Exchange Guide
Federal registration, state licensing, fee disclosures, and consumer rights for international remittances from the United States.
How Money Transmission Works
A licensed money transmitter accepts value from a sender and arranges for equivalent value to be made available to a designated recipient, typically in another country. The transmitter does not necessarily move physical currency. Most international remittances are settled through correspondent banking networks, bilateral settlement agreements between transmitters, or real-time payment rails.
The core business model involves the transmitter collecting funds in the sender's currency, converting to the recipient's currency at a rate that includes a margin, and delivering the converted amount through a local payout network in the destination country. The transmitter earns revenue through the exchange rate margin and any explicit transaction fees charged to the sender.
International remittance transfer flow from sender to recipient
MSB Definition Under Federal Law
Under 31 CFR Part 1010.100(ff), a money service business includes any person doing business in one or more of the following capacities: currency dealer or exchanger, check casher, issuer of traveler's checks, money orders, or stored value, seller or redeemer of traveler's checks, money orders, or stored value, and money transmitter. The definition applies to businesses that exceed $1,000 in transactions with any single person in any one day for certain categories.
A money transmitter is specifically defined as any person that provides money transmission services, or any other person engaged in the transfer of funds. The definition is intentionally broad and has been applied to informal value transfer systems, mobile payment applications, and digital currency exchangers.
FinCEN MSB Registration
The Financial Crimes Enforcement Network (FinCEN) is a bureau of the US Department of the Treasury. FinCEN administers the Bank Secrecy Act and is the primary federal regulator for money service businesses that are not depository institutions.
Registration Requirement
Under 31 CFR Part 1022.380, any business that qualifies as an MSB must register with FinCEN using FinCEN Form 107. Registration must occur within 180 days of establishing the business and must be renewed every two years. Failure to register is a federal crime under 31 USC 5330.
What Registration Requires
The FinCEN registration form requires the business to identify its owner or controlling person, list the type of MSB services provided, identify all agents operating on behalf of the business, and provide contact information. The registration is publicly searchable through FinCEN's MSB Registrant Search tool at fincen.gov.
Registration with FinCEN does not substitute for state licensing. A business may be registered with FinCEN but still be operating illegally in states where it has not obtained a money transmitter license.
AML Program Requirements
Registered MSBs must implement a written anti-money laundering program under 31 CFR Part 1022.210. The program must include internal policies and procedures, designation of a compliance officer, ongoing employee training, and independent testing. The program must be reasonably designed to prevent the MSB from being used to facilitate money laundering or the financing of terrorist activities.
Reporting Obligations
MSBs must file Currency Transaction Reports (CTRs) for cash transactions exceeding $10,000 with a single person in a single business day. Suspicious Activity Reports (SARs) must be filed when the MSB knows, suspects, or has reason to suspect that a transaction involves funds from illegal activity, is designed to evade BSA reporting requirements, or lacks a lawful purpose. SARs are confidential and must not be disclosed to the subject of the report.
State Money Transmitter Licensing
Separate from federal FinCEN registration, most US states require a money transmitter license to conduct business within their borders. State licensing is administered by state banking or financial services regulators. Requirements vary significantly across jurisdictions.
State licensing requirements vary across 50 jurisdictions
The Uniform Money Services Act
The Uniform Law Commission developed the Uniform Money Services Act (UMSA) to provide a model framework for state money transmission licensing. Several states have adopted versions of the UMSA, but adoption has been partial and states have modified the model law in various ways. As a result, there is no single uniform licensing standard across the country.
Common Licensing Requirements
While requirements vary, most state money transmitter licenses involve the following elements. Applicants must submit detailed background information on owners, officers, and directors. Financial statements demonstrating minimum net worth are required, with thresholds ranging from $25,000 to over $1 million depending on the state. A surety bond or other permissible investment must be maintained to protect consumer funds. Applicants must describe their AML compliance program and demonstrate operational capacity.
NMLS and Multi-State Licensing
The Nationwide Multistate Licensing System (NMLS) is used by many states for money transmitter license applications and renewals. The NMLS Consumer Access portal allows consumers to look up licensed money transmitters by name, state, and license number. Using NMLS does not eliminate the need to obtain separate licenses in each state, but it streamlines the application process.
Montana and Wyoming
Montana and Wyoming historically did not require money transmitter licenses, making them notable exceptions to the general state licensing requirement. However, regulatory landscapes change and consumers should verify current requirements directly with state regulators.
Agent Relationships
Many money transmitters operate through networks of retail agents, such as convenience stores, check cashing locations, and pharmacies. In most states, the licensed transmitter is responsible for the compliance of its agents. Consumers sending money through an agent location should be able to identify the licensed transmitter on whose behalf the agent is acting.
The Dodd-Frank Act and Remittance Transfers
Section 1073 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 amended the Electronic Fund Transfer Act (EFTA) to add new provisions specifically governing remittance transfers. These provisions are codified in 15 USC 1693o-1 and implemented through the CFPB's Regulation E, specifically 12 CFR Part 1005 Subpart B, which took effect in October 2013.
What Is a Remittance Transfer
Under the rule, a remittance transfer is an electronic transfer of funds requested by a sender to a designated recipient in a foreign country. The transfer must be sent by a remittance transfer provider. The rule applies to transfers of more than $15. Certain transactions are excluded, including transfers sent for business purposes and transfers between accounts owned by the same person at the same institution.
