Senate File 2294 - Introduced SENATE FILE 2294 BY COMMITTEE ON COMMERCE (SUCCESSOR TO SSB 3110) (COMPANION TO HF 2262 BY COMMITTEE ON COMMERCE) A BILL FOR An Act relating to money transmission services, providing 1 penalties, and including effective date and retroactive 2 applicability provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 5289SV (1) 90 nls/ko
S.F. 2294 Section 1. Section 533C.102, subsection 2, Code 2024, is 1 amended to read as follows: 2 2. Authorized delegate means a person a licensee 3 designates to provide money services transmission on behalf of 4 the licensee. 5 Sec. 2. Section 533C.103, Code 2024, is amended by adding 6 the following new subsection: 7 NEW SUBSECTION . 21. A person appointed as an agent of a 8 payor for purposes of providing payroll processing services for 9 which the agent would otherwise need to be licensed, provided 10 all of the following apply: 11 a. There is a written agreement between the payor and the 12 agent that directs the agent to provide payroll processing 13 services on the payors behalf. 14 b. The payor holds the agent out to employees and other 15 payees as providing payroll processing services on the payors 16 behalf. 17 c. The payors obligation to a payee, including an employee 18 or any other party entitled to receive funds via the payroll 19 processing services provided by the agent, shall not be 20 extinguished if the agent fails to remit the funds to the 21 payee. 22 Sec. 3. NEW SECTION . 533C.901 Suspension and revocation 23 receivership. 24 The superintendent may suspend or revoke a licensees 25 license, place a licensee in receivership, or order a licensee 26 to revoke the designation of an authorized delegate if any of 27 the following apply: 28 1. The licensee violates this chapter, a rule adopted under 29 this chapter, or an order issued under this chapter. 30 2. The licensee does not cooperate with an examination or 31 investigation conducted by the superintendent. 32 3. The licensee engages in fraud, intentional 33 misrepresentation, or gross negligence. 34 4. As a result of the licensees willful misconduct or 35 -1- LSB 5289SV (1) 90 nls/ko 1/ 11
S.F. 2294 willful blindness, an authorized delegate is convicted of a 1 violation of a state or federal anti-money laundering statute, 2 or violates this chapter, a rule adopted under this chapter, or 3 an order issued under this chapter. 4 5. The competence, experience, character, or general 5 fitness of the licensee, authorized delegate, person in control 6 of a licensee, or key individual of the licensee or authorized 7 delegate indicates that it is not in the public interest to 8 permit the person to provide money transmission. 9 6. The licensee engages in an unsafe or unsound practice. 10 In determining whether a licensee is engaging in an unsafe or 11 unsound practice, the superintendent may consider the size and 12 condition of the licensees money transmission, the magnitude 13 of any losses, the gravity of any violations of this chapter, 14 and the previous conduct of any persons involved. 15 7. The licensee is insolvent, suspends payment of the 16 licensees obligations, or makes a general assignment for the 17 benefit of the licensees creditors. 18 8. The licensee does not remove an authorized delegate after 19 the superintendent issues and serves upon the licensee a final 20 order finding that the authorized delegate has violated this 21 chapter, a rule adopted under this chapter, or an order issued 22 under this chapter. 23 Sec. 4. NEW SECTION . 533C.902 Suspension and revocation of 24 authorized delegates. 25 1. The superintendent may issue an order suspending or 26 revoking the designation of an authorized delegate if the 27 superintendent finds any of the following apply: 28 a. The authorized delegate violated this chapter, a rule 29 adopted under this chapter, or an order issued under this 30 chapter. 31 b. The authorized delegate failed to cooperate with an 32 examination or investigation by the superintendent. 33 c. The authorized delegate engaged in fraud, intentional 34 misrepresentation, or gross negligence. 35 -2- LSB 5289SV (1) 90 nls/ko 2/ 11
