Assemblyman JOHN F. MCKEON
District 27 (Essex)
Assemblyman FREDERICK SCALERA
District 36 (Bergen, Essex and Passaic)
Revises "New Jersey Money Transmitters Act"; provides consumer protections; increases reporting and record keeping requirements.
CURRENT VERSION OF TEXT
An Act concerning money transmitters and amending P.L.1998, c.14.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 2 of P.L.1998, c.14 (C.17:15C-2) is amended to read as follows:
2. As used in this act:
"Applicant" means a person filing an application for a license under this act.
"Authorized delegate" means an entity authorized by the licensee pursuant to the provisions of section 17 of this act to sell or issue payment instruments or engage in the business of transmitting money on behalf of a licensee.
"Commissioner" means the Commissioner of Banking and Insurance.
"Control" means ownership of, or the power to vote, 25 percent or more of the outstanding voting securities of a licensee or controlling person. For purposes of determining the percentage of a licensee controlled by any person, there shall be aggregated with the person's interest the interest of any other person controlled by that person or by any spouse, parent, or child of that person.
"Controlling person" means any person in control of a licensee.
"Department" means the Department of Banking and Insurance.
"Executive officer" means the licensee's president, chairman of the executive committee, senior officer responsible for the licensee's business in this State, chief financial officer and any other person who performs similar functions.
"Foreign money transmitter" means a person who engages, in this State, only in the business of the receipt of money for transmission or transmitting money to locations outside of the United States by any and all means, including but not limited to payment instrument, wire, facsimile, electronic transfer, or otherwise for a fee, commission or other benefit.
"Key shareholder" means any person, or group of persons acting in concert, who is the owner of 25 percent or more of any voting class of an applicant's stock.
"Licensee" means a person licensed under this act.
"Location" means a place of business at which activities regulated by this act occur.
litigation" means any litigation that, according to generally accepted
accounting principles, is deemed significant to any applicant's or licensee's
financial health and would be required to be referenced in that entity's annual
audited financial statements,
report to shareholders or similar documents.
"Money" means a medium of exchange authorized or adopted by the United States or a foreign government as a part of its currency and that is customarily used and accepted as a medium of exchange in the country of issuance.
"Money transmitter" means a person who engages in this State in the business of:
(1) the sale or issuance of payment instruments for a fee, commission or other benefit;
(2) the receipt of money for transmission or transmitting money within the United States or to locations abroad by any and all means, including but not limited to payment instrument, wire, facsimile, electronic transfer, or otherwise for a fee, commission or other benefit; or
(3) the receipt of money for obligors for the purpose of paying obligors' bills, invoices or accounts for a fee, commission or other benefit paid by the obligor.
"Outstanding payment instrument" means any payment instrument issued by the licensee which has been sold in the United States directly by the licensee or any payment instrument issued by the licensee which has been sold by an authorized delegate of the licensee in the United States, which has been reported to the licensee as having been sold, and which has not yet been paid by or for the licensee.
"Payment instrument" means any check, draft, money order, travelers check or other instrument or written order for the transmission or payment of money, sold or issued to one or more persons, whether or not the instrument is negotiable. The term "payment instrument" does not include any credit card voucher, any letter of credit or any instrument which is redeemable by the issuer in goods or services.
"Permissible investments" means:
(2) certificates of deposit or other debt obligations of a bank, savings bank, savings and loan association, or credit union, either domestic or foreign;
(3) bills of exchange or time drafts drawn on and accepted by a commercial bank, otherwise known as bankers' acceptances, which are eligible for purchase by member banks of the Federal Reserve System;
(4) any investment which is rated in one of the three highest rating categories by a nationally recognized statistical rating organization;
(5) investment securities that are obligations of the United States, its agencies or instrumentalities, or obligations that are guaranteed fully as to principal and interest by the United States, or any obligations of any state, municipality or any political subdivision thereof which is rated in one of the three highest rating categories by a nationally recognized statistical rating organization;
(6) shares in a money market mutual fund, interest-bearing bills, notes or bonds, debentures or stock traded on any national securities exchange or on a national over-the-counter market, or mutual funds primarily composed of those securities or a fund composed of one or more permissible investments as set forth in this section;
(7) demand borrowing agreements made to a corporation or a subsidiary of a corporation whose capital stock is listed on a national exchange;
(8) receivables which are due to a licensee from its authorized delegates pursuant to a contract described in section 17 of this act, which are not past due or doubtful of collection; or
(9) any other investments or security device which the commissioner may authorize by rule.
