SESSION OF 2024
SUPPLEMENTAL NOTE ON SENATE BILL NO. 406
As Amended by House Committee on Financial
Institutions and Pensions
Brief*
SB 406, as amended, would repeal and replace the
Kansas Money Transmitter Act (KSA 9-508 et seq.) with the
Kansas Money Transmission Act (Act). The bill would require
the State Bank Commissioner (Commissioner) to provide
oversight of the electronic transmission of money and
establish the powers, duties, and responsibilities of the
Commissioner under the Act. The bill would also establish a
licensing and renewal process for persons licensed under the
Act. Additionally, the bill would establish penalties for
violations of the Act.
The bill would become effective and be in force from and
after January 1, 2025, and its publication in the statute book.
Kansas Money Transmission Act
Definitions (Section 1)
The bill would define terms as used in the Act, including:
●“Money” would mean a medium of exchange that is
authorized or adopted by the United States or a
foreign government. “Money” includes a monetary
unit of account established by an
intergovernmental organization or by agreement
between two or more governments;
____________________
*Supplemental notes are prepared by the Legislative Research
Department and do not express legislative intent. The supplemental
note and fiscal note for this bill may be accessed on the Internet at
http://www.kslegislature.org ●“Money transmission” would mean any of the
following:
○Selling or issuing payment instruments to a
person located in Kansas;
○Selling or issuing stored value to a person
located in Kansas;
○Receiving money for transmission from a
person located in Kansas; or
○Payroll processing services.
“Money transmission” would not include the provision of
solely online or telecommunications services or network
access.
●“Person” would mean any individual, general
partnership, limited partnership, limited liability
company, corporation, trust, association, joint stock
corporation, or other corporate entity identified or
recognized by the Commissioner; and
●“Tangible net worth” would mean the aggregate
assets of a licensee excluding all intangible assets,
less liabilities, as determined in accordance with
United States generally accepted accounting
principles.
Exemptions (Section 2)
The bill would provide a list of entities the Act would not
apply to:
●An operator of a payment system to the extent that
such operator provides processing, clearing, or
settlement services between persons exempted
under this subsection or licensees in connection
with wire transfers, credit card transactions, debit
card transactions, stored value transactions,
2- 406 automated clearing house transfers, or similar
funds transfers;
●A person appointed as an agent of a payee to
collect and process a payment from a payor to the
payee for goods or services other than money
transmission provided to the payor by the payee if:
○A written agreement exists between the payee
and the agent directing the agent to collect
and process payments from payors on the
payee’s behalf;
○The payee holds the agent out to the public
as accepting payments for goods and
services on the payee’s behalf; and
○Payment for the goods and services is treated
as received by the payee upon receipt by the
agent so that the payor’s obligation is
extinguished and there is no risk of loss to the
payor if the agent fails to remit the funds to
the payee;
●A person that acts as an intermediary by
processing payments between an entity that has
directly incurred an outstanding money
transmission obligation to a sender and the
sender’s designated recipient, if the entity:
○Is properly licensed or exempt from licensing
requirements under this act;
○Provides a receipt, electronic record, or other
written confirmation to the sender identifying
the entity as the provider of money
transmission in the transaction; and
○Bears sole responsibility to satisfy the
outstanding money transmission obligation to
the sender, including the obligation to make
the sender whole in connection with any
failure to transmit the funds to the sender’s
designated recipient;
3- 406 ●The U.S. government and any agency, bureau,
department, office, or instrumentality, corporate or
otherwise, thereof, including any official, employee,
or agent of any such entity;
●Money transmission by the U.S. Postal Service
(USPS) or by an agent of the USPS;
●Any state office or officer, department, board,
commission, bureau, division, authority, agency, or
institution of this state, including any political
subdivision thereof, and any county, city, or other
municipality;
●A federally insured depository financial institution,
bank holding company, office of an international
banking corporation, foreign bank that establishes
a federal branch pursuant to federal law; a
corporation organized pursuant to the federal Bank
Service Company Act, or a corporation organized
to do foreign banking under federal law;
●Electronic funds transfer of governmental benefits
for a federal, state, county, or governmental agency
or instrumentality thereof or on behalf of a state or
governmental subdivision, agency, or
instrumentality thereof;
●A board of trade designated as a contract market
under federal law or a person that in the ordinary
course of business provides clearance and
settlement services for a board of trade to the
extent of the board of trade’s operation as or for
such a board;
●A futures commission merchant registered under
federal commodities law to the extent of the
registrant’s operation as such a futures commission
merchant;
4- 406 ●A person registered as a securities broker-dealer
under federal or state securities law to the extent of
such registrant’s operation as such a securities
broker-dealer;
●An individual employed by a licensee, authorized
delegate, or any person exempted from the
licensing requirements of the Act when acting
within the scope of employment and under the
supervision of the licensee, authorized delegate, or
exempted person as an employee and not as an
independent contractor;
●A person expressly appointed as a third-party
service provider to or agent of a state office or
officer, department, board, commission, bureau,
division, authority, agency, or institution of this
state, including any political subdivision thereof,
and any county, city, or other municipality, solely to
the extent that:
○Such service provider or agent is engaging in
money transmission on behalf of and
pursuant to a written agreement with the
exempt entity that sets forth the specific
functions that the service provider or agent is
to perform; and
○The exempt entity assumes all risk of loss and
all legal responsibility for satisfying the
outstanding money transmission obligations
owed to purchasers and holders of the
outstanding money transmission obligations
upon receipt of the purchaser’s or holder’s
money or monetary value by the service
provider or agent;
●A person engaging in the practice of law,
bookkeeping, accounting, real estate sales, or
brokerage;
5- 406 ●A person appointed as an agent of a payor for
purposes of providing payroll processing services
for which such agent would otherwise need to be
licensed if:
○There is a written agreement between the
payor and the agent that directs the agent to
provide payroll processing services on the
payor’s behalf;
○The payor holds the agent out to employees
and other payees as providing payroll
processing services on the payor’s behalf;
and
○The payor’s obligation to a payee, including
an employee or any other party entitled to
receive funds via the payroll processing
services provided by the agent, is not
extinguished if such agent fails to remit such
funds to the payee; and
●A person exempt by any rules or regulations
adopted or by an order issued if the Commissioner
finds such exemption to be in the public interest
and that the regulation of such person is not
necessary for the purposes of this Act.
The Commissioner would be permitted to require that
any person claiming to be exempt from licensing provide
information and documentation to the Commissioner
demonstrating that such person qualifies for any claimed
exemption.
Implementation—State Bank Commissioner (Section 3)
To carry out the purposes of the Act, the Commissioner
could:
●Enter into agreements or relationships with other
government officials or federal and state regulatory
6- 406 agencies and regulatory associations to improve
efficiencies and reduce regulatory burden by
standardizing methods or procedures and sharing
resources, records, or related information under
this act;
●Use hire, contract, or employ analytical systems,
methods, or software to examine or investigate any
person subject to this act;
●Accept from other state or federal government
agencies or officials, licensing, examination, or
investigation reports made by such state or federal
government agencies or officials; and
●Accept audit reports made by an independent
certified public accountant or other qualified third-
party auditor for an applicant or licensee and
incorporate the audit report in any report of
examination or investigation.
The Commissioner would have the broad administrative
authority to:
●Administer, interpret, and enforce this act;
●Promulgate rules and regulations necessary to
implement this act; and
●Set proportionate and equitable fees and costs
associated with applications, examinations,
investigations, and other actions required to
provide sufficient funds to meet the budget
requirements of administering and enforcing the
Act for each fiscal year and to achieve the
purposes of this act.
7- 406 Confidentiality (Section 4)
Except as otherwise provided, the following documents
would be deemed confidential and not subject to disclosure
under the Kansas Open Records Act (KORA):
●All information or reports obtained by the
Commissioner from an applicant, licensee, or
authorized delegate; and
●All information contained in or related to an
examination, investigation, operating report, or
condition report prepared by, or on behalf of, or for
use of the Commissioner or financial statements,
balance sheets, or authorized delegate information.
The provisions of this act providing for confidentiality of
public records would expire on July 1, 2030, unless the
Legislature reviewed and reenacted such provisions in
accordance with KORA prior to that date.
