10VAC5-120 Money Order Sellers and Money Transmitters

REGULATIONS

Vol. 31 Iss. 12 - February 09, 2015

TITLE 10. FINANCE AND FINANCIAL INSTITUTIONS

STATE CORPORATION COMMISSION

Chapter 120

Final Regulation

REGISTRAR'S NOTICE: The State Corporation Commission is claiming an exemption from the Administrative Process Act in accordance with § 2.2-4002 A 2 of the Code of Virginia, which exempts courts, any agency of the Supreme Court, and any agency that by the Constitution is expressly granted any of the powers of a court of record.

Title of Regulation: 10VAC5-120. Money Order Sellers and Money Transmitters (amending 10VAC5-120-10, 10VAC5-120-40, 10VAC5-120-50; adding 10VAC5-120-60 through 10VAC5-120-100).

Statutory Authority: §§ 6.2-1913 and 12.1-13 of the Code of Virginia.

Effective Date: February 15, 2015.

Agency Contact: Susan Hancock, Deputy Commissioner, Bureau of Financial Institutions, State Corporation Commission, P.O. Box 640, Richmond, VA 23218, telephone [phone], FAX [phone], or email [e-mail].

Summary:

The amendments (i) define various terms and clarify the scope of the term "money transmission," (ii) require licensees to file a quarterly report of outstandings and permissible investments; (iii) clarify that permissible investments must be unencumbered and held solely in the name of the licensee; (iv) prohibit licensees from providing false, misleading, or deceptive information to the Bureau of Financial Institutions or a Virginia resident; (v) clarify that the acts and omissions of a licensee's authorized delegates constitute acts and omissions of the licensee; (vi) require licensees and former licensees to maintain their contact information with the Bureau of Financial Institutions until they have no outstanding money orders and money transmission transactions; (vii) add certain receivables from depository institutions as permissible investments and limit receivables under § 6.2-1919 A 5 of the Code of Virginia as permissible investments; (viii) require licensees and their authorized delegates to dispose of records containing consumers' personal financial information in a secure manner; (ix) specify additional events that require licensees to file a written report with the Commissioner of Financial Institutions; (x) prescribe an application fee for any person submitting an application to acquire 25% or more of the ownership of a licensee; and (xi) prohibit licensees from allowing an authorized delegate to designate or appoint a subdelegate to sell money orders or engage in money transmission business.

Changes to the reporting requirements in 10VAC5-120-40 C in the final regulation clarify when a report is made and what information the report contains.

AT RICHMOND, JANUARY 12, 2015

COMMONWEALTH OF VIRGINIA, ex rel.

STATE CORPORATION COMMISSION

CASE NO. BFI-2014-00009

Ex Parte: In re: Money Order Sellers
and Money Transmitters

ORDER ADOPTING REGULATIONS

On September 24, 2014, the State Corporation Commission ("Commission") entered an Order to Take Notice of a proposal by the Bureau of Financial Institutions ("Bureau") to amend the Commission's regulations governing licensed money order sellers and money transmitters, which are set forth in Chapter 120 of Title 10 of the Virginia Administrative Code, 10VAC5-120-10 et seq. The Order to Take Notice and proposed regulations were published in the Virginia Register of Regulations on October 20, 2014, posted on the Commission's website, and sent to all licensed money order sellers and money transmitters, and other interested parties. Licensees and other interested parties were afforded the opportunity to file written comments or request a hearing on or before November 20, 2014.

Comments on the proposed regulations were filed by Terry Harbin of GSC Enterprises, Inc., and Bradley S. Lui, Esquire, counsel for The Money Services Round Table. The Commission did not receive any requests for a hearing.

Mr. Harbin indicated in his comments that the requirement in 10VAC5-120-40 C that licensees file a written report with the Commissioner of Financial Institutions within one business day following the occurrence of certain events is unreasonable. He suggested a ten day reporting requirement following the occurrence of a covered event. Mr. Lui expressed a similar concern and suggested a thirty day reporting requirement following a licensee becoming aware of the occurrence of a covered event, not upon the actual occurrence of the event. Mr. Lui also noted that § 6.2-1917 of the Code of Virginia does not require licensees to report the expected impact of a covered event on the licensee's Virginia activities.

Mr. Lui further commented that the prohibitions in 10VAC5-120-60 B and 10VAC5-120-70 J on a licensee providing false, misleading, or deceptive information to the Bureau or to a Virginia resident may be overly broad and have the potential to apply to unintentional acts by a licensee. He recommended that the proposed regulations be modified to prohibit licensees from knowingly providing false, misleading, or deceptive information to the Bureau or to a Virginia resident, or providing such information with the intent to deceive.