"Publicly traded corporation" means any corporation or other legal entity, except a natural person, which:
(1) has one or more classes of security registered pursuant to section 12 of the “Securities Exchange Act of 1934,” Pub.L.73-291 (15 U.S.C. s.78l);
(2) is an issuer subject to section 15(d) of the “Securities Exchange Act of 1934,” Pub.L.73-291 (15 U.S.C. s.78o(d)); or
(3) has one or more classes of securities traded in any open market in any foreign jurisdiction or regulated pursuant to a statute of any foreign jurisdiction which the commissioner determines to be substantially similar to the statutes referred to in paragraphs (1) or (2) herein.
(cf: P.L.1998, c.14, s.2)
2. Section 4 of P.L.1998, c.14 (C.17:15C-4) is amended to read as follows:
4. a. No person, other than a person exempt from the provisions of this act pursuant to section 3, shall engage in the business of money transmission without a license as provided in this act. A licensee shall prominently display its license in its principal place of business.
b. A licensee may conduct its business in this State at one or more locations, directly or indirectly owned, or through one or more authorized delegates, or both, pursuant to the [single] license granted to the licensee under this act.
(cf: P.L.1998, c.14, s.4)
3. Section 10 of P.L.1998, c.14 (C.17:15C-10) is amended to read as follows:
10. a. Each licensee, shall make, keep and preserve the following books, accounts and other records for a period of [three] five years:
(1) a record of each [payment instrument] transmission sold, including the date and the amount of the transaction;
(2) a general ledger containing all assets, liabilities, capital, income and expense accounts (which general ledger shall be posted at least monthly);
(3) settlement sheets received from authorized delegates;
(4) bank statements and bank reconciliation records;
(5) records of outstanding payment instruments;
(6) records of each payment instrument paid within the [three-year] five-year period;
(7) a list of names and addresses of all of the licensee's authorized delegates;
(8) a list of all countries to which money is transmitted or from which money is received for transmission;
(9) a list of the names and addresses of all clearing banks through which the licensee's money transmission business is conducted; and
(10) such other books and records as the commissioner may require by regulation.
b. Maintenance of the documents required by this section in a photographic, electronic or other similar form shall constitute compliance with this section.
c. Each licensee shall maintain the records it is required to maintain pursuant to 31 C.F.R. s.103.11 et seq.
d. The records of the licensee regarding business regulated under this act shall be maintained at its principal place of business or, with notice to the commissioner, at another location designated by the licensee. If the records are maintained outside this State, the commissioner may require that the licensee reimburse the department for the travel costs incurred in the examination or investigation of those records or may require that the licensee make those records available to the commissioner at the commissioner's office not more than seven business days after demand. The commissioner may further require that those records be accompanied by an individual who will be available to answer questions regarding those records and the business regulated under this act. The commissioner may require the appearance of a specific individual, or request that the licensee designate an individual with knowledge of the records and the business.
e. Each licensee is deemed to consent to inspection, by the commissioner and any appropriate representative of any State or federal law enforcement agency, of all records of the licensee regarding business regulated under P.L.1998, c.14 (C.17:15C-1 et seq.).