The Commissioner would be permitted to disclose
information not otherwise subject to disclosure to
representatives of state or federal agencies who promise in a
record that such representatives will maintain the
confidentiality of the information or where the Commissioner
finds that the release is reasonably necessary for the
protection and interest of the public in accordance with
KORA.
Public Information
The bill would state the following information contained
in the records of the Office of the State Bank Commissioner
(OSBC) is not confidential and may be made available to the
public:
●The name, business address, telephone number,
and unique identifier of a licensee;
8- 406 ●The business address of a licensee’s registered
agent for service;
●The name, business address, and telephone
number of all authorized delegates;
●The terms of or a copy of any bond filed by a
licensee, provided that confidential information,
including, but not limited to, prices and fees for
such bond is redacted; or
●Copies of any orders of the OSBC relating to any
violation of or regulations implementing this act.
This section would not be construed to prohibit the
Commissioner from disclosing to the public a list of all
licensees or the aggregated financial or transactional data
concerning those licensees.
Examination (Section 5)
The bill would authorize the Commissioner to conduct
an examination or investigation of a licensee or authorized
delegate or otherwise take independent action authorized by
this act, by any rules and regulations adopted, or by an order
issued under this act as reasonably necessary or appropriate
to administer and enforce the Act, regulations implementing
this act, and other applicable federal law. Under this authority,
the Commissioner could:
●Conduct an examination on-site or off-site as the
Commissioner may reasonably require;
●Conduct an examination in conjunction with an
examination conducted by representatives of other
state agencies, agencies of another state, or the
federal government;
9- 406 ●Accept the examination report of another state
agency, an agency of another state, or the federal
government, or a report prepared by an
independent accounting firm, which, on being
accepted, would be considered an official report of
the Commissioner; and
●Summon and examine under oath or subpoena a
key individual or employee of a licensee or
authorized delegate and require such individual or
employee to produce records regarding any matter
related to the condition and business of the
licensee or authorized delegate.
Provision of Records
A licensee or authorized delegate would be required to
provide the Commissioner with full and complete access to all
records the Commissioner would reasonably require to
conduct a complete examination. The records would be
provided at the location and in the format specified by the
Commissioner. The Commissioner could utilize multistate
record production standards and examination procedures
when such standards would reasonably achieve these
requirements.
Unless otherwise directed by the Commissioner, the
licensee would be required to pay all costs reasonably
incurred in connection with an examination.
Multistate Supervision (Section 6)
To administer and enforce the provisions of the Act and
minimize the regulatory burden, the Commissioner would be
authorized to participate in multistate supervisory processes
established between states and coordinated through the
Conference of State Bank Supervisors (CSBS), money
transmitter regulators associations, and affiliates and
successors thereof for all licensees that hold licenses in
10- 406 Kansas or other states. As a participant in such established
multistate supervisory processes, the Commissioner could:
●Cooperate, coordinate, and share information with
other state and federal regulators in accordance
with examination provisions of the Act (Section 5);
●Enter into written cooperation, coordination, or
information-sharing contracts or agreements with
organizations, the membership of which is made
up of state or federal governmental agencies; and
●Cooperate, coordinate, and share information with
organizations, the membership of which is made
up of state or federal governmental agencies, if the
organizations agree in writing to maintain the
confidentiality and security of the shared
information in accordance with disclosure
provisions of the Act (Section 4).
The Commissioner could not waive, and nothing in the
Act would constitute a waiver of, the Commissioner’s
authority to conduct an examination or investigation or
otherwise take independent action authorized by the Act,
rules and regulations adopted, or an order issued under the
Act to enforce compliance with applicable state or federal law.
A joint examination, investigation, or acceptance of an
examination or investigative report would not be construed to
waive an examination assessment provided for in this act.
Relationship to Federal Law (Section 7)
The bill would provide that if the jurisdiction of state
money transmission is conditioned on federal law, any
inconsistencies between a provision of the Act and federal
law governing money transmission would be governed by the
applicable federal law to the extent of the inconsistency. If
there are inconsistencies between the Act and any federal
11- 406 law that governs, the Commissioner would be authorized to
provide interpretive guidance that identifies the inconsistency
and appropriate means of compliance with federal law.
License Prohibitions (Section 8)
A person would not be able to engage in the business of
money transmission or advertise, solicit, or hold itself out as
providing money transmission unless the person is licensed
under the Act. This would not apply to a person that is:
●An authorized delegate of a person licensed under
the Act acting within the scope of authority
conferred by a written contract with the licensee; or
●Exempt under provisions of the Act (Section 2) and
does not engage in money transmission outside
the scope of such exemption.
A license issued under the Act would not be transferable
or assignable.
Licensing Practices (Section 9)
To establish consistent licensing practices between
Kansas and other states, the bill would authorize the
Commissioner to:
●Implement all licensing provisions in a manner
consistent with other states that have adopted the
Act or multistate licensing processes; and
●Participate in nationwide protocols for licensing
cooperation and coordination among state
regulators, if such protocols are consistent with the
Act.
The Commissioner would be authorized to establish
relationships or contracts with the Nationwide Multistate
12- 406 Licensing System and Registry (NMLS or “registry”) or other
entities designated by the NMLS to:
●Collect and maintain records;
●Coordinate multistate licensing processes and
supervision processes;
●Process fees; and
●Facilitate communication between the
Commissioner and licensees or other persons
subject to the Act.
Under the bill, the Commissioner would be authorized to
utilize the NMLS for all aspects of licensing in accordance
with the Act, including, but not limited to:
●License applications;
●Applications for acquisition of control;
●Surety bonds;
●Reporting;
●Criminal history background checks;
●Credit checks;
●Fee processing; and
●Examinations.
The Commissioner would be authorized to establish
requirements or waive or modify, in whole or in part, any or all
of the existing requirements as reasonably necessary to
participate in the NMLS through the adoption of any rules and
regulations adopted or an order issued or the issuance of an
order.
License Applications (Section 10)
An applicant for a license would be required to submit a
completed application in a form and manner as prescribed by
the Commissioner. The bill would require the application to
13- 406 contain content as set forth by rules and regulations,
instruction, or procedure of the Commissioner and could be
changed or updated by the Commissioner in accordance with
applicable law to carry out the purposes of the Act and
maintain consistency with NMLS licensing standards and
practices. The application would state or contain, as
applicable:
●The legal name and any fictitious or trade name
used by the applicant in conducting business and
the residential and business address of the
applicant;
●A list of any criminal convictions of the applicant
and any material litigation in which the applicant
was involved in the ten-year period immediately
preceding the submission of the application;
●A description of any money transmission services
previously provided by the applicant and the
money transmission services the applicant seeks
to provide in Kansas;
●A list of the applicant’s proposed authorized
delegates and the locations in Kansas where the
applicant and the applicant’s authorized delegates
proposed to engage in money transmission;
●A list of all other states where the applicant is
licensed to engage in money transmission and any
license revocations, suspensions, or other
disciplinary action taken against the applicant in
other states;
●Information concerning any bankruptcy or
receivership proceedings affecting the licensee or
person in control of a licensee;
●A sample form of the contract for authorized
delegates, if applicable;
14- 406 ●A sample form of the payment instrument or stored
value, as applicable;
●The name and address of any federally insured
depository financial institution through which the
applicant plans to conduct money transmission;
and
●Any other information the Commissioner or the
NMLS reasonably requires regarding the applicant.