The Bureau considered the comments filed and responded to them in its Statements of Position, which the Bureau filed with the Clerk of the Commission on December 17, 2014. In its response, the Bureau stated that it is amenable to (1) replacing the first instance of the word "following" in 10VAC5-120-40 C with the words "after a licensee becomes aware of"; and (2) removing the requirement that a licensee report the expected impact that a covered event would have on the licensee's Virginia activities. The Bureau otherwise recommended that the Commission adopt the proposed regulations as proposed.

NOW THE COMMISSION, having considered the proposed regulations, the comments filed, the Bureau's Statements of Position, the record herein, and applicable law, concludes that the proposed regulations should be modified to incorporate certain suggestions that were made by commenters and the Bureau. The Commission further concludes that the proposed regulations, as modified, should be adopted with an effective date of February 15, 2015.

Accordingly, IT IS ORDERED THAT:

(1) The proposed regulations, as modified herein and attached hereto, are adopted effective February 15, 2015.

(2) This Order and the attached regulations shall be posted on the Commission's website at: http://www.scc.virginia.gov/case.

(3) The Commission's Division of Information Resources shall provide a copy of this Order, including a copy of the attached regulations, to the Virginia Registrar of Regulations for publication in the Virginia Register of Regulations.

(4) This case is dismissed, and the papers filed herein shall be placed in the Commission's file for ended causes.

AN ATTESTED COPY hereof, together with a copy of the attached regulations, shall be sent by the Clerk of the Commission to the Commission's Office of General Counsel and the Commissioner of Financial Institutions, who shall forthwith send a copy of this Order, together with a copy of the attached regulations, to all licensed money order sellers and money transmitters, and such other interested parties as he may designate.

10VAC5-120-10. Definitions.

The following words and terms, when used in this chapter, shall have the following meaning meanings unless the context clearly indicates otherwise:

"Money "Authorized delegate," "licensee," "monetary value," "money order," "money transmission," and "licensee" "outstanding" shall have the meaning meanings ascribed to them in § 6.2-1900 of the Code of Virginia.

"Bureau," "commission," and "commissioner" shall have the meanings ascribed to them in § 6.2-100 of the Code of Virginia.

"Chapter 19" means Chapter 19 (§ 6.2-1900 et seq.) of Title 6.2 of the Code of Virginia.

"Generally accepted accounting principles" for purposes of Chapter 19 and this chapter means standard accounting guidelines as established and administered by the American Institute of Certified Public Accountants (AICPA) and the United States Financial Accounting Standards Board (FASB).

"Merchant or service provider" means a person engaged in the business of selling goods or services, but excluding a person licensed or required to be licensed under Chapter 19.

"Money transmission" for purposes of Chapter 19 and this chapter shall have the meaning ascribed to it in § 6.2-1900 of the Code of Virginia. However, the term shall not include the actions of an agent who collects funds on behalf of a merchant or service provider, provided that (i) the agent has been explicitly designated in a written agreement as an agent of the merchant or service provider; (ii) any funds collected by the agent shall be deemed for all purposes to be received by the merchant or service provider, regardless of whether the agent actually remits such funds to the merchant or service provider; (iii) the agent provides the Virginia resident with a dated receipt indicating that payment to the agent constitutes payment to the merchant or service provider; and (iv) there is no risk of loss to the Virginia resident if the agent fails to remit such resident's funds to the merchant or service provider. This definition shall not be construed to prohibit the merchant or service provider from seeking indemnification from its agent for any direct losses incurred due to the agent's failure to remit funds in accordance with its agreement.

"Reporting period" means a calendar quarter, the first six months of a calendar year, or the last six months of a calendar year, as the case may be.

"Senior officer" for purposes of Chapter 19 means an individual who has significant management responsibility within an organization or otherwise has the authority to influence or control the conduct of the organization's affairs, including but not limited to its compliance with applicable laws and regulations.

10VAC5-120-40. Reporting requirements.

A. 1. Licensees licensed for less than three years shall file reports with the commissioner within 45 days after the end of each calendar quarter.

2. Licensees licensed for three years or longer shall file reports with the commissioner within 45 days after the end of each semiannual reporting period.

3. Licensees affiliated by common ownership with another licensee licensed for three years or longer, and licensees which that acquire all or part of the money order sales business or money transmission business of another licensee licensed for three years or longer, shall file reports with the commissioner within 45 days after the end of each semiannual reporting period.

B. Licensees shall file a report of outstandings and permissible investments with the commissioner within 45 days after the end of each calendar quarter.

