A&B Abstract:

On May 4, 2023, Governor Holcomb signed SEA 458, the Model Money Transmission Modernization Act (the “MTMA”), into law in Indiana. The MTMA repeals and replaces Indiana’s existing law on money transmitters and, in doing so, expands the definition of money transmission to include business purposes. The new law took effect on January 1, 2024.

The MTMA

The MTMA is based on the Conference of State Bank Supervisors’ (CSBS) endorsed model act (the “Model Act”) with a few modifications. The Model Act is intended to streamline the licensing process and promote multistate supervision. Around 25 states have at least partially adopted provisions of the Model Act over the past two years.  The MTMA adopts many of the Model Act’s provisions, including:

• Definitions applicable to money transmitters.
• Exemptions from money transmitter licensing.
• Licensing process, including standardized determination of who controls a licensee and the vetting process.
• Safety and soundness requirements, including net worth, bonding, and permissible investments.

Critically, the new definitions adopted under the MTMA are broader than Indiana’s prior law and encompass both consumer purpose and business purpose activity. That said, the MTMA is narrower than the Model Act in several respects. For example, under the MTMA, typical payroll processing activity may no longer be considered licensable activity, while entities offering “bill pay services” and those engaged in money transmission for jail or prison commissaries must assess whether a license is required under the MTMA. Indiana did not adopt the virtual currency portion of the Model Act and did not include the transmission of virtual currency in its regulation. In addition, the MTMA includes several statutory exceptions to licensure which are similar to the exemptions under Indiana’s prior law.

Licensure under the MTMA is required as of January 1, 2024. Applicants working toward licensure and compliance will have until June 30, 2024, to confirm submission of a completed application with the Indiana Department of Financial Institutions. Note that any late or incomplete applications submitted after June 30, 2024, will be considered delinquent.  Existing licensees need not reapply but must adhere to the MTMA’s new requirements as of January 1, 2024.

Takeaway:

Entities engaged in business purpose money transmission who have not previously been required to obtain a money transmission license in Indiana are strongly encouraged to review the MTMA and their business model to determine whether their business activities will require a license under the MTMA.

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