Opinions Letters – Technological/customer service support not money transmission
STATE OF CALIFORNIA
Department of Business Oversight
GOVERNOR Gavin Newsom · COMMISSIONER Jan Lynn Owen
December 21, 2018
Re: Request for Interpretive Opinion – ____________________
Dear ____________________:
This letter is in response your e-mail dated August 9, 2018 to ____________________, the Deputy Commissioner of the Money Transmitter Division in the Department of Business Oversight, as supplemented by your emails dated September 7 and October 29. In your correspondence, you request a determination that your client, ____________________, Inc. (“_____”), is not subject to, or is exempt, from the Money Transmission Act.
Background
Money Transmission Act
The MTA provides that a person shall not engage in the business of money transmission in California unless the person is licensed or exempt from licensure under the MTA, or is an agent of a person licensed or exempt from licensure.[1]
Financial Code section 2003, subdivision (q) defines “money transmission” in relevant part as receiving money for transmission. Financial Code section 2003, subdivision (u) defines “receiving money for transmission” as receiving money or monetary value in the United States for transmission within or outside of the United States by electronic or other means.
_________ Activities
In your correspondence, you provided an overview of the cross-border payment service offered by ____________________ (“_____”), _______________, and _____ (“Payment System”). You
explained that U.S. merchants can use this service to facilitate payments from the merchant’s customers in China. _______________ is responsible for pulling money from a customer’s account, converting the funds into U.S. Currency, and wiring it to the
_______________(“_____”), which is an FDIC-insured commercial bank. The funds are deposited into an “___-_______________ Account”, owned and managed by _____, and _____ becomes liable for the money. From the _____-_______________ Account, _____ deducts an operational fee and routes the remaining funds to the merchant’s settlement account, which is owned by _____. At that point, _____ provides the agreed upon amount to the merchant’s account, with the balance, representing ___’s transaction fee, going to ___’s account.
___ enrolls merchants to use the Payment System and provides customer service to these merchants. It also provides the merchant access to a third-party online system on which the merchant can review its transactions with its customers. You confirmed in your emails that ___ does not assume responsibility for customer funds and is not directly involved in sending money from China to the United States, nor the clearing and settlement of funds before the funds are transmitted to the merchant.
Analysis
___ does not receive money for transmission in relation to this Payment System. Rather, ___ is providing the technological and customer service support that allows _____ to receive money for transmission in the U.S. Therefore, ___ is not subject to the requirements of the MTA because it is not conducting money transmission. And, as a commercial bank whose deposits are insured by the FDIC, _____ is exempt from the requirements of the MTA.[2]
This opinion is based solely on the facts as represented in your correspondence, and the Department’s understanding of those representations. The Department may reach a different conclusion under other facts and circumstances. If you have any questions, please feel free to contact me at ________________.
Sincerely,
Jan Lynn Owen Commissioner
Department of Business Oversight
By
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[1] Fin. Code, § 2030, subd. (a).
[2] Fin. Code, § 2010, subd. (d).