C. Within one business day [ following after a licensee becomes aware of ] the occurrence of any of the following events, [ a the ] licensee shall file a written report with the commissioner describing the event [ and its expected impact, if any, on the activities of the licensee in Virginia ]:

1. Bankruptcy, reorganization, or receivership proceedings are filed by or against the licensee.

2. Any local, state, or federal governmental authority institutes revocation, suspension, or other formal administrative, regulatory, or enforcement proceedings against the licensee.

3. Any local, state, or federal governmental authority (i) revokes or suspends the licensee's money order seller license, money transmitter license, or other license for a similar business; (ii) takes formal administrative, regulatory, or enforcement action against the licensee relating to its money order sales, money transmission, or similar business; or (iii) takes any other action against the licensee relating to its money order sales, money transmission, or similar business where the total amount of restitution or other payment from the licensee exceeds $20,000. A licensee shall not be required to provide the commissioner with information about such event to the extent that such disclosure is prohibited by the laws of another state.

4. Based on allegations by any local, state, or federal governmental authority that the licensee violated any law or regulation applicable to the conduct of its licensed money order sales, money transmission, or similar business, the licensee enters into, or otherwise agrees to the entry of, a settlement or consent order, decree, or agreement with or by such governmental authority.

5. The licensee surrenders its money order seller license, money transmitter license, or other license for a similar business in another state in lieu of threatened or pending license revocation; license suspension; or other administrative, regulatory, or enforcement action.

6. The licensee is denied a money order seller license, money transmitter license, or other license for a similar business in another state.

7. The licensee or any of its members, partners, directors, officers, principals, employees, or authorized delegates is indicted or convicted of a felony.

D. The reports required by this section shall contain such information as the commissioner may require. The commissioner may require such additional reports as he deems necessary.

10VAC5-120-50. Assessment schedule for the examination and supervision of money order sellers and money transmitters.

Pursuant to subsection B of § 6.2-1905 of the Code of Virginia, the commission sets the following schedule for the annual assessment to be paid by persons licensed under Chapter 19 (§ 6.2-1900 et seq.) of Title 6.2 of the Code of Virginia. The assessment defrays the costs of the examination and supervision of licensees by the Bureau of Financial Institutions bureau.

The annual assessment shall be $0.000047 per dollar of money orders sold and money transmitted by a licensee pursuant to Chapter 19 (§ 6.2-1900 et seq.) of Title 6.2 of the Code of Virginia. The assessment shall be based on the dollar volume of business conducted by a licensee, either directly or through its authorized delegates, during the calendar year preceding the year of the assessment.

The amount calculated using the above schedule shall be rounded down to the nearest whole dollar.

Fees shall be assessed on or before August 1 for the current calendar year. The assessment shall be paid by licensees on or before September 1.

The annual report, due April 15 each year, of each licensee provides the basis for its assessment. In cases where a license has been granted between January 1 and April 15 of the year of the assessment, the licensee's initial annual assessment shall be $0.

Fees prescribed and assessed pursuant to this schedule are apart from, and do not include, the following: (i) the annual license renewal fee of $750 authorized by subsection A of § 6.2-1905 of the Code of Virginia and (ii) the reimbursement for expenses authorized by subsection C of § 6.2-1905 of the Code of Virginia.

10VAC5-120-60. Responding to requests from the Bureau of Financial Institutions; providing false, misleading, or deceptive information.

A. When the bureau requests a written response, books, records, documentation, or other information from a licensee or its authorized delegate in connection with the bureau's investigation, enforcement, or examination of compliance with applicable laws and regulations, the licensee or authorized delegate shall deliver a written response as well as any requested books, records, documentation, or information within the time period specified in the bureau's request. If no time period is specified, a written response as well as any requested books, records, documentation, or information shall be delivered by the licensee or its authorized delegate to the bureau not later than 30 days from the date of such request. In determining the specified time period for responding to the bureau and when considering a request for an extension of time to respond, the bureau shall take into consideration the volume and complexity of the requested written response, books, records, documentation, or information, and such other factors as the bureau determines to be relevant under the circumstances. Requests made by the bureau pursuant to this subsection are deemed to be in furtherance of the bureau's investigation and examination authority provided for in § 6.2-1910 of the Code of Virginia.

B. A licensee shall not provide any false, misleading, or deceptive information to the bureau.

10VAC5-120-70. Acquisitions; additional business requirements and restrictions; operating rules.

A. Any person submitting an application to acquire, directly or indirectly, 25% or more of the voting shares of a corporation or 25% or more of the ownership of any other person licensed to conduct business under Chapter 19 shall pay a nonrefundable application fee of $500.