(cf: P.L.1998, c.14, s.10)
4. Section 12 of P.L.1998, c.14 (C.17:15C-12) is amended to read as follows:
12. a. Each licensee shall file with the commissioner [an annual] a report for the quarterly periods ending March 31, June 30, September 30 and December 31 of each year, containing the information required by the commissioner and within the time period required by the commissioner by regulation , along with a fee in an amount set by the commissioner by regulation not to exceed $200 per filing. In addition to this filing fee, the commissioner may assess an additional fee by regulation in that amount which the commissioner determines is necessary to meet the costs to the department pursuant to this section.
b. The commissioner may require reports of any licensee or authorized delegate, under penalty of perjury or otherwise, concerning the licensee's or authorized delegate's business conducted pursuant to the license issued under this act, as the commissioner requires for the enforcement of this act.
c. A licensee who fails to file any report required by this section on or before the day designated for making the report, or fails to include any prescribed matter in the report, shall pay a penalty of [not more than $100] $200 for each day that the report is delayed or incomplete, unless the commissioner, for good cause shown, reduces the amount to be paid, or unless the time to file the report is extended in writing by the commissioner. [In addition, the commissioner may revoke or suspend the authority of a licensee to do business in this State.] The penalty may be collected in a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). A warrant may issue in lieu of a summons.
d. [The] Each licensee shall file with the commissioner on or before April 1 of each year an annual report and include in its annual report:
(1) (a) except as provided pursuant to subparagraph (b) of this paragraph (1), for a person licensed to engage only in the business of a foreign money transmitter, a copy of its most recent audited consolidated annual financial statement, including balance sheet, statement of income or loss, statement of changes in shareholder's equity and statement of changes in financial position, or, in the case of a licensee that is a wholly owned subsidiary of another corporation, the consolidated audited annual financial statement of the parent corporation may be filed in lieu of the licensee's audited annual financial statement;
(b) for a person licensed to engage only in the business of a foreign money transmitter, a copy of its most recent compiled annual financial statement, including balance sheet, statement of income or loss, statement of changes in shareholder's equity and statement of changes in financial position, except that the commissioner may, for good cause, request a foreign money transmitter to submit an audited financial statement;
(2) for the most recent quarter for which data is available prior to the date of the filing of the annual report, but in no event more than 120 days prior to the annual report filing date, the licensee shall provide the number of payment instruments sold by the licensee in the State, the dollar amount of those instruments and the dollar amount of those instruments currently outstanding;
(3) any material changes to any of the information submitted by the licensee on its original application which have not previously been reported to the commissioner on any other report required to be filed under this act;
(4) a list of the licensee's permissible investments;
(5) a list of the locations within this State at which business regulated by this act is being conducted by either the licensee or its authorized delegate; [and]
(6) [such] any other information as the commissioner may require by regulation; and
(7) a copy of the licensee’s most recent registration as a money transmitter business with the Financial Crimes Enforcement Network, established within the United States Department of the Treasury, pursuant to 31 C.F.R. s.103.11 et seq.
