S2201

SENATE, No. 2201

STATE OF NEW JERSEY

INTRODUCED JUNE 16, 1997

By Senator INVERSO

An Act concerning money transmitters, supplementing Title 17 of the Revised Statutes and repealing chapter 15 of Title 17 of the Revised Statutes and P.L.1964, c.273.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. This act shall be known and may be cited as the "New Jersey Money Transmitters Act."

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.

"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.

"Material 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:

(1) cash;

(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.

3. a. This act shall not apply to:

(1) The United States or any department, agency, or instrumentality thereof;

(2) The United States Postal Service;

(3) The State or any political subdivision thereof;

(4) Banks, bank holding companies, credit unions, building and loan associations, savings and loan associations, savings banks or mutual banks organized under the laws of any state or the United States, provided that they do not issue or sell payment instruments through authorized delegates who are not banks, bank holding companies, credit unions, building and loan associations, savings and loan associations, savings banks or mutual banks;

(5) The provision of electronic transfer of government benefits for any federal, state or county agency as defined in Regulation E, 12 C.F.R. §205.1 et seq., by a contractor for and on behalf of the United States or any department, agency or instrumentality thereof, or any state or political subdivision thereof; and

(6) A person licensed to conduct business as a debt adjuster pursuant to P.L.1979, c.16 (C.17:16G-1 et seq.), when acting within the scope of activities regulated by that license.

b. Authorized delegates of a licensee, acting within the scope of authority conferred by a written contract as described in section 17 of this act shall not be required to obtain a license pursuant to this act.

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.

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.

5. a. Each licensee shall at all times have a net worth of not less than $100,000, calculated in accordance with generally accepted accounting principles. Licensees engaging in money transmission at more than one location or through authorized delegates shall have an additional net worth of $25,000 per location or agent located in this State, as applicable, up to a maximum net worth amount of $1,000,000.

b. Every corporate applicant, at the time of filing an application and at all times after a license is issued, shall be in good standing in the state of its incorporation. All non-corporate applicants shall, at the time of the filing of an application and at all times after a license is issued, be registered or qualified to do business in this State.

6. a. Each licensee shall at all times possess permissible investments having an aggregate market value, calculated in accordance with generally accepted accounting principles, of not less than the aggregate face amount of all outstanding payment instruments issued or sold by the licensee in the United States. This requirement may be waived by the commissioner if the dollar volume of a licensee's outstanding payment instruments does not exceed the bond or other security devices posted by the licensee pursuant to section 8 of this act.

b. In the event of bankrutcy of the licensee, permissible investments, even if commingled with other assets of the licensee, shall be deemed to be held in trust for the benefit of the purchasers and holders of the licensee's outstanding payment instruments by operation of law.

7. Each application for a license shall be made in writing, under oath, and in a form prescribed by the commissioner. Each application shall contain:

a. For all applicants:

(1) The exact name of the applicant, the applicant's principal address, any fictitious or trade name used by the applicant in the conduct of its business and the location of the applicant's business records;

(2) The history, if any, of the applicant's material litigation and criminal convictions for the five year period prior to the date of the application;

(3) A description of the activities conducted by the applicant and a history of operations;

(4) A description of the business activities in which the applicant seeks to be engaged in the State;

(5) A list identifying the applicant's proposed authorized delegates in the State, if any, at the time of the filing of the license application;

(6) A sample authorized delegate contract, if applicable;

(7) A sample form of payment instrument, if applicable;

(8) Each location at which the applicant and its authorized delegates, if any, propose to conduct the licensed activities in the State;

(9) The name and address of each clearing bank on which the applicant's payment instruments will be drawn or through which those payment instruments will be payable;

(10) A list identifying each country to which an applicant proposes to transmit money or from which an applicant proposes to receive money transmissions;

(11) Federal tax identification number; and

(12) Non-refundable application fee as prescribed by regulation by the commissioner in an amount not to exceed $1,000.

b. If the applicant is a corporation, the applicant shall also provide:

(1) The date of the applicant's incorporation and state of incorporation;

(2) A certificate of good standing from the state in which the applicant was incorporated;

(3) A description of the corporate structure of the applicant, including the identity of any parent or subsidiary of the applicant, and the disclosure of whether any parent or subsidiary is publicly traded on any stock exchange;