If an applicant is a corporation, limited liability company,
partnership, or other legal entity, the applicant would also be
required to provide:
●The date of the applicant’s incorporation or
formation and state or country of incorporation or
formation;
●A certificate of good standing from the state or
country where the applicant is incorporated or
formed, if applicable;
●A brief description of the business structure or
organization of the applicant, including any parents
or subsidiaries of the applicant and whether any
such parents or subsidiaries are publicly traded;
●The legal name, any fictitious or trade name, all
business and residential addresses, and the
employment, as applicable, for the ten-year period
immediately preceding the submission of the
application for each key individual and person in
control of the applicant;
●For any person in control of the applicant, a list of
any felony convictions and, for the ten-year period
immediately preceding the submission of the
application, a list of any criminal misdemeanor
convictions of a crime of dishonesty, fraud, or
15- 406 deceit and any material litigation in which the
person involved is in control of an applicant that is
not an individual;
●A copy of the applicant’s audited financial
statements for the most recent fiscal year and for
the two-year period immediately preceding the
most recent fiscal year or, if acceptable to the
Commissioner, certified unaudited financial
statements for the most recent fiscal year or other
period acceptable to the Commissioner;
●A certified copy of the applicant’s unaudited
financial statements for the most recent fiscal
quarter;
●If the applicant is a publicly traded corporation, a
copy of the most recent report filed with the
Securities and Exchange Commission;
●If the applicant is a wholly owned subsidiary of:
○A corporation publicly traded in the United
States, a copy of the parent corporation’s
audited financial statements for the most
recent fiscal year or a copy of the parent
corporation’s most recent financial report filed
with the Securities and Exchange
Commission; or
○A corporation publicly traded outside the
United States, a copy of documentation
similar to the requirements for corporations
publicly traded in the United States, filed with
the regulator of the parent corporation’s
domicile outside the United States;
●The name and address of the applicant’s registered
agent in Kansas; and
●Any other information that the Commissioner
reasonably requires regarding the applicant.
16- 406 The Commissioner would be required to set a
nonrefundable new application fee each year and could waive
one or more requirements of application or permit an
applicant to submit other information in lieu of the required
information.
Requirements for Applicants (Section 11)
As part of any original application, the bill would require
any individual in control of a licensee, any applicant in control
of a licensee, and each key individual to provide certain items
to the Commissioner through the NMLS. These items would
include the following:
●The OSBC could require an individual to be
fingerprinted and submit to a state and national
criminal history record check. The fingerprints
would be used to identify the individual and to
determine whether the individual has a record of
criminal history in Kansas or other jurisdictions.
The OSBC would be authorized to submit the
fingerprints to the Kansas Bureau of Investigation
(KBI) and the Federal Bureau of Investigation for a
state and national criminal history record check.
The OSBC would be able to use the information
obtained from fingerprinting and criminal history for
purposes of verifying the identification of the
individual and in the official determination of the
qualifications and fitness of the individual to be
issued or to maintain a license;
●Local and state law enforcement would be required
to assist the OSBC in taking and processing of
fingerprints of applicants for and holders of any
license, registration, permit, or certificate;
●The KBI would be required to release all records of
adult convictions and nonconvictions in Kansas
and adult convictions, adjudications, and
17- 406 nonconvictions of another state or country to the
OSBC. Disclosure or use of any information
received for any purpose other than provided in the
bill would be a class A misdemeanor and would
constitute grounds for removal from office or
termination of employment;
●Any individual that currently resides and has
continuously resided outside the United States for
the past ten years would not be required to comply
with these provisions; and
●A description of the individual’s personal history
and experience provided in a form and manner
prescribed by the Commissioner to obtain the
following:
○An independent credit report from a consumer
reporting agency. This requirement would be
waived if the individual does not have a Social
Security number;
○Information related to any criminal convictions
or pending charges; and
○Information related to any regulatory or
administrative action and any civil litigation
involving claims of fraud, misrepresentation,
conversion, mismanagement of funds, breach
of fiduciary duty, or breach of contract.
If the individual has resided outside of the United States
at any time during the ten-year period immediately preceding
the individual’s application, the individual would also be
required to provide an investigative background report
prepared by an independent search firm.
At a minimum, the search firm would be required to:
●Demonstrate that it has sufficient knowledge and
resources and that the firm employs accepted and
18- 406 reasonable methodologies to conduct the research
of the background report; and
●Not be affiliated with or have an interest with the
individual it is researching.
The investigative background report would be provided
in English and, at a minimum, contain the following:
●A comprehensive credit report or any equivalent
information obtained or generated by the
independent search firm to accomplish such report,
including a search of the court data in the
countries, provinces, states, cities, towns, and
contiguous areas where the individual resided and
worked if the report is available in the individual’s
current jurisdiction of residency;
●Criminal records information for the ten-year period
immediately preceding the individual’s application,
including, but not limited to, felonies,
misdemeanors, or similar convictions for violations
of law in the countries, provinces, states, cities,
towns, and contiguous areas where the individual
resided and worked;
●Employment history;
●Media history, including an electronic search of
national and local publications, wire services, and
business applications; and
●Financial services-related regulatory history,
including, but not limited to, money transmission,
securities, banking, insurance, and mortgage-
related industries.
Under the bill, any information required could be used by
the Commissioner in making an official determination of the
qualifications and fitness of the person in control or that seeks
to gain control of the licensee.
19- 406 Acquisition of Control (Section 12)
A person would be presumed to exercise a controlling
influence when the person holds the power to vote, directly or
indirectly, at least 10 percent of the outstanding voting shares
or voting interests of a licensee or person in control of a
licensee. The bill would authorize a person presumed to
exercise a controlling influence to rebut the presumption of
control if the person is a passive investor.
For purposes of determining the percentage of a person
controlled by any individual, the individual’s interest would be
aggregated with the interest of any other immediate family
member, including the individual’s spouse, parents, children,
siblings, mothers-in-law and fathers-in-law, sons-in-law and
daughters-in-law, brothers-in-law and sisters-in-law, and any
other person who shares the individual’s home.
Application Approval; Denial; Licensure of (Section 13)
When an application for an original license under the Act
appears to include all the items and addresses all of the
matters that are required, the application would be deemed
complete, and the Commissioner would promptly notify the
applicant of the date the application is deemed complete. The
Commissioner would approve or deny the application within
120 days after the completion date.
If the application has not been approved or denied
within 120 days after the completion date:
●The application would be considered approved;
and
●The license would take effect as of the first
business day after expiration of the 120-day period.
The bill would allow the Commissioner to extend the
application period for good cause.
20- 406 A determination by the Commissioner that an application
is complete and accepted for processing would mean that the
application, on its face, appears to include all of the items,
including the criminal history background check response
from the KBI, and that such application addresses all of the
required matters. A determination of completion by the
Commissioner would not be deemed to be an assessment of
the substance of the application or of the sufficiency of the
information provided.
When an application is filed and considered complete
under the bill, the Commissioner would be required to
investigate the applicant’s financial condition and
responsibility, financial and business experience, and
character and general fitness. The Commissioner would be
authorized to conduct an on-site investigation of the applicant
at the applicant’s expense. The Commissioner would issue a
license to an applicant under the bill if the Commissioner
finds that the following conditions have been fulfilled:
●The applicant has complied with the provisions of
the bill related to applications; and
●The financial condition and responsibility, financial
and business experience, competence, and
character and general fitness of the applicant and
key individuals and persons in control of the
applicant indicate that it is in the interest of the
public to permit the applicant to engage in money
transmission.
If an applicant avails itself or is otherwise subject to a
multistate licensing process:
●The Commissioner would be authorized to accept
the investigation results of a lead investigative
state to satisfy the requirements of investigation if
such lead investigative state has sufficient staffing,
expertise, and minimum standards; or
21- 406 ●If Kansas is the lead investigative state, the
Commissioner would be authorized to investigate
the applicant utilizing the time frames established
by agreement through the multistate licensing
process. No such time frames would be considered
noncompliant with the application period described
in the bill.
The Commissioner would issue a formal written notice of
the denial of a license application within 14 days of the
decision to deny the application. The Commissioner would
state in the notice of denial the specific reasons for the denial
of the application. An applicant whose application is denied
by the Commissioner could appeal within 14 days of receiving
the notice and request a hearing in accordance with the
Kansas Administrative Procedure Act (KSA 77-501 et seq.).
The initial license term would begin on the day the
application is approved. The license would expire on
December 31 of the year in which the license term began,
unless the initial license date is between November 1 and
December 31, in which case the initial license term would run
through December 31 of the following year.
Renewal of Licenses (Section 14)
A license issued under the Act would be renewed
annually. An annual renewal fee set by the Commissioner
would be paid not more than 60 days before the license
expiration. The bill would specify the renewal term would be
for a period of one year and would begin on January 1 of
each year after the initial license term and expire on
December 31 of the year the renewal term begins.