S.F. 2294 d. The authorized delegate was convicted of a violation of a 1 state or federal anti-money laundering statute. 2 e. The competence, experience, character, or general 3 fitness of the authorized delegate or a person in control of 4 the authorized delegate indicates that it is not in the public 5 interest to permit the authorized delegate to provide money 6 transmission. 7 f. The authorized delegate is engaging in an unsafe or 8 unsound practice. In determining whether an authorized 9 delegate is engaging in an unsafe or unsound practice, the 10 superintendent may consider the size and condition of the 11 authorized delegates provision of money transmission; the 12 magnitude of any losses; the gravity of any violations of this 13 chapter, a rule adopted under this chapter, or an order issued 14 under this chapter; and the previous conduct of the authorized 15 delegate. 16 2. An authorized delegate may apply for relief from a 17 suspension or revocation of designation as an authorized 18 delegate according to procedures prescribed by the 19 superintendent. 20 Sec. 5. NEW SECTION . 533C.903 Orders to cease and desist. 21 1. a. If the superintendent determines that a violation 22 of this chapter, a rule adopted under this chapter, or an 23 order issued under this chapter by a licensee or authorized 24 delegate is likely to cause immediate and irreparable harm 25 to the licensee, the licensees customers, or the public, or 26 cause insolvency or significant dissipation of assets of the 27 licensee, the superintendent may issue an order requiring the 28 licensee or authorized delegate to cease and desist from the 29 violation. 30 b. The superintendent may issue an order for a licensee to 31 cease and desist from providing money transmission through an 32 authorized delegate that is the subject of a separate order by 33 the superintendent. 34 2. a. If the superintendent has reason to believe that a 35 -3- LSB 5289SV (1) 90 nls/ko 3/ 11
S.F. 2294 person has violated or is violating section 533C.301, 533C.501, 1 or 533C.502, the superintendent may issue an order requiring 2 the person to show cause why an order to cease and desist the 3 violation should not be issued. 4 b. In an emergency under this subsection, the superintendent 5 may petition the district court for the issuance of a temporary 6 restraining order ex parte pursuant to the rules of civil 7 procedure. 8 3. An order to cease and desist becomes effective upon 9 service of the order upon the person, licensee, or authorized 10 delegate. 11 4. An order to cease and desist remains effective and 12 enforceable pending the completion of an administrative 13 proceeding pursuant to section 533C.908. 14 5. A person, licensee, or an authorized delegate who is 15 served with an order to cease and desist under this section may 16 petition the appropriate court for a judicial order setting 17 aside, limiting, or suspending the enforcement, operation, 18 or effectiveness of the order pending the completion of an 19 administrative proceeding pursuant to section 533C.908. 20 6. An order to cease and desist shall expire ten days after 21 the order is issued unless the superintendent commences an 22 administrative proceeding pursuant to section 533C.908. 23 Sec. 6. NEW SECTION . 533C.904 Consent orders. 24 The superintendent may enter into a consent order at any 25 time with a person to resolve a matter arising under this 26 chapter, a rule adopted under this chapter, or an order issued 27 under this chapter. A consent order must be signed by the 28 person to whom the consent order is issued, or by the persons 29 authorized representative, and must indicate agreement with the 30 terms contained in the order. A consent order may provide that 31 the order does not constitute an admission by the person that 32 the person violated this chapter, a rule adopted under this 33 chapter, or an order issued under this chapter. 34 Sec. 7. NEW SECTION . 533C.905 Investigations. 35 -4- LSB 5289SV (1) 90 nls/ko 4/ 11
S.F. 2294 1. The attorney general or a county attorney may conduct an 1 investigation within or outside of this state to determine if 2 a licensee, an authorized delegate, or a person engaged in a 3 trade or business has failed to file a report required by this 4 chapter, or has engaged or is engaging in any act, practice, or 5 transaction that constitutes a violation of this chapter. 6 2. Upon presentation of a subpoena from a prosecuting 7 attorney, a licensee, an authorized delegate, or a financial 8 institution shall make its books and records available to the 9 attorney general or county attorney during normal business 10 hours for inspection and examination in connection with an 11 investigation pursuant to this section. 12 Sec. 8. NEW SECTION . 533C.906 Civil penalties. 