(4) The name, business and residence address, social security number, date of birth and employment history for the past five years of each of the applicant's executive officers and of each officer or manager who will be in charge of the applicant's activities to be licensed under this act;

(5) The name, business and residence address, social security number, date of birth and employment history for the period five years prior to the date of the application of each key shareholder of the applicant;

(6) The history, if any, of material litigation and criminal convictions for the five year period prior to the date of the application of every executive officer or key shareholder of the applicant;

(7) A copy of the applicant's most recent audited financial statements (including balance sheet, statement of income or loss, statement of changes in shareholder equity and statement of changes in financial position) prepared by a certified public accountant or public accountant in good standing and, if available, the applicant's audited financial statements for the immediately preceding three year period. However, if the applicant is a wholly owned subsidiary of another corporation, the applicant may submit either the parent corporation's consolidated audited financial statements for the current year and for the immediately preceding three year period or the parent corporation's Form 10-K reports filed with the Securities and Exchange Commission for the prior three years in lieu of the applicant's financial statements. If the applicant is a wholly owned subsidiary of a corporation having its principal place of business outside the United States, similar documentation filed with the parent corporation's non-United States regulator may be submitted to satisfy this provision;

(8) Copies of all filings, if any, made by the applicant with the Securities and Exchange Commission, or with a similar regulator in a country other than the United States, within the year preceding the date of filing of the application; and

(9) Except in the case of a publicly traded corporation, its subsidiaries and affiliates, or a bank, bank holding company, subsidiaries and affiliates thereof, fingerprints of each of the applicant's executive officers and of each officer or manager who will be in charge of the applicant's activities to be licensed hereunder.

c. If the applicant is not a corporation, the applicant shall also provide:

(1) The name, business and residence address, personal financial statement and employment history for the past five years, social security number, date of birth, and fingerprints of each principal of the applicant and the name, business and residence address, employment history for the past five years, social security number, date of birth, and fingerprints of any other persons who will be in charge of the applicant's activities to be licensed under this act;

(2) The place and date of the applicant's registration or qualification to do business in this State;

(3) The history, if any, of material litigation and criminal convictions for the five year period prior to the date of the application for each individual having any ownership interest in the applicant and each individual who exercises supervisory responsibility with respect to the applicant's activities; and

(4) Copies of the applicant's audited financial statements (including balance sheet, statement of income or loss, and statement of changes in financial position) prepared by a certified public accountant or public accountant in good standing for the current year and, if available, for the immediately preceding two year period; and

(5) Alien registration information, if applicable.

d. Such other information as the commissioner may require by regulation.

8. a. Each application must be accompanied by a surety bond, irrevocable letter of credit or such other similar security device (hereinafter "security device") acceptable to the commissioner in an amount prescribed by the commissioner by regulation of not less than $100,000 and not more than $1,000,000. The security device shall be in a form satisfactory to the commissioner and shall run to the State for the benefit of any person injured by a wrongful act, default, fraud or misrepresentation of the licensee, including its directors, officers, authorized delegates and employees, to secure the 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, transmission of money, or both. In the case of a bond, the bond shall be obtained from a surety company authorized to do business in this State and the aggregate liability of the surety in no event shall exceed the principal sum of the bond.

b. In lieu of the security device or of any portion of the principal thereof, as required by this section, the licensee may deposit with the commissioner, or with banks in this State that the licensee designates and the commissioner approves, cash, interest-bearing stocks and bonds, notes, debentures or other obligations of the United States or any agency or instrumentality thereof, or guaranteed by the United States, or of this State, or of a political subdivision or instrumentality of this State, or guaranteed by this State which is rated in one of the three highest categories by a nationally recognized statistical rating organization, to an aggregate amount, based upon principal amount or market value, whichever is lower, of not less than the amount of the security device or portion thereof. The securities, cash, or both, shall be deposited as aforesaid and held to secure the same obligations as the security device, but the depositor shall be entitled to receive all interest and dividends thereon, shall have the right, with the approval of the commissioner, to substitute other securities for those deposited, and shall be required to do so on written order of the commissioner for good cause shown.

c. The security device shall remain in effect until cancellation, which may occur only after thirty days' written notice to the commissioner. Cancellation shall not affect any liability incurred or accrued during that period.

d. The security device shall remain in place for no longer than five years after the licensee ceases money transmission operations in the State. However, notwithstanding this provision, the commissioner may permit the security device to be reduced or eliminated prior to that time to the extent that the amount of the licensee's payment instruments outstanding in this State are reduced. The commissioner may also permit a licensee to substitute a letter of credit or other form of security device acceptable to the commissioner for the security device in place at the time the licensee ceases money transmission operations in the State by surrender, revocation or expiration of its license.