Who Is a Remittance Transfer Provider
A remittance transfer provider is any person that provides remittance transfers for consumers in the normal course of its business. The rule includes a safe harbor for providers that make 500 or fewer remittance transfers per year, meaning those providers are not considered to be providing transfers in the normal course of business and are not subject to the rule's full requirements.
Pre-Payment Disclosure Requirements
Before a consumer pays for a remittance transfer, the provider must disclose the transfer amount in the currency in which the funds will be transferred, the exchange rate to be used, all fees and taxes imposed by the provider, and the amount to be received by the designated recipient in the currency in which the funds will be received. This disclosure must be provided in writing and the consumer must have an opportunity to review it before payment.
Receipt Requirements
At or before the time the consumer pays, the provider must provide a receipt containing the pre-payment disclosure information plus the date of availability, the name and contact information of the provider, the name and contact information of the designated recipient where reasonably practicable, a statement of the consumer's cancellation and error resolution rights, and contact information for the CFPB and the relevant state regulatory agency.
Remittance Fee Structures
The total cost of an international money transfer consists of multiple components. The Dodd-Frank remittance rules require that all costs be disclosed before payment, but understanding how these components work helps consumers evaluate what they are paying.
Exchange Rate Margin
The interbank exchange rate is the rate at which banks trade currencies with each other. Money transmitters apply a markup to this rate when converting funds for consumers. The difference between the interbank rate and the rate offered to the consumer represents revenue to the transmitter. Under Dodd-Frank, the rate actually used in the transaction must be disclosed, but the margin above the interbank rate is not required to be separately quantified.
Transfer Fee
An explicit charge per transaction. This may be a flat fee regardless of transfer amount, a percentage of the transfer amount, or a combination. The transfer fee must be disclosed as a separate line item in the required pre-payment disclosure. Fees vary by provider, corridor, payment method, and delivery speed.
Taxes
Taxes imposed by the provider's jurisdiction or the recipient's jurisdiction must be disclosed. Some countries impose taxes on incoming remittances or on the payout transaction. These must be included in the disclosed amount to be received.
Third-Party Fees
Correspondent banks or payout agents in the recipient country may deduct fees from the transfer amount. The Dodd-Frank rule addresses this through a "covered third-party fees" concept, requiring disclosure of fees imposed by the designated recipient's institution when the provider can determine those fees in advance. This area has been subject to ongoing CFPB rulemaking.
CFPB Consumer Protections
The Consumer Financial Protection Bureau is the federal agency responsible for enforcing the remittance transfer rules under Dodd-Frank. The CFPB also handles consumer complaints about money transfer services and publishes educational materials about consumer rights.
CFPB rights apply to remittance transfers over $15
Cancellation Rights
Under 12 CFR 1005.34, a consumer may cancel a remittance transfer within 30 minutes of payment and receive a full refund of all amounts paid, including fees and taxes, provided the funds have not been picked up by the designated recipient or deposited into the recipient's account. The 30-minute window begins when the consumer pays. Providers must include a clear statement of cancellation rights on the receipt.
Error Resolution Rights
Under 12 CFR 1005.33, a consumer may report an error within 180 days of the disclosed date of availability of the transfer. Errors covered by the rule include transfers not made available by the disclosed date, transfers sent to the wrong recipient due to provider error, transfers in the wrong amount, and mathematical errors. Upon receiving an error notice, the provider must investigate and either correct the error or explain why no error occurred within specific timeframes.
Error Resolution Timeframes
After receiving an error notice, the provider has 90 days to resolve the error. For certain errors, the provider must provide a provisional credit within 5 business days while the investigation is pending. If the provider determines an error occurred, it must refund the amount of the error, redeliver the transfer at no additional cost, or provide the difference between the disclosed amount and the amount actually received.
Filing a Complaint
Consumers can submit complaints about money transfer services to the CFPB at consumerfinance.gov/complaint. The CFPB forwards complaints to the relevant company and publishes complaint data in its Consumer Complaint Database. Consumers can also contact the CFPB by phone at 1-855-411-CFPB (2372).
Verifying a Money Transmitter's License
Before using a money transfer service, consumers can verify the provider's licensing status through several official channels. Using an unlicensed provider carries significant risk, as unlicensed operators are not subject to regulatory oversight and consumers have no regulatory recourse if funds are lost.
FinCEN MSB Registrant Search
Available at fincen.gov, this tool allows consumers to search for businesses registered as money service businesses with FinCEN. A result confirms federal registration but does not confirm state licensing.
NMLS Consumer Access
Available at nmlsconsumeraccess.org, this portal shows money transmitter licenses issued through the NMLS system by participating states. Consumers can search by company name and see license status, license number, and state.
State Regulatory Websites
Each state's banking or financial services department maintains its own list of licensed money transmitters. For states not participating in NMLS, this is the primary verification source. Contact information for state regulators is available through the Conference of State Bank Supervisors.
Red Flags
Providers that cannot produce a license number, do not appear in FinCEN's MSB search, operate exclusively through cash or cryptocurrency, or are not reachable through verifiable contact information should be treated with caution. Consumers should verify before sending.