(cf: P.L.2007, c.81, s.17)
5. Section 16 of P.L.1998, c.14 (C.17:15C-16) is amended to read as follows:
16. After notice and hearing pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), the commissioner may suspend or revoke a licensee's license if the commissioner finds that:
a. The licensee has made a material misstatement or suppressed or withheld information on the application for a license or any document required to be filed with the commissioner, or the licensee's authorized delegate has made a material misstatement or suppressed or withheld information on the application for a license or any document required to be filed with the commissioner, and the licensee knew or should have known of the delegate's misstatement, suppression or withholding of the information ;
b. Any fact or condition exists that, if it had existed at the time when the licensee applied for its license, would have been grounds for denying the application;
c. The licensee's net worth has become inadequate and the licensee, after 10 days' written notice from the commissioner, fails to take the steps the commissioner deems necessary to remedy the deficiency;
d. The licensee knowingly violates any material provision of this act or any rule or order validly promulgated by the commissioner under authority of this act;
e. The licensee is conducting its business in an unsafe or unsound manner;
f. The licensee is insolvent; for the purposes of this section, a licensee shall be insolvent if: (1) the aggregate of its property at a fair valuation, exclusive of any property which it may have conveyed, transferred, concealed, removed or permitted to be concealed or removed, with intent to defraud, hinder or delay its creditors, is not sufficient in amount to pay its debts; or (2) the licensee is unable, by its available assets or the honest use of credit, to pay its debts as they become due;
g. The licensee has suspended payment of its obligations, has made an assignment for the benefit of its creditors, or has admitted in writing its inability to pay its debts as they become due;
h. The licensee has applied for an adjudication of bankruptcy, reorganization, arrangement, or other relief under any bankruptcy;
i. The licensee refuses to permit the commissioner to make any examination or investigation authorized by this act;
j. The licensee willfully fails to make any report required by this act;
k. The licensee has willfully violated any provision of 31 C.F.R. s.103.11 et seq.; [or]
l. The licensee has willfully violated any provision of P.L.1994, c.121 (C.2C:21-23 et seq.) ; or
m. The licensee has been convicted of, or has entered a plea of guilty or nolo contendere to a crime of the first, second, third or fourth degree, without regard to whether adjudication was held.
(cf: P.L.1998, c.14, s.16)
6. Section 17 of P.L.1998, c.14 (C.17:15C-17) is amended to read as follows:
17. a. Licensees desiring to conduct licensed activities through authorized delegates shall authorize each delegate to operate pursuant to an express written contract, which shall provide that the licensee appoints the person as its delegate with authority to engage in the activities of a money transmitter on behalf of the licensee.
b. The department shall collect and maintain the names and addresses of each licensee and each authorized delegate of each licensee. The department shall make that information available to the public on the official website of the department and shall update that information as it is received by the department. The commissioner may assess a fee by regulation in that amount which the commissioner determines is necessary to meet the costs to the department pursuant to this section.
(cf: P.L.1998, c.14, s.17)
7. Section 18 of P.L.1998, c.14 (C.17:15C-18) is amended to read as follows:
18. a. An authorized delegate shall not make any fraudulent or false statement or misrepresentation to a licensee or to the commissioner.
b. All money transmission or sale or issuance of payment instrument activities conducted by authorized delegates shall be strictly in accordance with the licensee's written procedures to the authorized delegate.
c. An authorized delegate shall remit all money owing to the licensee in accordance with the terms of the contract between the licensee and the authorized delegate. The failure of an authorized delegate to remit all money owing to a licensee within the time presented shall result in liability of the authorized delegate to the licensee for three times the licensee's actual damages. The commissioner shall have the discretion to set, by regulation, the maximum remittance time.
d. An authorized delegate is deemed to consent to [the commissioner's] inspection by the commissioner and any appropriate representative of any State or federal law enforcement agency, with or without prior notice to the licensee or authorized delegate, of the books and records of the authorized delegate of the licensee whenever the commissioner has a reasonable basis to believe that the licensee or authorized delegate is not in compliance with this act.
e. An authorized delegate is under a duty to act only as authorized under the contract with the licensee and an authorized delegate who exceeds its authority is subject to cancellation of its contract and further disciplinary action by the commissioner.
f. All funds (less fees) received by an authorized delegate of a licensee from the sale or delivery of a payment instrument issued by a licensee or received by an authorized delegate for transmission shall, from the time the funds are received by an authorized delegate until that time when the funds or an equivalent amount are remitted by the authorized delegate to the licensee, constitute trust funds owned by and belonging to the licensee. If an authorized delegate commingles any trust funds with any other funds or property owned or controlled by the authorized delegate, all commingled proceeds and other property shall be impressed with a trust in favor of the licensee in the amount equal to the amount of the proceeds due the licensee. Nothing contained in this subsection shall constitute authority for the creation of any trust funds, or a trust to be impressed for funds, owned by or belonging to the licensee, that have been deposited with a financial institution unless the financial institution has actual knowledge that the funds are owned by or belong to the licensee. The licensee shall be liable to a purchaser or holder of an outstanding payment instrument, which is issued by the licensee or received by the licensee’s authorized delegate for transmission and set-off by the financial institution. If the licensee has insufficient assets to make the purchaser or holder whole, the purchaser or holder shall be entitled to reimbursement under the surety bond, irrevocable letter of credit or security device possessed by the licensee pursuant to the provisions of sections 6 and 8 of P.L.1998, c.14 (C.17:15C-6 and 17:15C-8) to secure faithful performance of the obligations of the licensee with respect to the receipt, handling, transmission and payment of money in connection with the sale and issuance of payment instruments or transmission of money.