9. a. Upon the filing of a complete application, in the case of an initial application, or the filing of a complete biennial renewal application, the commissioner shall investigate the financial condition and responsibility, financial and business experience, character and general fitness of the applicant for an initial license or a renewal license. The commissioner may conduct an on-site investigation of the applicant for an initial license, the reasonable cost of which shall be borne by the applicant. If the commissioner finds that the applicant's business will be conducted honestly, fairly and in a manner commanding the confidence and trust of the community and that the applicant has fulfilled the requirements imposed by this act and has paid the required license fee, the commissioner shall issue a license to the applicant authorizing the applicant to engage in the licensed activities in this State. If these requirements have not been met, the commissioner shall deny the application in writing, setting forth the reasons for the denial.

b. The commissioner shall approve or deny every application for an initial license within 120 days from the date that the applicant has satisfied all requirements for licensure.

c. The license fee for each two-year period, or any part thereof, shall be in an amount prescribed by the commissioner by rule or regulation, not to exceed $4,000. The two-year license period shall be set by the commissioner by rule or regulation. A license shall run from the date of issuance to the end of the biennial period. If the initial license is issued in the second year of the biennial licensing period, the license fee shall be in an amount not to exceed $2,000.

d. Each license issued pursuant to this act shall expire at the end of the biennial licensing period. Licenses shall not be transferable or assignable.

e. The licensee shall submit a biennial fee to register locations in the State. The fee shall be established by the commissioner by regulation in an amount which is not less than $25 per location in the State but which shall not to exceed a maximum amount of $5,000 for all locations.

f. Within 45 days after the end of each calendar quarter, each licensee shall file with the commissioner in writing a list of all locations within the State that have been added or terminated by the licensee, if any. The list shall include the name and business address of each location.

g. If the licensed name or licensed business address is changed, the licensee shall notify the commissioner in writing of the change within 10 days.

10. a. Each licensee, shall make, keep and preserve the following books, accounts and other records for a period of three years:

(1) a record of each payment instrument sold;

(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 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;

(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. §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.

11. a. The commissioner may investigate and examine any licensee or other person the commissioner deems necessary to determine compliance with this act and the orders, rules and regulations issued hereunder. For these purposes, the commissioner may examine the books, accounts, records, and other documents or matters of any licensee or other person. The commissioner shall have the power to compel by subpoena the production of all relevant books, records and other documents and materials relative to an examination or investigation. The cost of the investigations and examinations shall be borne by the licensee.

b. Examinations and investigations conducted under the provisions of this section shall be confidential except as required in the administration, enforcement and prosecution of violations under this act, or pursuant to a court order made upon notice to the commissioner and after affording the commissioner an opportunity to advise the court of reasons for excluding that evidence. The court shall order the issuance of a subpoena for the production or admission into evidence of any report or portion thereof, only if it is satisfied that: (1) it is material and relevant to the issues in the proceedings; and (2) the ends of justice and public advantage will be served thereby. If any person refuses to obey a subpoena, or to give testimony or produce evidence as required thereby, the commissioner may apply ex parte to any court having jurisdiction over that person for an order compelling the appearance of the witness before the commissioner to give testimony or to produce evidence as required thereby, or both. The commissioner, in lieu of an on-site examination, may establish by regulation other reports which will be deemed acceptable and which will be considered for all purposes an official report of the commissioner.

c. The commissioner may request additional financial data from a licensee or conduct an on-site examination or investigation of any authorized delegate or location of a licensee within this State without prior notice to the authorized delegate or licensee if the commissioner has a reasonable basis to believe that the licensee or authorized delegate is not in compliance with this act. Whenever the commissioner examines or investigates an authorized delegate's operations, the authorized delegate shall pay the costs of that examination or investigation, but the licensee shall remain liable for ensuring that the payment is made. Whenever the commissioner examines or investigates a licensee's location within the State, the licensee shall pay all reasonably incurred costs of that examination.

