Seven states have agreed to a multi-state compact standardizing key aspects of money services business (MSB) licensing. As of today, Georgia, Illinois, Kansas, Massachusetts, Tennessee, Texas, and Washington have joined into the compact, with other states expected to join the near future.
Under the multi-state agreement, if one state reviews a significant element of state MSB licensing, the other participating states must accept the initial state’s findings. This should significantly limit the number of repetitive exams faced by interstate MSBs. The key elements addressed in the multi-state protocol are: (i) information technology, (ii) cybersecurity, (iii) business plan, (iv) background check, and (v) compliance with the Bank Secrecy Act and anti-money laundering regulations.
The Washington State Department of Financial Institutions emphasized in their press release, that the streamlined process should address some of the most serious complaints from FinTech startups. These companies, who provide money services, should see a significant relaxation of the present burdens imposed by diverse licensing requirements across the states.
This agreement represents a substantial step in implementing Vision 2020, a policy statement issued by state regulators operating through the Conference of State Bank Supervisors (CSBS). Vision 2020 set out a goal of an integrated 50-state system of licensing and supervision for FinTech companies. This compact is one of the early steps towards realizing these changes.
While no details regarding the licensing process have been announced, they are expected shortly. The current states plan to undertake a pilot licensing program in April 2018.