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Extend FDIC Insurance Coverage to Money Transmitters

2,023 Views / Posted by Aaron Greenspan

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Money transmitters should pay an FDIC premium, just like a bank, so that each company doesn't have to spend millions of dollars and years of time obtaining 46 individual surety bonds. Since money transmitters have different risk profiles than banks, the coverage amount doesn't need to be as high--something like $10,000 per account would be more than adequate for most companies' needs.
Supporters: Aaron Greenspan, Lisa Matulevicz
Opponent: Stajuana Bureller

Laws and Regulations, United States Code
18 U.S.C. § 1960: Title 18, Part I, Chapter 95, Section 1960

§1960. Prohibition of unlicensed money transmitting businesses

(a) Whoever knowingly conducts, controls, manages, supervises, directs, or owns all or part of an unlicensed money transmitting business, shall be fined in accordance with this title or imprisoned not more than 5 years, or both.

(b) As used in this section--

(1) the term "unlicensed money transmitting business" means a money transmitting business which affects interstate or foreign commerce in any manner or degree and--

(A) is operated without an appropriate money transmitting license in a State where such operation is punishable as a misdemeanor or a felony under State law, whether or not the defendant knew that the operation was required to be licensed or that the operation was so punishable;

(B) fails to comply with the money transmitting business registration requirements under section 5330 of title 31, United States Code, or regulations prescribed under such section; or

(C) otherwise involves the transportation or transmission of funds that are known to the defendant to have been derived from a criminal offense or are intended to be used to promote or support unlawful activity;

(2) the term "money transmitting" includes transferring funds on behalf of the public by any and all means including but not limited to transfers within this country or to locations abroad by wire, check, draft, facsimile, or courier; and

(3) the term "State" means any State of the United States, the District of Columbia, the Northern Mariana Islands, and any commonwealth, territory, or possession of the United States.


(Added Pub. L. 102–550, title XV, §1512(a), Oct. 28, 1992, 106 Stat. 4057; amended Pub. L. 103–325, title IV, §408(c), Sept. 23, 1994, 108 Stat. 2252; Pub. L. 107–56, title III, §373(a), Oct. 26, 2001, 115 Stat. 339; Pub. L. 109–162, title XI, §1171(a)(2), Jan. 5, 2006, 119 Stat. 3123.)


2006—Subsec. (b)(1)(C). Pub. L. 109–162 substituted “to be used” for “to be used to be used”. 2001—Pub. L. 107–56 amended section catchline and text generally, substituting provisions relating to prohibition of unlicensed money transmitting businesses for similar provisions relating to prohibition of illegal money transmitting businesses. 1994—Subsec. (b)(1). Pub. L. 103–325 amended par. (1) generally. Prior to amendment, par. (1) read as follows: “(1) the term ‘illegal money transmitting business’ means a money transmitting business that affects interstate or foreign commerce in any manner or degree and which is knowingly operated in a State— “(A) without the appropriate money transmitting State license; and “(B) where such operation is punishable as a misdemeanor or a felony under State law;”.

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Problem Arbitrary State Money Transmission Laws Grant Monopoly Powers To Banks and Credit Card Companies
As banks are becoming increasingly dependent on technology, and technology companies are increasingly capable of offering financial services, there is a gray area of financial regulation related to money transmission by non-banks that is becoming increasingly important. For historical reasons, each state regulates money transmission differently, with some imposing requirements on companies that make it virtually impossible for any new business to get a license. In Pennsylvania, for example, new money transmitters must secure $1 million worth of surety bonds; in Maryland, the application fee is $2,000 or $4,000 depending on whether or not one applies in an even or odd year.

The difficulty inherent in obtaining state money transmission licenses means that new technology companies are forbidden by law from competing with the banks--some of which have paid lobbyists a lot of money to get these laws on the books in the first place. When there isn't any competition in an industry, it becomes far too easy for the incumbents to abuse their power through price increases and poor service.

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