12. a. Each licensee shall file with the commissioner on or before April 1 of each year an annual report containing the information required by the commissioner by regulation, along with a fee in an amount set by the commissioner by regulation not to exceed $200.

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 $100 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. The penalty may be recovered in a summary proceeding under the "penalty enforcement law" (N.J.S.2A:58-1 et seq.).

d. The licensee shall include in its annual report:

(1) 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;

(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.

(6) such other information as the commissioner may require by regulation.

13. Within 15 days of the occurrence of any one of the events listed below, a licensee shall file a written report with the commissioner describing the event and its expected impact on the licensee's activities in the State:

a. The filing for bankruptcy or reorganization by the licensee;

b. The institution of revocation or suspension proceedings against the licensee by any state or governmental authority with regard to the licensees' money transmission activities;

c. Any indictment of the licensee or any of its key officers or directors related to money transmission activities and specified as a crime by P.L.1994 c.121 (C.2C:21-23 et seq.);

d. Any conviction of the licensee or any of its key officers or directors related to money transmission activities and specified as a crime by P.L.1994 c.121 (C.2C:21-23 et seq.).

14. a. A person shall not directly or indirectly acquire control of a licensee without the prior written approval of the commissioner. The application for change of control shall be in writing in a form prescribed by the commissioner and shall be accompanied by the information, data and records the commissioner requires by regulation. The application shall be accompanied by a fee in an amount not to exceed $500 set by the commissioner by regulation.

b. The commissioner shall deny the application to acquire control of a licensee if the commissioner finds that the acquisition of control is contrary to law or that disapproval is reasonably necessary to protect the interest of the public. In making that determination, the commissioner shall consider the following:

(1) Whether the financial condition of the person that seeks to control the licensee might jeopardize the financial condition of the licensee or the interests of the public in the conduct of the business regulated under this act; and

(2) Whether the competence, experience, and integrity of the person who seeks to control the licensee, or the officers, directors and controlling persons of the person who seeks to control the licensee, indicate that it would not be in the interests of the public to permit that person to control the licensee.

c. Nothing in this section shall prohibit a person from negotiating or entering into agreements subject to the condition that the acquisition of control will not be effective until approved by the commissioner.

d. This section shall not apply to any of the following persons or transactions:

(1) A registered dealer who acts as an underwriter or member of a selling group in a public offering of the voting securities of a licensee or controlling person of a licensee;

(2) A person who acts as proxy for the sole purpose of voting at a designated meeting of the security holders of a licensee or controlling person of a licensee;

(3) A person who acquires control of a licensee or controlling person as a personal representative, custodian, guardian, conservator, trustee or other officer appointed by a court of competent jurisdiction or by operation of law;

(4) Purchases of a controlling amount of shares on a national stock exchange of a publicly held licensee, until the licensee has actual notice of that purchase and, within five days, notifies the commissioner; and

(5) Any other person or transaction that the commissioner by rule or order exempts in the public interest.

e. Before filing an application for approval to acquire control, a person may request in writing a determination from the commissioner as to whether that person will be deemed in control, upon consummation of a proposed transaction. If the commissioner determines in response to that request that the person will not be in control within the meaning of this act, the commissioner shall notify the person that the proposed transaction is not subject to the requirements of this section.

15. a. Notwithstanding any other provision of law, all information or reports obtained by the department from an applicant, licensee or authorized delegate, whether obtained through reports, applications, examinations, audits, investigations, or otherwise, including, but not limited to: (1) all information contained in or related to examination, investigation, operating, or condition reports prepared by, on behalf of, or for the use of the department; or (2) financial statements, balance sheets, or authorized delegate information, are confidential and may not be disclosed or distributed outside the department by the commissioner or any officer or employee of the department. The commissioner, however, may provide for the release of information to representatives of state or federal agencies and foreign countries having regulatory or supervisory authority over the activities of the licensee or similar licensees if those representatives, upon request of the commissioner, disclose similar information respecting those licensees under their regulation or supervision, or to those representatives who state in writing under oath that they shall maintain the confidentiality of that information.

b. The commissioner may:

(1) Disclose the fact of filing of applications with the department pursuant to this act, give notice of a hearing, if any, regarding those applications, and announce his action thereon;

