Hawaii Money Transmitter Bond: A Comprehensive Guide

April 26, 2021

Hawaii Money Transmitter Bond

This guide provides information for insurance agents to help money transmitters obtain Hawaii Money Transmitter Bonds

At a Glance:

  • Average Cost: Between 1.5% to 7.5% of the bond amount per year based on the applicant’s credit
  • Bond Amount: $10,000 for the company’s initial 12 months in business (more on this later)
  • Who Needs it: All money transmitters seeking to obtain a license in Hawaii
  • Purpose: To ensure the public will receive compensation for any damages should the money transmitter fail to comply with licensing law
  • Who Regulates Money Transmitters in Hawaii: The Hawaii Division of Financial Institutions

Background

Hawaii Statute 489D-3 requires all money transmitters operating in the state to obtain a license with the Division of Financial Institutions. The Hawaii legislature enacted the licensing laws and regulations to ensure that money transmitters engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, money transmitters must purchase and maintain a surety bond to be eligible for licensure.

What is the Purpose of the Hawaii Money Transmitter Bond?

Hawaii requires money transmitters to purchase a surety bond as part of the application process to obtain a business license. The bond ensures that the public will receive compensation for financial harm if the money transmitter fails to comply with the licensing regulations. In short, the bond is a type of insurance that protects the public if the money transmitter breaks licensing laws.

Hawaii Money Transmitter Bond Form

Hawaii Money Transmitter Bond Form

How Can an Insurance Agent Obtain a Hawaii Money Transmitter Surety Bond?

BondExchange makes obtaining a Hawaii Money Transmitter Bond easy. Simply login to your account and use our keyword search to find the “Money” bond in our database. Don’t have a login? Enroll now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email or chat from 7:30 AM to 7:00 PM EST to assist you.

At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.

How is the Bond Amount Determined?

Hawaii Statute 489D-7 requires money transmitters to purchase a surety bond with a limit of $10,000 for the business initial 12 months of licensure. After the 12 month period has elapsed, the Hawaii Division of Financial Institutions may increase the bond amount up to a maximum limit of $500,000 based on the money transmitter’s financial condition.

Is a Credit Check Required for the Hawaii Money Transmitter Bond?

Surety companies will run a credit check on the owners of the money transmission company to determine eligibility and pricing for the Hawaii Money Transmitter bond. Owner’s with excellent credit and work experience can expect to receive the best rates. Owners with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the owner’s credit.

How Much Does the Hawaii Money Transmitter Bond Cost?

The Hawaii Money Transmitter surety bond can cost anywhere between 1.5% to 7.5% of the bond amount per year. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. The chart below offers a quick reference for the approximate bond cost on a $10,000 bond requirement.

$10,000 Money Transmitter Bond Cost

Credit Score Bond Cost (1 year)
800+ $150
650 – 799 $200
600 – 649 $400
550 – 599 $750

*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.

How Does Hawaii Define “Money Transmitter?”

To paraphrase Hawaii Statute 489D-4, a money transmitter is any business entity who engages in one or both of the following business functions:

  • Sells or issues payment instruments
  • Receives money or monetary value for transmission to a location within or outside the United States by any and all means, including wire, facsimile, or electronic transfer

How do Money Transmitters Apply for a License in Hawaii?

Money transmitters in Hawaii must navigate several steps to secure their license. Below are the general guidelines, but applicants should refer to the NMLS’s application guidelines for details on the process.

License Period – The Hawaii Money Transmitter License expires on December 31 of each year and must be renewed before the expiration date

Step 1 – Meet the Net Worth Requirements

Applicants for the Hawaii Money Transmitter License must have a company net worth (assets – liabilities) of at least $1,000 at all times. Applicants must submit an audited financial statement verifying their net worth when submitting their license application.

Step 2 – Purchase a Surety Bond

First time money transmitter license applicants must purchase and maintain a $10,000 surety bond

Step 3 – Request a NMLS Account

The Hawaii Money Transmitter License application is submitted electronically through the Nationwide Multistate Licensing System (NMLS). To submit a license application, applicants must first request to obtain an NMLS account.

Step 4 – Complete the Application

All Hawaii Money Transmitter License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:

    • Audited financial statements indicating a company net worth of at least $1,000
    • List of all company branch locations
    • Account information for the company’s clearing bank account
    • Company business plan detailing the following information
    • Certificate of Good Standing obtained from the Hawaii Business Registration Division
    • Management chart showing the company’s hierarchy
    • Organizational chart showing the company’s ownership structure
    • Copy of most recent AML/BSA Policy audit
    • Copy of most recent independent technology security audit
    • Name and location of all of the company’s authorized delegates
    • Sample authorized delegate contract (if applicable)
    • Sample form of all payment instruments to be used in the company’s business

Money transmitters must pay a $10,000 fee when submitting their license application

How Do Hawaii Money Transmitters Renew Their License?

Money Transmitters can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Hawaii Money Transmitter License expires on December 31 of each year and must be renewed before the expiration date.

What Are the Insurance Requirements for the Hawaii Money Transmitter License?

The State of Hawaii does not require money transmitters to obtain any form of liability insurance as a prerequisite to obtaining a business license. First time money transmitter license applicants must purchase and maintain a $10,000 surety bond.

How Do Hawaii Money Transmitters File Their Bond?

Money transmitters should submit the completed bond form, including the power of attorney, electronically through the NMLS. The surety bond requires signatures from both the surety company that issues the bond and a representative from the money transmission company. The surety company should include the following information on the bond form:

  • Legal name and business address of entity/individual(s) buying the bond
  • Surety company’s name
  • Bond amount
  • Date the bond is signed
  • Witness signatures for both the principal and surety company

What Can Hawaii Money Transmitters Do to Avoid Claims Against Their Bond?

In order to avoid claims made against their bond, money transmitters in Hawaii must follow all license regulations in the state. Including some of the most important issues below that tend to cause claims:

  • Properly account for all funds received
  • Transmit all funds owed to consumers

What Other Insurance Products Can Agents Offer Money Transmitters in Hawaii?

Hawaii does not require money transmitters to purchase any form of liability insurance as a prerequisite to obtaining a license. However, most reputable businesses will seek to obtain this insurance anyway. Bonds are our only business at BondExchange, so we do not issue liability insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.

How Can Insurance Agents Prospect for Hawaii Money Transmitter Customers?

The NMLS conveniently provides a public database to search for active money transmitters in Hawaii. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.

2021-12-28T15:20:55-05:00