Money Transmitter Bonds

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about money transmitter bonds.  If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts.

CONTACT US FOR A

FREE MONEY TRANSMITTER BOND

What Are Money Transmitter Bonds?

Under U.S. law, money transmitters are defined as business entities that provide money transfer services and/or payment instruments, which makes them a type of money service business, or MSB. As such, they are subject to the regulatory provisions of the Bank Secrecy Act, along with other MSBs, such as check cashing services and issuers, sellers, and redeemers of money orders.

A money transmitter bond is classified as a type of license and permit surety bond because purchasing one is a prerequisite to obtaining a money transmitter license in all but a couple of states. The bond serves as a money transmitter’s pledge to operate in compliance with all state laws and regulations governing MSBs and provides protection for the state and the public against financial losses caused by the unlawful actions of the money transmitter.

Who Needs Them?

Specific bonding requirements vary by state, but in general, any business entity applying for initial licensure as a money transmitter is required to purchase a money transmitter bond. The dollar amount of the bond is established by each state in its capacity as the “obligee” requiring the bond.

When a money transmitter bond expires (usually at the time the license is due for renewal), the money transmitter, known as the bond’s “principal,” must purchase a new one so that coverage is continuous. Unless an active bond is always in force, the principal is subject to license suspension or revocation.

How Do They Work?

In addition to the obligee and the principal, there is a third party to the legally binding surety bond agreement for a money transmitter bond. The “surety” is the company guaranteeing the bond—more specifically, guaranteeing the principal’s payment of all valid claims against the bond. The state and customers of the money transmitter have the right to file claims to recover financial damages resulting from the principal’s violation of the terms of the surety bond agreement.

The surety will examine each claim received to ensure that it is valid and approve it for payment. Then, although the principal is solely responsible by law for paying every valid claim, the surety will honor its guarantee and pay the claim on behalf of the principal. That does not, however, relieve the principal of the legal obligation to pay valid claims, so the principal must subsequently reimburse the surety.

What Do They Cost?

The annual premium for a money transmitter bond is a small percentage of the required bond amount. The surety decides what that percentage, the premium rate, will be at the time the bond is sold. The primary consideration is the risk that the principal will not repay the surety in a timely fashion, or at all.

The underwriters will assess that risk based largely on the principal’s personal credit score.  With good credit, the risk to the surety is considered to be low, which warrants a low premium rate, potentially as low as one percent. With a low credit score, the risk is higher, and the premium rate will be higher as well.

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about money transmitter bonds.  If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts.

CONTACT US FOR A

FREE MONEY TRANSMITTER BOND QUOTE

What Are Money Transmitter Bonds?

Under U.S. law, money transmitters are defined as business entities that provide money transfer services and/or payment instruments, which makes them a type of money service business, or MSB. As such, they are subject to the regulatory provisions of the Bank Secrecy Act, along with other MSBs, such as check cashing services and issuers, sellers, and redeemers of money orders.

A money transmitter bond is classified as a type of license and permit surety bond because purchasing one is a prerequisite to obtaining a money transmitter license in all but a couple of states. The bond serves as a money transmitter’s pledge to operate in compliance with all state laws and regulations governing MSBs and provides protection for the state and the public against financial losses caused by the unlawful actions of the money transmitter.

Specific bonding requirements vary by state, but in general, any business entity applying for initial licensure as a money transmitter is required to purchase a money transmitter bond. The dollar amount of the bond is established by each state in its capacity as the “obligee” requiring the bond.

When a money transmitter bond expires (usually at the time the license is due for renewal), the money transmitter, known as the bond’s “principal,” must purchase a new one so that coverage is continuous. Unless an active bond is always in force, the principal is subject to license suspension or revocation.

In addition to the obligee and the principal, there is a third party to the legally binding surety bond agreement for a money transmitter bond. The “surety” is the company guaranteeing the bond—more specifically, guaranteeing the principal’s payment of all valid claims against the bond. The state and customers of the money transmitter have the right to file claims to recover financial damages resulting from the principal’s violation of the terms of the surety bond agreement.

The surety will examine each claim received to ensure that it is valid and approve it for payment. Then, although the principal is solely responsible by law for paying every valid claim, the surety will honor its guarantee and pay the claim on behalf of the principal. That does not, however, relieve the principal of the legal obligation to pay valid claims, so the principal must subsequently reimburse the surety.

The annual premium for a money transmitter bond is a small percentage of the required bond amount. The surety decides what that percentage, the premium rate, will be at the time the bond is sold. The primary consideration is the risk that the principal will not repay the surety in a timely fashion, or at all.

The underwriters will assess that risk based largely on the principal’s personal credit score.  With good credit, the risk to the surety is considered to be low, which warrants a low premium rate, potentially as low as one percent. With a low credit score, the risk is higher, and the premium rate will be higher as well.

REQUEST A QUOTE

Request a quote online or call today to speak with one of our surety bond experts about obtaining a money transmitter bond.