13 The superintendent may assess a civil penalty against a 14 person who violates this chapter, a rule adopted under this 15 chapter, or an order issued under this chapter in an amount 16 not to exceed one thousand dollars per day for each day the 17 violation is outstanding, plus the states costs and expenses 18 for the investigation and prosecution of the matter, including 19 reasonable attorney fees. 20 Sec. 9. NEW SECTION . 533C.907 Criminal penalties. 21 1. A person who is not licensed under this chapter and 22 who knowingly engages in an activity for which a license is 23 required under this chapter commits an aggravated misdemeanor. 24 2. A person commits a class C felony, and is subject to a 25 civil penalty of three times the value of the property involved 26 in the transaction, or, if no transaction is involved, a civil 27 penalty of five thousand dollars, if the person does any of the 28 following: 29 a. With the intent to disguise the fact that money or 30 a payment instrument is the proceeds of criminal conduct, 31 or with the intent to promote, manage, establish, carry on, 32 or facilitate the promotion, management, establishment, or 33 carrying on of any criminal conduct, the person knowingly 34 furnishes or provides any false, inaccurate, or incomplete 35 -5- LSB 5289SV (1) 90 nls/ko 5/ 11
S.F. 2294 information to a licensee, authorized delegate, financial 1 institution, person engaged in a trade or business, or any 2 officer, employee, or their agent, or to the attorney general 3 or department of public safety, or knowingly conceals a 4 material fact in connection with a transaction for which a 5 report is required to be filed pursuant to this chapter. 6 b. With the intent to disguise the fact that money or 7 a payment instrument is the proceeds of criminal conduct, 8 or with the intent to promote, manage, establish, carry on, 9 or facilitate the promotion, management, establishment, or 10 carrying on of any criminal conduct, or with the intent to 11 evade the making or filing of a report required under this 12 chapter, or with the intent to cause the making or filing of 13 a report that contains a material omission or misstatement of 14 fact, the person conducts or structures a transaction or series 15 of transactions by or through one or more licensees, authorized 16 delegates, financial institutions, or persons engaged in a 17 trade or business. 18 3. A person who intentionally makes a false statement, 19 misrepresentation, or false certification in a record filed 20 or required to be maintained under this chapter, or who 21 intentionally makes a false entry or omits a material entry in 22 such a record commits a class D felony. 23 4. Notwithstanding any provision of law to the contrary, 24 each violation of this section constitutes a separate, 25 punishable offense. 26 Sec. 10. NEW SECTION . 533C.908 Administrative proceedings. 27 1. Except as otherwise provided in section 533C.903, the 28 superintendent shall not suspend or revoke a license, place a 29 licensee in receivership, issue an order to cease and desist, 30 suspend or revoke the designation of an authorized delegate, or 31 assess a civil penalty without notice and an opportunity to be 32 heard. 33 2. The superintendent shall hold a hearing when requested by 34 an applicant whose application for a license is denied. 35 -6- LSB 5289SV (1) 90 nls/ko 6/ 11
S.F. 2294 3. All administrative proceedings under this chapter shall 1 be conducted in accordance with chapter 17A. 2 Sec. 11. NEW SECTION . 533C.1001 Uniformity of application 3 and construction. 4 1. This chapter shall be liberally construed to effectuate 5 its remedial purposes. Civil remedies under this chapter shall 6 be supplemental and not mutually exclusive. The civil remedies 7 under this chapter do not preclude and are not precluded by any 8 other provision of law. 9 2. This chapter shall be applied and construed to effectuate 10 its general purpose to make uniform the law with respect to the 11 subject of this chapter among states enacting the same law, 12 and to make the reporting requirements regarding financial 13 transactions under Iowa law uniform with the reporting 14 requirements regarding financial transactions under federal 15 law. 16 3. The attorney general may enter into reciprocal 17 agreements with the attorney general or chief prosecuting 18 attorney of any state to effectuate the purposes of this 19 chapter. 20 Sec. 12. NEW SECTION . 