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01.13.2025 | Legal Advisory

On January 1, 2025, Massachusetts Governor Maura Healey signed into law Chapter 312 of the Acts of 2024 titled “An Act Relative to the Regulation of Money Transmission by the Division of Banks” covering domestic money transmitters (the “Act”). The Act closely follows nationwide standards proposed by the Conference of State Bank Supervisors (“CSBS”) known as the Model Money Transmission Modernization Act. Prior to the Act, Massachusetts was one of only two states nationwide whose money transmitter regime did not cover companies engaging in domestic money transfers.

Nonbanks participating in peer-to-peer consumer money transfers are the largest market segment that will be subject to licensure requirements under the Act. Although Governor Healey and the Massachusetts Division of Banks (“MDOB”) have emphasized that the Act will require companies that provide popular money transfer apps to be licensed under the Act, the new law is much broader. Any nonbank company engaged in receiving money for transmission from a person located in Massachusetts should be aware of these new licensure requirements. 

Covered and Exempt Entities and Transactions

The Act requires any person who engages in the business of money transmission, or who advertises, solicits, or holds themselves out as providing money transmission to be licensed with the MDOB. 

Importantly, the Act is specifically designed as a consumer protection bill and does not apply to entities engaged solely in business payments, as the definition of money transmission covers only “those transactions engaged in by a person for personal, family or household purposes.”

In addition to the commercial transactions exemption, the Act specifically exempts a number of entities from the licensure requirement, including but not limited to (i) federally insured depository institutions, (ii) bank holding companies, (iii) offices of an international banking corporation, (iv) foreign banks with a federal branch, (v) operators of payment systems for licensees and exempt entities, (vi) any person acting as an authorized delegate of an existing licensee supported by written contract, (vii) any person appointed as an agent of a payee subject to certain requirements, and (viii) any person appointed as third party service providers to or agent of a federally insured depository institution or bank holding company (or international banking corporation or foreign bank with a federal branch) so long as that person assumes certain risks of loss and legal liability for satisfying transactions.

Licensure Requirements

Licensees with the MDOB will be subject to a number of oversight and disclosure requirements, including the publication of their contact information and that of any registered agents or authorized delegates. Licensees will be subject to the MDOB’s examination and investigation authority, which may be conducted concurrently with other state and federal agencies, and licensees will be expected to give MDOB examiners and investigators complete access to all records required for the examination and investigation—licensees are expected to cover all costs incurred by the MDOB in connection with an examination of a licensee and/or their authorized delegate(s). 

License applications will include background checks (including credit and criminal reports) and a review of the applicant’s financial condition and responsibility, business experience and character, and general character for confirmation by the DOB commissioner that a license is in the public interest. Licenses must be renewed annually and at the end of each quarter a licensee must submit a report to the Commissioner that includes financial information, nationwide and state money transmission information for every licensed jurisdiction, a permissible investments report, and transaction destination country reporting.

Notably, a licensee must also maintain a tangible net worth of the greater of (i) $100,000 or 3 percent of total assets for the first $100 million, (ii) 2 percent of additional assets for $100 million to $1 billion, and (iii) 0.5 percent of additional assets for over $1 billion. 

A licensee is also required to maintain a trust account backing 100 percent of its outstanding money transmission obligations and limited to certain highly liquid permissible investments. These permissible investments are limited to cash and cash equivalents, CDs and senior debt obligations of insured depository institutions, U.S. and agency obligations, full drawable amount of an irrevocable standby letter of credit, and 100 percent of the surety bond required under the law. In addition to the permissible investments listed, other permissible categories of liquid investments are subject to limits and include short term investments, commercial paper, bills, notes, bonds, repurchase agreements, money market mutual funds, and mutual funds that meet eligible rating requirements.

Effective Date

While the DOB may begin preparing for the implementation of the law immediately, licensure requirements will not take effect until October 1, 2025. Any person already engaged in money transmission in Massachusetts on October 1, 2025 may continue to conduct money transmission while their application is pending if they have filed or will file an application for licensure by April 1, 2026.   

This advisory was prepared by Michael Krebs, Matt Hanaghan, and Dan Hartman in Nutter’s Banking and Financial Services Group. For more information, please contact the authors or your Nutter attorney at 617.439.2000.

This advisory is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.