A licensee would submit a complete renewal report with
the renewal fee, in a form and manner determined by the
Commissioner. The renewal report would contain a
description of each material change in information submitted
22- 406 by the licensee in the licensee’s original license application
that has not been reported to the Commissioner.
Renewal applications received within 30 days of the
expiration of the license and incomplete applications as of 30
days prior to the expiration of the license would be subject to
a late fee set by the Commissioner. The Commissioner would
be able to grant an extension of the renewal date for good
cause.
The Commissioner would be authorized to utilize the
NMLS to process license renewals, if the utilization satisfies
the requirements of the bill.
Renewal applications submitted between November 1,
2024, and December 31, 2024, and considered complete
pursuant to the current Kansas Money Transmitter Act
requirements (KSA 9-509) would be considered complete.
Revocation of Licenses (Section 15)
The bill would provide that if a licensee does not
continue to meet the qualifications or satisfy the requirements
of an applicant for a new money transmission license, the
Commissioner could suspend or revoke the licensee’s license
in accordance with the procedures established by the Act or
other applicable state law for such suspension and
revocation.
An applicant for a money transmission license would be
required to demonstrate that it meets or will meet the
requirements of the Act.
Completeness of Applications (Section 16)
The Commissioner would have the discretion to
determine the completeness of any application submitted
pursuant to the Act. In making such a determination, the
23- 406 Commissioner would consider the applicant’s compliance
with the requirements of the Act and any other facts and
circumstances that the Commissioner deems appropriate.
If an applicant fails to complete the application for a new
license or for a change of control of a license within 60 days
after the Commissioner provides written notice of an
incomplete application, the application would be deemed
abandoned and the application fee would be nonrefundable.
An applicant whose application is abandoned under the Act
could reapply to obtain a new license.
Transfer of License Control (Section 17)
When any person or group of persons acting in concert
are seeking to acquire control of a licensee, the bill would
require the licensee to obtain the written approval of the
Commissioner prior to the change of control. An individual
would not be deemed to acquire control of a licensee and
would not be subject to this section when that individual
becomes a key individual in the ordinary course of business.
A person or group of persons acting in concert that
seeks to acquire control of a licensee in cooperation with
such licensee would submit an application in the form and
manner prescribed by the Commissioner. The application
would be accompanied by a nonrefundable fee set by the
Commissioner.
Upon request, the Commissioner could permit a
licensee, the person, or group of persons acting in concert to
submit some or all information required by the Commissioner
without using the NMLS. The required application would
include all required information for any new key individuals
who have not previously completed the requirements of the
application.
When an application for acquisition of control appears to
include all the items and addresses all of the required
24- 406 matters, the application would be deemed complete and the
Commissioner would promptly notify the applicant of the date
on which the application was so deemed, and the
Commissioner would approve or deny the application within
60 days after the completion date.
If the application is not approved or denied within 60
days after the completion date:
●The application would be deemed approved; and
●The person or group of persons acting in concert
would not be prohibited from acquiring control.
The Commissioner could extend the application period
for good cause.
A determination by the Commissioner that an application
is complete and is accepted for processing would mean only
that the application, on its face, appears to include all of the
items and addresses all required matters. A determination of
completion by the Commissioner would not be deemed to be
an assessment of the substance of the application or the
sufficiency of the information provided.
When an application is filed and considered complete,
the Commissioner would investigate the financial condition
and responsibility, financial and business experience, and
character and general fitness of the person or group of
persons acting in concert that seek to acquire control. The
Commissioner would approve an acquisition of control
pursuant to the Act if the Commissioner finds that all of the
following conditions have been fulfilled:
●The requirements of the Act have been met, as
applicable; and
●The financial condition and responsibility, financial
and business experience, competence, and
character and general fitness of the person or
25- 406 group of persons acting in concert seeking to
acquire control and the key individuals and persons
that would be in control of the licensee after the
acquisition of control indicate that it is in the
interest of the public to permit the person or group
of persons acting in concert to control the licensee.
If the applicant avails itself or is otherwise subject to a
multistate licensing process:
●The Commissioner would be authorized to accept
the investigation results of a lead investigative
state for the purposes of the Act if the lead
investigative state has sufficient staffing, expertise,
and minimum standards; or
●If Kansas is a lead investigative state, the
Commissioner would be authorized to investigate
the applicant pursuant to the Act and the time
frames established by agreement through the
multistate licensing process.
The Commissioner would issue a formal written notice of
the denial of an application to acquire control within 30 days
of the decision to deny the application. The Commissioner
would state in the notice of denial the specific reasons for the
denial. An applicant whose application is denied by the
Commissioner could appeal within 14 days and request a
hearing in accordance with the Kansas Administrative
Procedure Act.
Requirements in the Act to obtain the written approval of
the Commissioner or submit an application to the
Commissioner prior to change of control (Section 17) would
not apply to any of the following:
●A person that acts as a proxy for the sole purpose
of voting at a designated meeting of the
shareholders or holders of the voting shares or
26- 406 voting interests of a licensee or a person in control
of a licensee;
●A person that acquires control of a licensee by
devise or descent;
●A person that acquires control of a licensee as a
personal representative, custodian, guardian,
conservator, or trustee or as an officer appointed
by a court of competent jurisdiction or by operation
of law;
●A person that has complied with and received
approval to engage in money transmission under
this Act or was identified as a person in control in a
prior application filed with and approved by the
Commissioner or by a money service business-
accredited state pursuant to a multistate license
process, if:
○The person has not had a license revoked or
suspended or controlled a licensee that has
had a license revoked or suspended while the
person was in control of the licensee in the
previous five years;
○The person is a licensee, the person is well-
managed and has received at least a
satisfactory rating for compliance at the
person’s most recent examination by a money
service business accredited state if such
rating was given;
○The licensee to be acquired is expected to
meet the requirements regarding prudential
standards (Sections 32, 33, and 34), after the
acquisition of control is completed. If the
person acquiring control is a licensee, the
licensee would also be expected to meet the
requirements of the prudential standards
outlined in the bill after the acquisition of
control is completed;
27- 406 ○The licensee to be acquired could not
implement any material changes to the
licensee’s business plan as a result of the
acquisition of control. If the person acquiring
control is a licensee, the licensee would not
implement any material changes to the
licensee’s business plan as a result of the
acquisition of control; and
○The person provides notice of the acquisition
in cooperation with the licensee and attests to
the provisions of this subsection in a form and
manner prescribed by the Commissioner;
●A person that the Commissioner determines is not
subject to written approval of the Commissioner
based on the public interest;
●A public offering of securities of a licensee or a
person in control of a licensee; or
●An internal reorganization of a person in control of
the licensee if the ultimate person in control of the
licensee remains the same.
Persons meeting the following requirements in
cooperation with the licensee would notify the Commissioner
within 15 days after the acquisition of control:
●A person that acquires control of a licensee by
devise or descent;
●A person that acquires control of a licensee as a
personal representative, custodian, guardian,
conservator, or trustee or as an officer appointed
by a court of competent jurisdiction or by operation
of law;
●A person that has complied with and received
approval to engage in money transmission under
this Act or was identified as a person in control in a
28- 406 prior application filed with and approved by the
Commissioner or by a money service business-
accredited state pursuant to a multistate license
process and has met certain requirements;
●A public offering of securities of a licensee or a
person in control of a licensee; or
●An internal reorganization of a person in control of
the licensee if the ultimate person in control of the
licensee remains the same.
If notice is not disapproved within 30 days after the date
on which the notice was determined to be complete, the
notice would be deemed approved.
Before filing and application for approval to acquire
control of a licensee, a person could request in writing a
determination from the Commissioner as to whether such
person would be considered a person in control of a licensee
upon consummation of a proposed transaction. If the
Commissioner determines that the person would not be a
person in control of a licensee, the person and the proposed
transaction would not be subject to requirements in the Act to
obtain the written approval of the Commissioner or submit an
application to the Commissioner prior to change of control.
If a multistate licensing process includes a prior
determination from the Commissioner and an applicant avails
itself or is otherwise subject to the multistate licensing
process:
●The Commissioner would be authorized to accept
the control determination of a lead investigative
state with sufficient staffing, expertise, and
minimum standards for the purpose of prior
determination from the Commissioner; or
●If Kansas is a lead investigative state, the
Commissioner would be authorized to investigate
29- 406 the applicant to make a prior determination
pursuant to the Act and the time frames
established by agreement through the multistate
licensing process.