533C.1002 Financial services 21 licensing fund. 22 1. A financial services licensing fund is created as a 23 separate fund in the state treasury under the authority of the 24 banking division of the department of insurance and financial 25 services. Moneys deposited in the fund shall be used to pay 26 for staffing necessary to perform examinations, audits, and 27 other duties required of the superintendent and the banking 28 division under this chapter. 29 2. The fund shall receive moneys including but not limited 30 to any fees, costs, expenses, or penalties collected pursuant 31 to this chapter. 32 3. Notwithstanding section 8.33, moneys appropriated to the 33 fund in this section that remain unencumbered or unobligated, 34 and other moneys credited to the fund, shall not revert at the 35 -7- LSB 5289SV (1) 90 nls/ko 7/ 11
S.F. 2294 close of the fiscal year but shall remain in the financial 1 services licensing fund and shall remain available for 2 expenditure for the purposes designated. 3 Sec. 13. NEW SECTION . 533C.1003 Applicability. 4 This chapter applies to the provision of money transmission 5 on or after October 1, 2003. 6 Sec. 14. EFFECTIVE DATE. This Act, being deemed of 7 immediate importance, takes effect upon enactment. 8 Sec. 15. RETROACTIVE APPLICABILITY. The following apply 9 retroactively to July 1, 2023: 10 The sections of this Act enacting sections 533C.901, 11 533C.902, 533C.903, 533C.904, 533C.905, 533C.906, 533C.907, 12 533C.908, 533C.1001, 533C.1002, and 533C.1003, and the section 13 of this Act amending section 533C.102. 14 Sec. 16. CODE EDITOR DIRECTIVE. The Code editor shall 15 designate sections 533C.901 through 533C.908, as enacted in 16 this Act, as article 9 entitled Enforcement, and sections 17 533C.1001 through 533C.1003, as enacted in this Act, as article 18 10 entitled Miscellaneous Provisions. 19 EXPLANATION 20 The inclusion of this explanation does not constitute agreement with 21 the explanations substance by the members of the general assembly. 22 This bill relates to money transmission services. 23 The bill adds an exemption from licensing for a person 24 appointed as an agent of a payor for purposes of providing 25 payroll processing services for which a license would otherwise 26 be required, if there is a written agreement between the payor 27 and the agent directing the agent to provide payroll processing 28 services, the payor holds the agent out as providing payroll 29 processing services on the payors behalf, and the payors 30 obligation to a payee is not extinguished if the agent fails to 31 remit the funds to the payee. 32 The bill authorizes the superintendent of banking 33 (superintendent) to suspend or revoke a license, place a 34 licensee in receivership, or order a licensee to revoke 35 -8- LSB 5289SV (1) 90 nls/ko 8/ 11
S.F. 2294 the designation of an authorized delegate (delegate) in the 1 circumstances described in the bill. 2 The bill authorizes the superintendent to issue an order 3 suspending or revoking the designation of a delegate in 4 the circumstances detailed in the bill. A delegate whose 5 designation has been suspended or revoked may apply for relief 6 from the suspension or revocation according to the procedures 7 prescribed by the superintendent. 8 The bill establishes the procedure for issuance of orders 9 to cease and desist by the superintendent. The superintendent 10 may issue an order requiring a licensee or delegate to cease 11 and desist from a violation if the superintendent determines 12 that the violation is likely to cause immediate and irreparable 13 harm to the licensee, the licensees customers, or the public, 14 or cause insolvency or significant dissipation of assets of 15 the licensee. Where a delegate is the subject of a separate 16 order by the superintendent, the superintendent may issue an 17 order for the licensee to cease and desist from providing 18 money transmission through such delegate. The superintendent 19 may require an unlicensed person to show cause why an order 20 to cease and desist a violation of Code section 533C.301, 21 533C.501, or 533C.502 should not be issued. In an emergency, 22 the superintendent may petition the district court for a 23 temporary restraining order ex parte. An order to cease 24 and desist is effective upon service and remains effective 25 and enforceable pending the completion of an administrative 26 proceeding. A person, licensee, or delegate served with 27 an order to cease and desist may petition the court for an 28 order setting aside, limiting, or suspending the enforcement, 29 operation, or effectiveness of the order pending the completion 30 of an administrative proceeding. An order to cease and 31 desist expires 10 days after issuance unless an administrative 32 proceeding is commenced by the superintendent. 33 The superintendent may enter into a consent order with a 34 person to resolve a matter arising under Code chapter 533C. 35 -9- LSB 5289SV (1) 90 nls/ko 9/ 11