B. A licensee shall not permit an authorized delegate to designate or appoint a subdelegate to sell money orders or engage in money transmission business.

C. The audited financial statements filed by a licensee pursuant to § 6.2-1905 D of the Code of Virginia shall cover the prior 12-month fiscal period and be prepared in accordance with generally accepted accounting principles.

D. Quarterly financial statements filed by a licensee pursuant to § 6.2-1917 B of the Code of Virginia shall be consolidated and prepared in accordance with generally accepted accounting principles.

E. A licensee shall comply with Chapter 19, this chapter, and all other state and federal laws and regulations applicable to the conduct of its business. For purposes of Chapter 19 and this chapter, the acts and omissions of a licensee's authorized delegates shall be deemed acts and omissions of such licensee.

F. In addition to the records specified in § 6.2-1916 B of the Code of Virginia, a licensee shall maintain in its principal place of business such other books, accounts, and records as the commissioner may reasonably require in order to determine whether such licensee is complying with the provisions of Chapter 19, this chapter, and other laws and regulations applicable to the conduct of its business.

G. If a licensee, authorized delegate, or former licensee disposes of records containing a consumer's personal financial information or copies of a consumer's identification documents, such records and copies shall be shredded, incinerated, or otherwise disposed of in a secure manner. A licensee, authorized delegate, or former licensee may arrange for service from a business record destruction vendor.

H. A licensee or former licensee shall provide the following information to the bureau within 10 days after such person's license is surrendered or revoked or the licensed business is otherwise closed: (i) the names, addresses, telephone numbers, fax numbers, and email addresses of a designated contact person and the person who consumers may contact regarding outstanding money orders or money transmission transactions; (ii) the location of the licensee's or former licensee's money order and money transmission records; and (iii) any additional information that the bureau may reasonably require. A licensee or former licensee shall maintain current information with the bureau until the licensee or former licensee has no outstanding money orders and money transmission transactions.

I. A person shall remain subject to the provisions of Chapter 19 and this chapter applicable to licensees in connection with all money orders sold and money or monetary value received for transmission while licensed under Chapter 19 notwithstanding the occurrence of any of the following events:

1. The person's license is surrendered or revoked; or

2. The person ceases selling money orders or transmitting money or monetary value.

J. A licensee shall not provide any information to a Virginia resident that is false, misleading, or deceptive.

K. A licensee shall not engage in any activity that directly or indirectly results in an evasion of the provisions of Chapter 19 or this chapter.

L. A licensee shall continuously maintain the requirements and standards for licensure prescribed in § 6.2-1906 of the Code of Virginia.

10VAC5-120-80. Permissible investments.

A. Permissible investments maintained by a licensee pursuant to § 6.2-1918 of the Code of Virginia shall be unencumbered and held solely in the name of the licensee.

B. In addition to the investments specified in § 6.2-1919 of the Code of Virginia, the following investments shall be considered permissible under § 6.2-1918 of the Code of Virginia: any receivables that are (i) payable to a licensee from any bank, savings institution, or credit union that is chartered under the laws of the United States or any state thereof; (ii) comprised of funds that have been tendered by residents of the United States for money transmission transactions; and (iii) no more than seven days old.

C. The receivables specified in § 6.2-1919 A 5 of the Code of Virginia shall be limited to funds that have been collected by a licensee's authorized delegates directly from residents of the United States for money transmission transactions.

10VAC5-120-90. Enforcement.

A. Failure to comply with any provision of Chapter 19 or this chapter may result in civil penalties, license revocation, the entry of a cease and desist order, or other appropriate enforcement action.

B. Pursuant to § 6.2-1920 of the Code of Virginia, a person required to be licensed under Chapter 19 shall be subject to a civil penalty of up to $2,500 for every violation of Chapter 19, this chapter, or other law or regulation applicable to the conduct of the person's business. Furthermore, if a person violates any provision of Chapter 19, this chapter, or other law or regulation applicable to the conduct of the person's business in connection with multiple money order sales or money transmission transactions, the person shall be subject to a separate civil penalty for each money order sale or money transmission transaction. For example, if a person sells five money orders and the person violates two provisions of this chapter in connection with each of the five money order sales, there would be a total of 10 violations and the person would be subject to a maximum civil penalty of $25,000.

10VAC5-120-100. Commission authority.

The commission may, at its discretion, waive or grant exceptions to any provision of this chapter for good cause shown.

VA.R. Doc. No. R15-4161; Filed January 21, 2015, 1:05 a.m.