(2) Disclose final decisions in connection with proceedings for the suspension or revocation of licenses issued pursuant to this act;

(3) Prepare and circulate reports reflecting the assets and liabilities of money transmitters in general, including other information considered pertinent to the purpose of each report for general statistical information; and

(4) Prepare and circulate reports as provided by law.

c. Every official report of the department is prima facie evidence of the facts therein stated in any action or proceeding wherein the commissioner is a party.

d. Nothing in this section shall be construed to prevent the disclosure of information that is admissible in evidence in any civil or criminal proceeding brought by or at the request of the commissioner or this State to enforce or prosecute violations of this act or the rules, regulations or orders issued or promulgated pursuant to this act.

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;

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.§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.).

17. 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.

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, 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; and

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.

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.§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.

19. a. If, after notice and a hearing, the commissioner finds that any authorized delegate of a licensee or any director, officer, employee, or controlling person of that authorized delegate:

(1) has violated any provision of this act or of any rule or regulation or order issued under this act;

(2) has engaged or participated in any unsafe or unsound act with respect to the business of selling or issuing payment instruments of the licensee or the business of money transmission; or

(3) has made or caused to be made in any application or report filed with the commissioner or in any proceeding before the commissioner, any statement which was at the time and in the circumstances under which it was made, false or misleading with respect to any material fact, or has omitted to state in any such application or report any material fact which is required to be stated therein,

the commissioner may issue an order, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (c.52:14B-1 et. seq.) suspending or barring the authorized delegate from continuing to be or becoming an authorized delegate of any licensee during the period for which the order is in effect. Upon issuance of an order, the licensee shall terminate its relationship with the authorized delegate according to the terms of the order.

b. (1) Any authorized delegate to whom an order is issued under this section may apply to the commissioner to modify or rescind the order. The commissioner shall not grant the application unless the commissioner finds that it is in the public interest to do so and that it is reasonable to believe that the person will, if and when the person is permitted to resume being an authorized delegate of a licensee, comply with all applicable provisions of this act and of any regulation and order issued under this act.

(2) The right of any authorized delegate to whom an order is issued under this section to petition for judicial review of that order shall not be affected by the failure of that person to apply to the commissioner to modify or rescind the order.

20. A licensee's responsibility to any person for a money transmission conducted on that person's behalf by the licensee or the licensee's authorized delegate shall be limited to the amount of money transmitted or the face amount of the payment instrument purchased and any fee, commission or other benefit paid to the licensee or the licensee's authorized delegate for that service.

21. The provisions of the "Administrative Procedure Act," P.L.1968, c.410 (52:14B-1 et seq.) shall apply to any hearing afforded pursuant to this act.

22. a. If, after notice and hearing, the commissioner finds that a person has violated any provision of this act or a rule adopted under this act, the commissioner may order the person to pay the commissioner a civil penalty in an amount specified by the commissioner, not to exceed $5,000 for each violation. Each violation shall constitute a separate offense and the penalty under this section shall be in addition to a suspension or revocation of a license. No such proceeding shall be initiated and no penalty shall be assessed pursuant to this section until after that person has been notified in writing of the nature of the violation and has been afforded a reasonable period of time, as set forth in the notice, to correct the violation and has failed to do so. The provisions of the "penalty enforcement law," N.J.S.2A:58-1 et seq., shall apply.

b. The commissioner, in the exercise of the commissioner's reasonable judgment, is authorized to compromise, settle, and collect civil penalties with any person for violations of any provision of this act, or of any rule, regulation or order issued or promulgated pursuant to this act.

23. a. If it appears to the commissioner that any person has committed or is about to commit a violation of any provision of this act or of any rule or order of the commissioner, the commissioner may apply to the Superior Court for an order enjoining that person from violating or continuing to violate this act or any rule, regulation or order of the commissioner and for injunctive or other relief as the nature of the case may require.

b. The commissioner may enter into consent orders at any time with any person to resolve any matter arising under this act. A consent order shall be signed by the person to whom it is issued or a duly authorized representative, and shall indicate agreement to the terms contained therein. A consent order need not constitute an admission by any person that any provision of this act, or any rule, regulation or order promulgated or issued thereunder has been violated, nor need it constitute a finding by the commissioner that the person has violated any provision of this act or any rule, regulation or order promulgated or issued thereunder.

c. Notwithstanding the issuance of a consent order, the commissioner may seek civil or criminal penalties or compromise civil penalties concerning matters encompassed by the consent order, unless the consent order by its terms expressly precludes the commissioner from so doing.

d. The commissioner is authorized to exchange fingerprint data with and receive criminal history information from the Federal Bureau of Investigation and the New Jersey Division of State Police or any other appropriate agency for use in performing background checks. The commissioner is authorized to conduct additional background checks the commissioner deems appropriate.