Replacement of Key Individual (Section 18)
Under the bill, a license adding or replacing a key
individual would be required to provide:
●Notice in the manner prescribed by the
Commissioner within 15 days after the effective
date of the appointment of the new key individual;
and
●Information as required by the bill within 45 days of
the effective date of the appointment of the new
key individual.
Within 90 days of the date on which the notice provided
was determined to be complete, the Commissioner could
issue a notice of disapproval of a key individual if the
competence, experience, character, or integrity of the
individual would not be in the best interest of the public or the
customers of the licensee.
A notice of disapproval would be required to state the
basis for disapproval and would be sent to the licensee and
the disapproved individual. A licensee would be able to
appeal a notice of disapproval pursuant to the Kansas
Administrative Procedure Act within 14 days.
If the notice provided is not disapproved within 90 days
after the date when the notice was determined to be
complete, the key individual would be considered approved.
If a multistate licensing process includes a key individual
notice review and disapproval process and the licensee avails
itself or is otherwise subject to the multistate license process:
30- 406 ●The Commissioner would be authorized to accept
the determination of another state if the
investigating state has sufficient staffing, expertise,
and minimum standards for investigation; or
●If Kansas is a lead investigative state, the
Commissioner would be authorized to investigate
the applicant and pursuant to the Act and the time
frames established by agreement through the
multistate licensing process.
Report of Condition (Section 19)
Each licensee would be required to submit a report of
condition within 45 days of the end of the calendar quarter or
within any extended time as the Commissioner may
prescribe.
The bill would require the report of condition to include:
●Financial information at the licensee level;
●Nationwide and state-specific money transmission
transaction information in every jurisdiction in the
United States where the licensee is licensed to
engage in money transmission;
●The permissible investments report;
●Transaction destination country reporting for
money received for transmission, if applicable; and
●Any other information the Commissioner
reasonably requires regarding the licensee.
The bill would authorize the Commissioner to utilize the
NMLS for the submission of the report and would be
authorized to change or update as necessary the
requirements of this section to carry out the purposes of the
Act and maintain consistency with NMLS.
31- 406 The information required regarding transaction
destination country reporting for money received for
transmission would only be included in a report of condition
submitted within 45 days of the end of the fourth calendar
quarter.
Fiscal Year Reporting (Section 20)
Within 90 days after the end of each fiscal year or within
any extended time prescribed by the Commissioner through
rules and regulations, every licensee would file with the
Commissioner:
●An audited financial statement of the licensee for
the fiscal year prepared in accordance with United
States generally accepted accounting principles;
and
●Any other information as the Commissioner may
reasonably require.
The audited financial statements would include or be
accompanied by a certificate of opinion of the independent
certified public accountant or independent public accountant
in a form and manner determined by the Commissioner. If the
certificate or opinion is qualified, the Commissioner would be
authorized to order the licensee to take any action as the
Commissioner may find necessary to enable the accountant
to remove the qualification.
Report of Authorized Delegates (Section 21)
Each licensee would be required to submit a report of
authorized delegates within 45 days of the end of each
calendar quarter. The Commissioner would be authorized to
utilize the NMLS for the submission of the required report if
such utilization is consistent with the requirements of this
section.
32- 406 The bill would require the authorized delegate report to
include, at a minimum, each authorized delegate’s:
●Company legal name;
●Taxpayer employer identification number;
●Principal provider identifier;
●Physical address;
●Mailing address;
●Any business conducted in other states;
●Any fictitious or trade name;
●Contact person’s name, phone number, and email;
●Start date as the licensee’s authorized delegate;
●End date acting as the licensee’s authorized
delegate, if applicable; and
●Any other information the Commissioner
reasonably requires regarding the authorized
delegate.
Reports of Action Against the Licensee (Section 22)
The bill would require a licensee to file a report with the
Commissioner within one business day after the licensee has
reason to know of the:
●Filing of a bankruptcy or reorganization petition by
or against the licensee;
●Filing of a petition by or against the licensee for
receivership, the commencement of any other
judicial or administrative proceeding for the
licensee’s dissolution or reorganization, or the
making of a general assignment for the benefit of
the licensee’s creditors; or
●Commencement of a proceeding to revoke or
suspend the licensee’s license in a state or country
where the licensee engages in business or is
licensed.
33- 406 A licensee would be required to file a report with the
Commissioner within three business days after the licensee
has reason to know of a felony conviction of the licensee, a
key individual or person in control of the licensee, or an
authorized delegate.
Reports of Money Laundering (Section 23)
The bill would require a licensee and an authorized
delegate to file all reports required by federal currency
reporting, recordkeeping, and suspicious activity reporting
requirements in federal and state laws that pertain to money
laundering. The bill would deem a timely filing of such
complete and accurate report with the appropriate agency to
be in compliance with the requirements of this section.
Maintenance of Records (Section 24)
Under the bill, every licensee would be required to
maintain the following records for at least three years:
●A record of each outstanding money transmission
obligation sold;
●A general ledger posted at least monthly containing
all assets, liability, capital, income, and expense
accounts;
●Bank statements and bank reconciliation records;
●Records of all outstanding money transmission
obligations;
●Records of each outstanding money transmission
obligation paid within the three-year period the
records are maintained;
●A list of the last-known names and addresses of all
the licensee’s authorized delegates; and
34- 406 ●Any other records the Commissioner reasonably
requires in rules and regulations.
The bill would allow the above-listed records to be
maintained in any form and maintained outside the state, if
the records are made accessible to the Commissioner on
seven business day’s notice. These required records
maintained by the licensee would be open to inspection by
the Commissioner pursuant to provisions that detail the
examination options available to the Commissioner (Section
5).
Requirements to Conduct Business Through an
Authorized Delegate (Section 25)
As it pertains to the requirements of this section
regarding business conducted through an authorized
delegate, the bill would define “remit” to mean making direct
payments of money to a licensee or the licensee’s
representative authorized to receive money or to deposit
money in a bank in an account specified by the licensee.
The bill would require a licensee to comply with the
following requirements before being authorized to conduct
business through an authorized delegate or allowing a person
to act as the licensee’s authorized delegate:
●Adopt and update as necessary all written policies
and procedures reasonably designed to ensure
that the licensee’s authorized delegates comply
with applicable state and federal law;
●Enter into a written contract that complies with the
contract requirements outlined below; and
●Conduct a reasonable risk-based background
investigation sufficient for the licensee to determine
if the authorized delegate has complied and will
likely comply with applicable state and federal law.
35- 406 The bill would require an authorized delegate to comply
with the Act.
Written Contract Requirements
The bill would require the written contract required to do
business through an authorized delegate to be signed by the
licensee and the authorized delegate and, at a minimum, do
the following:
●Appoint the person signing the contract as the
licensee’s authorized delegate with the authority to
conduct money transmission on behalf of the
licensee;
●Set forth the nature and scope of the relationship
between the licensee and the authorized delegate
and the respective rights and responsibilities of
each party;
●Require the authorized delegate to agree to fully
comply with all applicable state and federal laws
and rules and regulations pertaining to money
transmission;
●Require the authorized delegate to remit and
handle money and any monetary value according
to the terms of the contract between the licensee
and the authorized delegate;
●Impose a trust on money and any monetary value
net of fees received for money transmission for the
benefit of the licensee;
●Require the authorized delegate to prepare and
maintain records as required by the Act or rules
and regulations adopted pursuant to this Act or as
reasonably required by the Commissioner;
36- 406 ●Acknowledge that the authorized delegate
consents to examination or investigation by the
Commissioner;
●State that the licensee is subject to regulation by
the Commissioner and, as part of such regulation,
the Commissioner may suspend or revoke an
authorized delegate designation or require the
licensee to terminate an authorized delegate
designation; and
●Acknowledge receipt of the written policies and
procedures designed to ensure that the licensee’s
authorized delegates comply with applicable state
and federal law as required when conducting
business with an authorized delegate.
