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Conference of State Bank Supervisors to Launch a Streamlined Single Exam Program for National Money Transmitters and Payments Firms

Regulatory Alert

On September 15, 2020, the Conference of State Bank Supervisors (CSBS) put out a press release stating their plans to launch a program called the “MSB Networked Supervision.” This program hopes to simplify licensing in the money transmitter and payments space by administering a single exam to companies who are operating in 40 or more states. The Office of the Comptroller of the Currency (OCC) claims that this new program will streamline the regulatory process and provide a more efficient regulatory experience for larger money service businesses who register in multiple states. 

The most important takeaways from this new announcement are as follows:

  • The “MSB Networked Supervision” would provide multistate licensing and supervision for nonbanks.
  • Nationwide payments firms will undergo a single comprehensive exam to satisfy all state regulatory requirements. 
  • The CSBS will introduce the same rules and standards across 48 states.
  • Money transmitters operating in 40 or more states will benefit from this streamlined state supervision starting in 2021. 
  • One state will lead a group in representing all 49 regulatory bodies in evaluating each different company.
  • Currently, this new model will apply to 78 MSBs, including Western Union and PayPal; companies that together move a reported $1 trillion annually.
  • This will streamline compliance, making it easy for state-licensed money transmitters to work across multiple states, instead of going through the time and expense of getting regulated in each and every one.

The debate between state regulators and the OCC on who is best equipped to regulate and monitor these nonbank financial providers has been ongoing for quite a few years now. This new federal program will likely increase the debate between state and federal regulators, with the potential to bring them to a promising compromise and conclusion. 

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