S.F. 2294 The consent order must be signed by the person or the persons 1 authorized representative and indicate agreement with the terms 2 contained in the order. 3 The bill authorizes the attorney general or a county 4 attorney to conduct investigations to determine if any 5 licensee, delegate, or person engaged in a trade or business 6 has failed to file a required report, or has engaged in any 7 act, practice, or transaction that constitutes a violation of 8 Code chapter 533C. Upon presentation of a subpoena from a 9 person specified in the bill, all licensees, delegates, and 10 financial institutions shall make their books and records 11 available during normal business hours for inspection and 12 examination in connection with an investigation. 13 The bill authorizes the superintendent to assess civil 14 penalties against a person for violation of Code chapter 533C 15 in an amount not to exceed $1,000 per day for each day of the 16 violation, plus costs and expenses for the investigation and 17 prosecution, and reasonable attorney fees. 18 Under the bill, a person commits an aggravated misdemeanor 19 if the person is not licensed and knowingly engages in an 20 activity for which a license is required, punishable by 21 confinement for no more than two years and a fine of at least 22 $855 but not more than $8,540. A person commits a class C 23 felony, and is subject to a civil penalty of three times the 24 value of the property involved in the transaction, or $5,000, 25 where, with the requisite intent as laid out in the bill, 26 the person knowingly furnishes or provides to a given party 27 any false, inaccurate, or incomplete information; knowingly 28 conceals a material fact in connection with a transaction 29 for which a report is required to be filed; or, with the 30 requisite intent laid out in the bill, conducts or structures 31 a transaction by or through a licensee, delegate, financial 32 institution, or persons engaged in a trade or business. A 33 class C felony is punishable by confinement for no more 34 than 10 years and a fine of at least $1,370 but not more than 35 -10- LSB 5289SV (1) 90 nls/ko 10/ 11
S.F. 2294 $13,660. A person commits a class D felony if the person 1 intentionally makes a false statement, misrepresentation, 2 or false certification in a record filed or required to be 3 maintained under Code chapter 533C or intentionally makes a 4 false entry or omits a material entry in such a record. A class 5 D felony is punishable by confinement for no more than five 6 years and a fine of at least $1,025 but not more than $10,245. 7 Each violation constitutes a separate, punishable offense. 8 The bill prohibits the superintendent from suspending or 9 revoking a license, placing a licensee in receivership, issuing 10 an order to cease and desist, suspending or revoking the 11 designation of a delegate, or assessing a civil penalty without 12 notice and an opportunity to be heard. The superintendent 13 is required to hold a hearing when requested to do so by an 14 applicant whose application for a license is denied. 15 The bill shall be construed to effectuate both its remedial 16 and general purposes. Civil remedies are supplemental and 17 not mutually exclusive, and are not precluded by any other 18 provision of law. The attorney general may enter into 19 reciprocal agreements with the attorney general or chief 20 prosecuting attorney of any state to effectuate the purposes 21 of the bill. 22 The bill creates a separate financial services licensing 23 fund (fund) in the state treasury under the authority of 24 the banking division of the department of commerce. Moneys 25 deposited in the fund shall be used to pay for staffing 26 necessary to perform duties required of the superintendent and 27 the banking division. Moneys appropriated or credited to the 28 fund remain in the financial services licensing fund and remain 29 available for expenditure for the designated purposes. 30 Except for the section of the bill amending Code section 31 533C.103, the bill applies retroactively to July 1, 2023. 32 The bill takes effect upon enactment. 33 -11- LSB 5289SV (1) 90 nls/ko 11/ 11