Notice of Licensee’s License Status
Within five business days after the suspension,
revocation, surrender, or expiration of a licensee’s license, a
licensee would be required to provide documentation to the
Commissioner that the licensee notified all of the licensee’s
applicable authorized delegates who are in the record filed
with the Commissioner of such action on the licensee’s
license. All applicable authorized delegates would be required
to immediately cease to provide money transmission as an
authorized delegate of the licensee upon the suspension,
revocation, surrender, or expiration of a licensee’s license.
Funds Held in Trust by Authorized Delegate
The bill would require all money net fees received from
money transmission to be held in trust by an authorized
delegate for the benefit of the licensee. If an authorized
delegate commingles any funds received from money
transmission with any other funds or property owned or
controlled by the authorized delegate, the bill would require
that all commingled funds and other property be considered
37- 406 held in trust in favor of the licensee in an amount equal to the
amount of money net fees received from money transmission.
An authorized delegate would be prohibited from using a
subdelegate to conduct money transmission on behalf of a
licensee.
Money Transmission on Behalf of an Unlicensed or
Nonexempt Person (Section 26)
The bill would prohibit a person from engaging in the
business of money transmission on behalf of a person that is
not licensed or exempt from licensing under the Act. A person
that engages in such activity would be deemed to have
provided money transmission to the same extent that such
person were a licensee and would be jointly and severably
liable with the unlicensed or nonexempt person.
Forwarding of Money Received for Transmission
(Section 27)
The bill would require every licensee to forward all
moneys received for transmission in accordance with the
terms of the agreement between the licensee and the sender
unless the licensee reasonably believes or has a reasonable
basis to believe the sender may be a victim of fraud or that a
crime or violation of law or any rules and regulations has
occurred, is occurring, or may occur.
If a licensee fails to forward money received for
transmission in accordance with this section, the bill would
require the licensee to respond to inquiries by the sender with
the reason for the failure unless providing a response would
violate a state or federal law or rules and regulations.
38- 406 Exceptions to the Refund of Money Received for
Transmission (Section 28)
The following exceptions would not apply to moneys
received for transmission subject to federal law pertaining to
the requirements for remittance transfers or pursuant to a
written agreement between the licensee and payee to
process payments for goods or services provided by the
payee.
Refund Exceptions
Within ten days of receipt of the sender’s written request
for a refund of all money received for transmission, the
licensee would be required to refund such money to the
sender, unless:
●The money has been forwarded within ten days of
the date when the money was received for
transmission;
●Instructions have been given committing an
equivalent amount of money to the person
designated by the sender within ten days of the
date when the money was received for
transmission;
●The agreement between the licensee and the
sender instructs the licensee to forward the money
after ten days of the date when the money was
received for transmission. If funds have not yet
been forwarded in accordance with the terms of the
agreement between the licensee and the sender,
the bill would require the licensee to issue a refund
in accordance with this section; or
●The refund is requested for a transaction that the
licensee has not completed based on a reasonable
belief or a reasonable basis to believe that a crime
39- 406 or violation of law, or rules and regulations has
occurred, is occurring, or may occur.
The refund request would not be construed to enable
the licensee to identify the sender’s name and address or
telephone number or the particular transaction to be refunded
if the sender has multiple outstanding transactions.
Receipt for Money Received for Transmission (Section
29)
The requirement that a receipt for money received for
transmission be provided to the sender would not apply to:
●Money received for transmission subject to federal
law pertaining to the requirements for remittance
transfers;
●Money received for transmission that is not
primarily for personal, family, or household
purposes;
●Money received for transmission pursuant to a
written agreement between the licensee and payee
to process payments for goods or services
provided by the payee; or
●Payroll processing services.
Receipt Requirements
For purposes of this section, the bill would define
“receipt” to mean a paper or electronic receipt.
For a transaction conducted in person, the bill would
allow the receipt to be provided electronically if the sender
requests or agrees to receive the receipt in such manner. For
a transaction conducted electronically or by telephone, the bill
would allow the receipt to be provided electronically. The bill
40- 406 would require all electronic receipts to be provided in
retainable form.
Every licensee or the licensee’s authorized delegate
would be required to provide the sender a receipt for money
received for transmission. The bill would require the receipt to
contain the:
●Name of the sender;
●Name of the designated recipient;
●Date of the transaction;
●Unique transaction or identification number;
●Name of the licensee, the licensee’s NMLS unique
identification number, the licensee’s business
address, and the licensee’s customer service
telephone number;
●Amount of the transaction in U.S. dollars;
●Fee charged, if any, by the licensee to the sender
for the transaction; and
●Taxes collected, if any, by the licensee from the
sender for the transaction.
The bill would require the receipt to be written in English
and in the language principally used by the licensee or
authorized delegate to advertise, solicit, or negotiate, either
orally or in writing, for a transaction conducted in person,
electronically, or by telephone, if other than English.
State Bank Commissioner Contact Information (Section
30)
Every licensee or authorized delegate would be required
to include on a receipt or disclose on the licensee’s website
41- 406 or mobile application the name of the Office of the State Bank
Commissioner and a statement that the licensee’s Kansas
customers could contact the OSBC with questions or
complaints about the licensee’s money transmission services.
Payroll Processing Services (Section 31)
A licensee that provides payroll processing services
would be required to issue reports to clients detailing client
payroll obligations in advance of the payroll funds being
deducted from an account and make available worker pay
stubs or an equivalent statement to workers.
These provisions would not apply to a licensee providing
payroll processing services where the licensee’s client
designates the intended recipients to the licensee and is
responsible for providing the disclosures.
Tangible Net Worth Requirement (Section 32)
The bill would require every licensee to maintain at all
times a tangible net worth of:
●The greater of $100,000 or 3 percent of such
licensee’s total assets, up to $100.0 million;
●2 percent of such licensee’s additional assets of
$100.0 million to $1.0 billion; and
●0.5 percent of such licensee’s additional assets of
over $1.0 billion.
The bill would require the licensee’s tangible net worth
to be demonstrated at initial application by the applicant’s
most recent audited or unaudited financial statements
pursuant to application requirements for a license to engage
in money transmission (Section 10).
42- 406 Despite the provisions of this section, the bill would
grant the Commissioner the authority to exempt any applicant
or licensee, in part or in whole, from the requirements of this
section.
Security Requirement (Section 33)
The bill would require an applicant for a money
transmission license to provide and a licensee at all times to
maintain security consisting of a surety bond in a form
satisfactory to the Commissioner or, with the Commissioner’s
approval, a deposit instead of a bond in accordance with this
section.
The following amount of security would be required:
●The greater of $200,000 or an amount equal to 100
percent of the licensee’s average daily money
transmission liability in Kansas calculated for the
most recently completed three-month period, up to
a maximum of $1.0 million; or
●$200,000, if the licensee’s tangible net worth
exceeds 10 percent of total assets.
If a licensee maintains a bond in the maximum amount
provided for above, the licensee would not be required to
calculate its average daily money transmission liability in
Kansas for purposes of this section.
The bill would allow a licensee to exceed the maximum
required bond amount pursuant to Section 35, which lists the
types of permissible investments a licensee may hold.
Permissible Investment Requirements (Section 34)
The bill would require a licensee to maintain permissible
investments with a market value computed according to
United States generally accepted accounting principles of not
43- 406 less than the aggregate amount of the total of the licensee’s
outstanding money transmission obligations.
With the exception of the permissible investments
(outlined in Section 35), the bill would allow the
Commissioner, by rules and regulations or order, to limit the
extent to which a specific investment maintained by a
licensee within a class of permissible investments may be
considered a permissible investment, if the specific
investment represents undue risk to customers not reflected
in the market value of investments.
The bill would authorize the Commissioner, by rules and
regulations or by order, to allow other types of investments
that are of sufficient liquidity and quality to be a permissible
investment. The bill would also authorize the Commissioner
to participate in efforts with other state regulators to
determine which other types of investments are of sufficient
liquidity and quality to be a permissible investment.
