Idaho expected to join multistate banking compact

Sharon Fisher//February 21, 2018

Idaho expected to join multistate banking compact

Sharon Fisher//February 21, 2018

Idaho is likely to join a recently formed compact of seven states to standardize key elements of the licensing process for money services businesses, which would make it easier for such businesses to operate across state lines.

photo of jim burns
Jim Burns

“I anticipate we will be joining this group in the near future,” said Jim Burns, securities bureau chief at the Department of Finance, the banking regulatory department for the state of Idaho. “The Idaho Department of Finance is always looking for ways to streamline processes since they most often benefit both the industry and regulatory communities.   We also work closely with fellow regulators across industry lines.”

photo of catherine pickels
Catherine Pickels

The compact was created by the Conference of State Bank Supervisors (CSBS), and governs MSBs, or any business that transmits or converts money, other than banks, said Catherine Pickels, communications director for the Washington, D.C.-based organization.

If one state reviews key elements of state licensing for a money transmitter – including IT, cybersecurity, business plan, background check, and compliance with the federal Bank Secrecy Act – then other participating states agree to accept the findings. “One state will do the work of certifying compliance, that state will share its work with the other six states, and they have agreed to accept that work as their own,” she said. “As new entrants come into the market in those states, they have an option to pursue this multistate licensing path.”

While that’s a lot of work for that one state, it’s work every state has had to do on its own until now, Pickels noted. According to Bloomberg Law, it takes one to two years and hundreds of thousands to millions of dollars in application fees and bonding requirements, not including capital requirements, to become licensed in all 50 states.

The result is expected to significantly streamline the MSB licensing process, especially since the states have committed to a 25-day turnaround time, Pickels said. The states announcing this agreement are Georgia, Illinois, Kansas, Massachusetts, Tennessee, Texas and Washington. The organization has seen interest from a number of other states around the country, she said.

The organization announced in May that it eventually intended to have all 50 states participate, and has launched a redesign of the Nationwide Multistate Licensing System (NMLS), the technology platform used by state bank regulators, to help regulators transform the licensing and supervision of non-bank financial institutions. This includes fintechs, or computer programs and other technology used to support or enable banking and financial services, such as blockchain and cryptocurrency.  “We’re not making tweaks, but rebuilding it from the ground up,” Pickels said.

CSBS’ multistate compact is the first step in CSBS’ Vision 2020 plan, a series of initiatives to modernize state regulation of non-banks, which is expected to be completed by 2020. The coordinated system is intended to make the U.S. itself more attractive for such companies. States are still free to impose other state-specific regulations, such as net worth requirements, Pickels said.

Idaho already participates in several other similar streamlining efforts, Burns said. Idaho also partners with the Money Transmitter Regulator’s Association  and the North American Securities Administration, he added.

Idaho Director of Finance Gavin Gee is a former chair of the CSBS.