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 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.

25. The commissioner shall promulgate regulations pursuant to the "Adminstrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), necessary to effectuate the provisions of this act.

26. a. Any licensee, authorized delegate or other person who engages in business activities that are regulated under this act, with or without filing an application, is deemed to have done both of the following:

(1) Consented to the jurisdiction of the courts of this State for all actions arising under this act; and

(2) Appointed the commissioner as his lawful agent for the purpose of accepting service of process in any action, suit or proceeding that may arise under this act.

b. Within three business days after service of process upon the commissioner, the commissioner shall transmit by certified mail copies of all lawful process accepted by the commissioner as an agent to that person at its last known address. Service of process shall be considered complete three business days after the commissioner deposits copies of the documents in the United States mail.

27. Every person engaged in activities within this State encompassed by this act on the effective date of this act, except those persons already licensed under chapter 15 of Title 17 of the Revised Statutes or P.L.1964, c.273 (C.17:15B-1 et seq.), shall file an application in accordance with the provisions of this act within 90 days after the date this act becomes operative. A person licensed under chapter 15 of Title 17 of the Revised Statutes or P.L.1964, c.273 (C.17:15B-1 et seq.), shall continue as a licensee under this act until April 1, 1998, at which time, if the licensee intends to continue to engage in activities regulated by this act, the licensee shall renew the license as a licensee under the provisions of this act no later than April 1, 1998.

28. The following are repealed:

R.S.17:15-1 through R.S.17:15-10

P.L.1964, c.273 (C.17:15B-1 et seq.).

29. Section 25 of this act shall take effect immediately and the remainder of this act shall take effect on January 1, 1998.

STATEMENT

This bill provides for the licensing and regulation of persons engaged in the business of money transmission. Under the bill the business of a money transmitter is defined as: a person who engages, either directly or through an authorized delegate, in the business of:

(1) the sale or issuance of payment instruments for a fee, commission or other benefit;

(3) the receipt of money for obligors for the purpose of paying obligor's bills, invoices or accounts for a fee, commission or other benefit paid by the obligor.

Currently these activities are regulated as foreign money transmitters under R.S.17:15-1 et seq. and "The Check Selling Law," P.L.1964, c.273 (C.17:15B-1 et seq.).

The bill restricts the business of money transmission to those licensed under the bill but provides an exception for federal and state departments and agencies (including the provision of electronic transfer of government benefits), bank holding companies, state or federally chartered banks, savings banks, savings and loan associations or credit unions or a person licensed as a debt adjuster. Each licensee is required to have a net worth of $100,000 plus an additional net worth amount of $25,000 for each location or authorized delegate through whom its business is conducted in this State up to a maximum net worth amount of $1,000,000 regardless of the total number of locations and authorized delegates.

The bill requires each application for a license to be accompanied by a surety bond or similar security device acceptable to the commissioner in an amount set by the commissioner of not less than $100,000 or more than $1,000,000.

Under the bill, a license is good for two years. The bill requires the Commissioner of Banking and Insurance to set a license fee for that two-year period of time which is not greater than $4,000.

Each licensee is required to keep certain records for a period of three years, which are to be available to the commissioner for inspection and examination, whether in an office in this State or out-of-State. The licensee is to bear the cost of any examination.

Under the bill, a licensee is permitted to conduct licensed activities through authorized delegates pursuant to an express written contract which provides that the licensee appoints the person as its delegate with authority to engage in the activities of a money transmitter on its behalf.

The bill authorizes the commissioner to enforce the provisions of the bill and upon notice and a hearing, issue an order suspending or barring an authorized delegate from continuing to engage in the money transmitting business. Authorized delegates have the right to apply to have any order modified or rescinded.

The bill provides for the imposition of civil and criminal penalties for a violation of any of its provisions.

Provides for the licensing and regulation of money transmitters.