Permissible Investment Held in Trust
The bill would require permissible investments, even if
commingled with other assets of the licensee, to be held in
trust for the benefit of the purchasers and holders of the
licensee’s outstanding money transmission obligations in the
following circumstances:
●The event of insolvency;
●The filing of a petition by or against the licensee
under general provisions in federal law pertaining
to bankruptcy or reorganization;
●The filing of a petition by or against the licensee for
receivership;
●The commencement of any other judicial or
administrative proceeding for such licensee’s
dissolution or reorganization; or
44- 406 ●The event of an action by a creditor against the
licensee who is not a beneficiary of this statutory
trust.
The bill would prohibit permissible investments
impressed with a trust, as described above in this subsection,
to be subject to attachment, levy of execution, or
sequestration by order of any court, except for a beneficiary
of this statutory trust.
When a statutory trust is established in accordance with
the above subsection or when any funds are drawn on a letter
of credit (Section 35), the bill would require the Commissioner
to notify the applicable regulator of each state where the
licensee is licensed to engage in money transmission, if any,
that a trust has been established or the funds drawn on the
letter of credit, as applicable. If performed pursuant to a
multistate agreement or through the NMLS, the bill would
deem the notice requirement satisfied. Funds drawn on a
letter of credit and any other permissible investments held in
trust for the benefit of the purchasers and holders of the
licensee’s outstanding money transmission obligations would
be deemed by the bill to be held in trust for the benefit of such
purchasers and holders on a pro rata and equitable basis in
accordance with statutes pursuant to which permissible
investments are required to be held in Kansas and other
states, as applicable. The bill would require any statutory trust
established under this section to be terminated when all of
the licensee’s outstanding money transmission obligations
have been extinguished.
Types of Permissible Investments (Section 35)
The following investments would be considered
permissible under this section:
●Cash, including demand deposits, savings
deposits, and funds in accounts held for the benefit
of the licensee’s customers in a federally insured
45- 406 depository financial institution and cash
equivalents, including automated clearing house
items in transit to the licensee and automated
clearing house items or international wires in transit
to a payee, cash in transit via armored car, cash in
smart safes, cash in licensee-owned locations, or
debit card or credit card-funded transmission
receivables owed by any bank or money market
mutual funds rated AAA by Standard & Poor or the
equivalent from any eligible rating service;
●Certificates of deposit or senior debt obligations of
a federally insured depository institution;
●An obligation of the United States or a commission,
agency, or instrumentality of the United States, an
obligation that is guaranteed fully as to principal
and interest by the United States or an obligation of
a state or a governmental subdivision, agency or
instrumentality of a state;
●The full drawable amount of an irrevocable standby
letter of credit for which the stated beneficiary is
the Commissioner that stipulates that the
beneficiary need only draw a sight draft under the
letter of credit and present it to obtain funds up to
the letter of credit amount within seven days of
presentation of the required items listed in this
section of the bill.
With regard to the line of credit, the bill would
provide:
○The required elements of the letter of credit;
○If any notice of expiration or non-extension of
a letter of credit is issued when an irrevocable
letter of credit not being extended, the bill
would provide the procedure to be followed,
licensee requirements, and action that could
be taken by the Commissioner to maintain the
licensee’s permissible investments. The bill
46- 406 would provide that the drawn funds would be
held in trust by the Commissioner or the
Commissioner’s designated agent, to the
extent authorized by law, as agent for the
benefit of the purchasers and holders of the
licensee’s outstanding money transmission
obligations;
○The issuer of such letter of credit would be
required to honor, at sight, a presentation
made of the following required documents by
the beneficiary to the issuer on or prior to the
expiration date of the letter of credit:
- The original letter of credit, including any
amendments; and
- A written statement from the beneficiary
stating that any of the following events have
occurred: the filing of a bankruptcy or
reorganization petition by or against the
licensee; the filing of a petition by or against
the licensee for receivership or the
commencement of any other judicial or
administrative proceeding for such licensee’s
dissolution or reorganization; the seizure of
assets of a licensee by a Commissioner
pursuant to an emergency order issued in
accordance with applicable law, on the basis
of an action, violation, or condition that has
caused or is likely to cause the insolvency of
the licensee; or the beneficiary has received
notice of expiration or non-extension of a
letter of credit and the licensee failed to
demonstrate to the satisfaction of the
beneficiary that the licensee would maintain
the required permissible investments, upon
the expiration or non-extension of the letter of
credit;
○The Commissioner could designate an agent
to serve on the Commissioner’s behalf as
beneficiary to a letter of credit if the agent and
47- 406 letter of credit meet requirements established
by the Commissioner. The Commissioner’s
agent could serve as agent for multiple
licensing authorities for a single irrevocable
letter of credit if the proceeds of the drawable
amount for the purposes outlined in the bill
(Section 35) are assigned to the
Commissioner; and
○The Commissioner could participate in
multistate processes designed to facilitate the
issuance and administration of letters of
credit, including, but not limited to, services
provided by the NMLS and registry and state
regulatory registry, LLC; and
●100 percent of the surety bond provided for under
Section 33 that exceeds the average daily money
transmission liability in Kansas.
Permissible Investments to the Extent Specified
Unless permitted by the Commissioner by rules and
regulations adopted or by order issued to exceed the limit as
set forth below, the bill would provide that the following
investments would be permissible to the extent specified:
●Receivables payable to a licensee from the
licensee’s authorized delegates in the ordinary
course of business that are less than seven days
old up to 50 percent of the aggregate value of the
licensee’s total permissible investments; and
●Of the receivables permissible above, receivables
payable to a licensee from a single authorized
delegate in the ordinary course of business could
not exceed 10 percent of the aggregate value of
the licensee’s total permissible investments.
Under the bill, the following investments would be
permissible up to 20 percent per category and up to 50
48- 406 percent combined of the aggregate value of the licensee’s
total permissible investments:
●A short-term investment of up to six months,
bearing an eligible rating;
●Commercial paper bearing an eligible rating;
●A bill, note, bond, or debenture bearing an eligible
rating;
●U.S. tri-party repurchase agreements collateralized
at 100 percent or more with U.S. government or
agency securities, municipal bonds, or other
securities bearing an eligible rating;
●Money market mutual funds rated less than AAA
and equal to or higher than A- by Standard & Poor
or the equivalent from any other eligible rating
service; and
●A mutual fund or other investment fund composed
solely and exclusively of one or more permissible
investments listed in subsection (a) (1) through (3)
(i.e. cash, certain certificates of deposit, or an
obligation of a U.S. government entity), which
would not include the full drawable amount of an
irrevocable standby letter of credit for which the
stated beneficiary is the Commissioner.
Cash, including demand deposits, savings deposits, and
funds in such accounts held for the benefit of the licensee’s
customers, at foreign depository institutions would be
permissible up to 10 percent of the aggregate value of the
licensee’s total permissible investments if the licensee has
received a satisfactory rating in the licensee’s most recent
examination and the foreign depository institution:
●Has an eligible rating;
49- 406 ●Is registered under the Foreign Account Tax
Compliance Act;
●Is not located in any country subject to sanctions
from the Office of Foreign Assets Control; and
●Is not located in a high-risk or non-cooperative
jurisdiction as designated by the Financial Action
Task Force.
Process for Suspension or Revocation of a Licensee’s
License (Section 36)
After notice and an opportunity for a hearing under the
Kansas Administrative Procedure Act, the bill would authorize
the Commissioner to suspend or revoke a license or order a
licensee to revoke the designation of an authorized delegate
if any of the 13 violations listed occur.
In determining whether a licensee is engaging in an
unsafe or unsound practice, the Commissioner could
consider the size and condition of the licensee’s money
transmission, the magnitude of the loss, the gravity of the
violation of the Act, and the previous conduct of the person
involved.
Suspension or Revocation of the Designation of an
Authorized Delegate (Section 37)
The bill would authorize the Commissioner to issue an
order suspending or revoking the designation of an
authorized delegate, if the Commissioner finds the:
●Authorized delegate violated the Act or any rules
and regulations adopted or an order issued under
the Act;
●Authorized delegate did not cooperate with an
examination or investigation by the Commissioner;
50- 406 ●Authorized delegate engaged in fraud, intentional
misrepresentation, or gross negligence;
●Authorized delegate is convicted of a violation of a
state or federal anti-money laundering statute;
●Competence, experience, character, or general
fitness of the authorized delegate or a person in
control of the authorized delegate indicates that it
is not in the public interest to permit the authorized
delegate to provide money transmission; or
●Authorized delegate is engaging in an unsafe or
unsound practice as determined by the
Commissioner.
