Money transmission licensing (and related compliance) can be an expensive and time-consuming process. To further complicate things, it is often difficult to determine where a particular state draws the line on whether or not a particular payments-related activity constitutes money transmission.
The state of Washington’s Department of Financial Institutions (“DFI”) recently clarified one of these grey areas (“payment processing”) with an interpretive statement (the “Statement”) regarding the Washington Uniform Money Services Act (the “Act”). The statement concludes that “payment processing” is money transmission. According to the statement, payment processing includes activities where an entity “receives[s] payments from consumers, settle[s] payment transaction with or without financial institutions, and transmit[s] payments to merchants’ or creditors’ accounts”, among other activities.
Despite the DFI’s conclusion that payment processing is money transmission, certain payment processors are eligible for a waiver from the licensing requirement. The waiver is primarily available for those processors that are acting as the agent of the payee. Companies that are not currently licensed money transmitters in the state must request an analysis and waiver from the DFI before performing payment processing activities in the state of Washington.
Interestingly, however, a “payment processor holding value beyond the time period necessary to complete the purchase of a good or service is not eligible for the license waiver.” Additionally, payment processors of virtual currency and payment processors providing services to the marijuana industry are not eligible for the license waiver.
- Despite some common industry assumptions about the scope of state money transmission laws, the state of Washington has clarified that its money transmission laws apply to payment processors (including those functioning as agents of the payee).
- Such payment processors are eligible to obtain a license waiver if certain criteria are met (such criteria are similar to those required for the federal payment processor exemption).
- License waivers are not available for (a) payment processors holding value beyond the time period necessary to complete the purchase of a good or service, (b) payment processors of virtual currency, or (c) payment processors providing services to the marijuana industry.