Banking and Finance Law Daily Seven states agree to standardized licensing of fintechs and MSBs
Tuesday, February 6, 2018

Seven states agree to standardized licensing of fintechs and MSBs

By J. Preston Carter, J.D., LL.M.

Seven state regulators have agreed to a multi-state compact standardizing the licensing of fintechs and money services businesses. Under the agreement, if one state reviews key elements of state licensing for a money transmitter—IT, cybersecurity, business plan, background check, and compliance with the federal Bank Secrecy Act—then other participating states agree to accept the findings. The states announcing this agreement today are Georgia, Illinois, Kansas, Massachusetts, Tennessee, Texas, and Washington. Other states are expected to join this compact.

The multi-state compact represents the first step among state regulators in moving toward an integrated, 50-state system of licensing and supervision for fintechs. In May 2017, state regulators, operating through the Conference of State Bank Supervisors, issued a policy statement establishing the 50-state goal. CSBS then developed Vision 2020 as a series of implementation initiatives.

In its announcement of the compact, the Washington State Department of Financial Institutions stated that the agreement is closely aligned with the CSBS initiative because it will create efficiencies in the multistate licensing process by allowing participating states to rely on each other’s work during the license application review process.

The agreement divides the multistate licensing process into two phases. Phase One allows states to rely on each other’s work regarding licensing requirements that are common across state lines. This leaves the few remaining state-specific licensing requirements to an expedited Phase Two, which will be performed by each individual participating state.

The Washington State DFI’s announcement also noted that the multistate streamlined licensing process will be voluntary for both states and applicants. Participating states will likely undertake a pilot licensing project around April of this year, the DFI stated. After making any adjustments based upon the pilot project, states will offer multistate licensing under the Agreement more broadly to new applicants.

OCC fintech meetings. The Office of the Comptroller of the Currency announced meetings in Chicago on March 21 and 22, 2018, with officials to discuss financial technology, new products or services, partnering with a bank or fintech company, or other matters related to financial innovation. At these one-on-one, hour-long, meetings—Innovation Office Hours—OCC staff will provide feedback and respond to questions.

The agency also announced the beginning of Listening Sessions—single topic group meetings of 30-40 individuals to discuss emerging issues, trends, and current events concerning responsible innovation. OCC staff will be engaged in these discussions and will respond to questions. The upcoming Listening Session will take place in Chicago on March 20, 2018, and will include a discussion with both banks and nonbanks on business partnerships and third-party risk management. Persons interested in participating in either event should contact the OCC by Feb. 14, 2018.

Companies: Conference of State Bank Supervisors

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