In determining whether an authorized delegate is
engaging in an unsafe or unsound practice, the
Commissioner could consider the size and condition of the
authorized delegate’s provision of money transmission, the
magnitude of the loss, the gravity of the violation of this act or
any rules and regulations adopted or an order issued under
this act, and the previous conduct of the authorized delegate.
An authorized delegate could apply for relief from a
suspension or revocation of designation as an authorized
delegate according to procedures prescribed by the
Commissioner in rules and regulations.
Issuance of Cease-and-Desist Order (Section 38)
Under provisions of the bill, if the Commissioner
determines that a violation of the Act or of any rules and
regulations adopted or an order issued under the Act by a
licensee that a person required to be licensed, or authorized
delegate, is likely to cause immediate and irreparable harm to
the licensee, the licensee’s customers, or the public as a
result of the violation or cause insolvency or significant
dissipation of assets of the licensee, the Commissioner could
51- 406 issue an order requiring the licensee or authorized delegate
to cease and desist from the violation. The order would
become effective upon service of the order on the licensee or
authorized delegate.
The Commissioner could issue an order against a
licensee to cease and desist from providing money
transmission through an authorized delegate that is the
subject of a separate order by the Commissioner.
An order to cease and desist would remain effective and
enforceable pending the completion of an administrative
proceeding pursuant to the Kansas Administrative Procedure
Act. Additionally, an order to cease and desist would be
considered a final order unless the licensee or authorized
delegate requests a hearing within 14 days after the cease
and desist order is issued.
Consent Orders (Section 39)
The bill would authorize the Commissioner to enter into
a consent order at any time with a person to resolve a matter
arising under the Act or any rules and regulations adopted or
order issued under the Act. The bill would require a consent
order to be signed by the person to whom such consent order
is issued or by the person’s authorized representative and
indicate agreement with the terms contained in the order. A
consent order could provide that the consent order would not
constitute an admission by a person that the Act or rules and
regulations adopted or an order issued under the Act had
been violated.
Criminal Penalties (Sections 40)
The following actions would result in the criminal
penalties listed:
52- 406 ●Any person that intentionally makes a false
statement, misrepresentation, or false certification
in a record filed or required to be maintained under
this act or that intentionally makes a false entry or
omits a material entry in such a record would be
guilty of a severity level 9 nonperson felony;
●Any person that knowingly engages in an activity
for which a license is required under the Act
without being licensed under the Act and that
receives more than $500 in compensation within a
30-day period from this activity would be guilty of a
severity level 9 nonperson felony; and
●Any person that knowingly engages in an activity
for which a license is required under the Act
without being licensed under the Act and that
receives not more than $500 in compensation
within a 30-day period from this activity would be
guilty of a class A nonperson misdemeanor.
Civil Penalties (Section 41)
The bill would would authorize the Commissioner, as
part of any summary order or consent order, to impose the
following civil penalties:
●Assess a fine against any person that violates the
Act or any rules and regulations adopted pursuant
to the Act in an amount not to exceed $5,000 per
violation. The bill would allow the Commissioner to
designate any fine collected pursuant to this
section be used for consumer education;
●Assess the agency’s operating costs and expenses
for investigating and enforcing the Act;
53- 406 ●Require the person to pay restitution for any loss
arising from the violation or requiring the person to
reimburse any profits arising from the violation;
●Prohibit the person from future application for
licensure pursuant to the Act; and
●Require such affirmative action as determined by
the Commissioner to carry out the purposes of the
Act.
Informal Agreement
The bill would authorize the Commissioner to enter into
an informal agreement at any time with a person to resolve a
matter arising under the Act, rules and regulations adopted
under the Act, or an order issued pursuant to the Act. Any
informal agreement authorized by this subsection would be
considered confidential examination material.
Adoption of an informal agreement authorized by this
subsection would not be:
●Subject to the provisions of the Kansas
Administrative Procedure Act or the Kansas
Judicial Review Act;
●Considered an order or other agency action;
●Subject to KORA; or
●Discovery or be admissible in evidence in any
private civil action.
The provisions of this subsection providing for the
confidentiality of public records would expire on July 1, 2030,
unless the Legislature reviews and reenacts such provisions
in accordance with KORA prior to July 1, 2030.
54- 406 Penalties from an Examination Finding
The bill would allow the Commissioner, through an
examination finding, to impose the following penalties:
●Assess a fine against any licensee who violates the
Act or rules and regulations adopted thereto, in an
amount not to exceed $5,000 per violation. The
Commissioner could designate any fine collected
pursuant to this section be used for consumer
education; or
●Require the licensee to pay restitution for any loss
arising from the violation or require the person to
reimburse any profits arising from the violation.
Severability of Provisions (Section 42)
The provisions of the Act would be severable. If any
portion of the Act would be declared unconstitutional or
invalid, or the application of any portion of the Act to any
person or circumstance would be held unconstitutional or
invalid, the invalidity would not affect other portions of the Act
that could be given effect without the invalid portion or
application, and the applicability of such other portions of the
Act to any person or circumstance would remain valid and
enforceable.
Background
The bill was introduced by the Senate Committee on
Financial Institutions and Insurance at the request of a
representative of the Office of the State Bank Commissioner
(OSBC).
[Note: The current Kansas Money Transmitter Act was
created by 2006 HB 2874 and is codified in the State Banking
Code at KSA 9-508 et seq.
55- 406 This bill largely incorporates the CSBS Model Money
Transmission Modernization Act (“Money Transmitter Model
Act” or MTMA) into Kansas law. According to the CSBS, 14
states have adopted the MTMA in full or in part and another
17 are expected to pursue its adoption in 2024.]
Senate Committee on Financial Institutions and
Insurance
In the Senate Committee hearing, proponent testimony
was provided by representatives of the OSBC and Money
Services Business Association. The representatives generally
stated the new act would better reflect the industry today and
codifies many changes in examination and licensing
procedures that have occurred in the past few years. The
representatives stated the proposed revisions and additions
would modernize existing Kansas regulations by increasing
efficiency in the licensing and ongoing supervision of money
transmitter licensees operating in multiple jurisdictions.
Written-only proponent testimony was provided by
representatives of the Electronic Transactions Association
and The Money Services Round Table.
No other testimony was provided.
The Senate Committee amended the bill to add a
person engaging in the practice of law, bookkeeping,
accounting, real estate sales, or brokerage to the list of
entities exempted from the Act.
House Committee on Financial Institutions and Pensions
In the House Committee hearing, proponent testimony
was provided by a representative of the OSBC, who stated
that this modernization bill would codify certain practices that
are already in place and would help make the regulation of
money transmission consistent across state lines.
56- 406 Neutral testimony was provided by a representative of
the Independent Payroll Providers Association and The
Payroll Group, who requested an amendment to exempt
certain payroll processors.
No other testimony was provided.
The House Committee amended the bill to add a person
appointed as an agent of a payor (i.e., agency payroll
processors) to the list of entities exempted from the Act.
Fiscal Information
According to the fiscal note prepared by the Division of
the Budget on the bill as introduced, the OSBC indicates the
bill only modernizes the Kansas Money Transmitter Act, and
the agency would use existing resources to implement the
bill. The Sentencing Commission indicates the bill could have
an effect on prison admissions, bed space, and workload of
the Commission; however, any fiscal effect would be
negligible. Based on the Kansas Sentencing Commission
estimates, the Department of Corrections indicates that any
increase in the prison population resulting from the bill would
be absorbed within the Department’s existing resources. The
Office of Judicial Administration indicates it would implement
the bill using existing resources.
The Kansas Association of Counties and the League of
Kansas Municipalities state the bill would not have a fiscal
effect on the counties and cities.
Any fiscal effect associated with enactment of the bill is
not reflected in The FY 2025 Governor’s Budget Report.
Financial institutions; Kansas Money Transmission Act; State Bank Commissioner;
licensure; civil penalties; criminal penalties; disciplinary action; money transmission;
permissible investments; rules and regulations; exemptions
57- 406