 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 Maryland Money Transmitter Bond?

BondExchange makes obtaining a Maryland 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 Maryland Money Transmitter Bond?

Surety companies will run a credit check on the owner’s of the money transmission company to determine eligibility and pricing for the Maryland Money Transmitter bond. Owners 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 Maryland Money Transmitter Bond Cost?

The Maryland Money Transmitter surety bond can cost anywhere between $2,250 to $11,250 per year or $225 to $1,125 per month. 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 the $50,000 bond requirement.

$150,000 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 Maryland Define “Money Transmitter?”

Maryland statute 12-401 defines a money transmitter as any business entity that performs on or both of the following services:

• Sells or issues payment instruments or stored value devices
• Receives money or monetary value, for transmission to a location within or outside the United States by any means, including electronically or through the Internet

The term “money transmitter” also includes:

• Bill payer services
• Accelerated mortgage payment services
• Any informal money transfer system that facilitates the transfer of money outside the conventional financial institutions system to a location within or outside the United States

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 Maryland?

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

License Period – The Maryland Money Transmitter License expires on December 31 of each year and must be renewed before the expiration date

Step 1 – Meet the Net Worth Requirements

Applicants for the Maryland Money Transmitter License must have a company net worth (assets – liabilities) of at least $150,000, plus an additional $10,000 per branch location to a maximum requirement of $500,000. Applicants must submit an unconsolidated audited financial statement, prepared by a CPA, verifying their net worth when submitting their license application.

Step 2 – Purchase a Surety Bond

Money transmitters must purchase and maintain a $150,000 surety bond

Step 3 – Hire a Qualifying Individual

Money transmitters must employ at least one individual who has a minimum of three years of experience in the money transmission business. License applicants must list this individual as the “qualifying individual” on their license application and submit a copy of their resume.

Step 4 – Request a NMLS Account

The Maryland 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 5 – Complete the Application

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

• • Unconsolidated audited financial statements verifying the company’s net worth
  • Company formation documents
  • Organizational chart detailing the company’s ownership structure
  • Company’s FinCen registration confirmation number and filing date
  • Bank account information for the company’s operating and trust account(s)
  • Company business plan containing the following information:
    • Marketing strategy
    • Products
    • Target markets and operating structure the applicant intends to employ
    • Detailed description or chart depicting the flow of money for each transaction type
  • >Certificate of Good Standing
  • Sample proposed Maryland authorized delegate contract
  • Management chart detailing the company’s hierarchy
  • Company’s compliance manual with all BSA, AML, and OFAC regulations
  • Company policies and procedures
  • List of all jurisdictions where the company is licensed to conduct money transmission services
  • Company fee schedule
  • List of all authorized agents and their locations
  • Trust account authorization

Money transmitters must pay the following fees when submitting their license application:

• • $2,000 license fee
  • $1,000 investigation fee
  • $100 processing fee
  • $36.25 background check fee (per person)
  • $15 credit report fee (per person)

How Do Maryland 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 Maryland Money Transmitter License expires on December 31 of each year and must be renewed before the expiration date.

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

The State of Maryland 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 $150,000 surety bond.

How Do Maryland Money Transmitters File Their Bond?

Money transmitters should submit the completed bond form, including the power of attorney, electronically through the NMLS. The 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:

• Legal name and NMLS number 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 Maryland Money Transmitters Do to Avoid Claims Against Their Bond?

To avoid claims on their bond, money transmitters in Maryland must follow all license regulations in the state, including some of the most important issues below that tend to cause claims:

• Do not engage in any acts of fraud
• Transmit all funds received from consumers to the appropriate parties

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

Maryland does not require money transmitters to purchase any form of liability insurance as a prerequisite to obtaining a license. However, most reputable businesses 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 Maryland Money Transmitter Customers?

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