g. An authorized delegate shall report to the licensee the theft or loss of payment instruments within 24 hours from the time it knew or should have known of that theft or loss.
h. Authorized delegates shall comply with the provisions of 31 C.F.R. s.103.11 et seq. and P.L.1994, c.121 (C.2C:21-23 et seq.).
i. Authorized delegates shall conduct all business governed by this act in the name of the licensee.
j. An authorized delegate shall prominently display at each of its locations a notice in a form prescribed by the commissioner, indicating that the authorized delegate is an authorized delegate of a licensee under P.L.1998, c.14 (C.17:15C-1 et seq.).
(cf: P.L.1998, c.14, s.18)
8. Section 24 of P.L.1998, c.14 (C.17:15C-24) is amended to read as follows:
24. a. Any person who knowingly and willfully violates any provision of this act for which a penalty is not specifically provided is guilty of a crime of the fourth degree.
b. Any person who knowingly and willfully makes a material, false statement in any document filed or required to be filed under this act with the intent to deceive the recipient of the document is guilty of a crime of the third degree.
c. Any person who knowingly and willfully engages in the business of money transmission without a license as provided herein shall be guilty of a crime of the [third] second degree.
d. Any person who purposely or knowingly refuses to permit any lawful investigation by the commissioner or the Attorney General shall be guilty of a crime of the third degree.
(cf: P.L.1998, c.14, s.24)
9. This act shall take effect on the 180th day following enactment.
This bill makes various revisions to the “New Jersey Money Transmitters Act” to require licensed money transmitters and their delegates to provide more reporting, record keeping and consumer disclosures.
The bill requires licensees to prominently display license information at their locations. The bill broadens the consent deemed to be given by licensees and delegates to include record inspection rights for appropriate law enforcement representatives in addition to the Commissioner of Banking and Insurance, and requires licensees to keep records for five years instead of the three years required by the current act. The bill requires licensees to file quarterly reports with the commissioner, in addition to the annual reports presently required, and raises the penalty to $200 per day, from not more than $100 per day, as to any licensee who fails to file any report. The licensee shall also file annually with the commissioner, a copy of the licensee's most recent registration with the Financial Crimes Enforcement Network (FinCEN) as a money transmitter business pursuant to 31 C.F.R. s.103.11 et seq.
The bill expands the liability of licensees for certain acts of their delegates and provides for license suspension upon conviction for certain crimes. The bill also requires a delegate to prominently display at each of its locations a notice indicating that the delegate is an authorized delegate of a licensee. Further, the bill mandates that the department maintain a website to make licensee and delegate information available to the public. Finally, the bill increases the crime of operating as a money transmitter without a license from a crime of the third degree to a crime of the second degree.
This bill provides that funds belonging to a licensee and deposited in a financial institution shall not constitute trust funds, unless the financial institution has actual knowledge that such funds are owned by or belong to the licensee. The bill also provides that the licensee is liable to a purchaser or holder of an outstanding payment instrument which is issued by the licensee or received by the licensee’s authorized delegate for transmission and set-off by the financial institution. If the licensee has insufficient assets to make the purchaser or holder whole, the purchaser or holder will be entitled to reimbursement under the surety bond that the act currently requires all licensees to have.