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MoFo Reenforcement The Enforcement Blog

Are You a “Payment Processor”? Washington State Appears to Significantly Expand Scope of Its Money Transmission Act

Posted in Regulatory Developments, State Regulators

One of the defining aspects of the payments revolution of the past few years—at least from a regulatory perspective—has been the question of whether any particular payments service is subject to regulation as money transmission. State money transmission laws were crafted to address what we would today call “traditional” money transmitters—i.e., major, well-known brands that sell money orders, stored value cards, and offer domestic and international wire transfers. Today, however, there are a number of new and innovative companies that are playing a somewhat different role: They play a part in facilitating the receipt of payments by merchants and other sellers of goods and services (such as utilities) as opposed to facilitating the transmission of funds on behalf of a sender. In recent years, state licensing authorities—and various participants in this market—have grappled with whether, and to what extent, this type of activity could be subject to state money transmitter licensing laws. Late last year, Washington State’s Department of Financial Institutions (“DFI”) entered the fray with an interpretive statement (“Statement”) that took effect in January. This Statement is unique, however, in that it requires a “payment processor” to obtain a licensing waiver from DFI prior to operating in the state.

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