Indiana Money Transmitter Bond: A Comprehensive Guide

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

At a Glance:

• Lowest Cost:  $2,000 per year or $200 per month based on the applicant’s credit
• Bond Amount: Between $200,000 to $300,000 (more on this later)
• Who Needs it: All money transmitters seeking to obtain a license in Indiana
• 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 Indiana: The Indiana Department of Financial Institutions

Background

Indiana code 28-8-4 requires all money transmitters operating in the state to obtain a license with the Department of Financial Institutions. The Indiana 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 $300,000 surety bond to be eligible for licensure.

What is the Purpose of the Indiana Money Transmitter Bond?

Indiana 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 set forth in Indiana statute 28-8-4. Specifically, the bond protects consumers in the event the money transmitter fails to disburse funds to consumers or does not properly account for all funds received. In short, the bond is a type of insurance that protects the public if the money transmitter breaks licensing laws.

How Can an Insurance Agent Obtain an Indiana Money Transmitter Surety Bond?

BondExchange makes obtaining an Indiana 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? Gain access 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.

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How is the Bond Amount Determined?

Indiana code 28-8-427 dictates money transmitters should determine their required bond amount by following these steps:

Step 1

Subtract one (1) from the number of locations where the applicant proposes to engage in business under the license

Step 2

Multiply the difference determined under Step 1 by ten thousand dollars ($10,000)

Step 3

Add two hundred thousand dollars ($200,000) to the product determined under Step 2

Step 4

Pay the amount that is the lesser of:

• The sum determined in Step 3; or
• Three hundred thousand dollars ($300,000)

Is a Credit Check Required for the Indiana 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 Indiana 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 Indiana Money Transmitter Bond Cost?

The Indiana Money Transmitter surety bond can cost anywhere between 1% to 12.5% 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 $300,000 bond requirement.

$300,000 Money Transmitter Bond Cost

*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 Indiana Define “Money Transmitter?”

Indiana code 28-8-4-13 defines a money transmitter as any business entity who performs one or more of the following services:

• Sells or issues payment instruments
• Receives money for transmission

Transmits money to any location by any means, including a payment instrument, wire, facsimile, or electronic transfer.

BondExchange now offers monthly pay-as-you-go subscriptions for surety bonds. Your customers are able to purchase their bonds on a monthly basis and cancel them anytime. Learn more here.

How do Money Transmitters Apply for a License in Indiana?

Money transmitters in Indiana 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 Indiana 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 Indiana Money Transmitter License must have a company net worth (assets – liabilities) of at least $600,000. Applicants must submit an audited financial statement, prepared by a CPA, verifying their net worth when submitting their license application.

Step 2 – Purchase a Surety Bond

Money transmitters must purchase and maintain a surety bond with a limit between $200,000 to $300,000 (see the above section to calculate your customer’s required limit)

Step 3 – Purchase Errors and Omissions Insurance

Money transmitters must purchase errors and omissions insurance with a minimum limit of $300,000

Step 4 – Request NMLS Account

The Indiana 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 5 – Complete the Application

All Indiana 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 $600,000
  • All authorized agents who conduct money transmission services on behalf of the applicant
  • Primary company and consumer complaint contact information
  • Company’s FinCen confirmation number and filing date
  • Company’s independently reviewed AML/BSA policy
  • Company business plan containing the following information:
    • Marketing strategies
    • Products and Services offered in Indiana
    • Target markets
    • Fee schedule
    • Operating structure the company intends to employ
    •  How money will be collected
    • How money will be exchanged
    • How records will be collected and retained
    • How use of authorized delegates/agents will be conducted on Indiana money transmission transactions
  • Certificate of Good Standing obtained from the Indiana INBiz platform
  • Company staffing and internal policies
  • Sample authorized agent contract (if applicable)
  • Flow of funds structure
  • Company formation documents
  • Management chart showing the company’s hierarchy
  • Organizational chart showing the company’s ownership structure
  • Resume with detailed job experience in an industry relevant to the Money Transmitter License

Money transmitters must pay the following fees when submitting their license application:

• • $1,000 application fee
  • $36.25 background check fee (per person)
  • Annual fee of $0.25 per authorized agent to a maximum of $25,000 (there is no fee for the first 100 agents)

How Do Indiana 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 Indiana 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 Indiana Money Transmitter License?

Indiana requires money transmitters to purchase errors and omissions insurance with a minimum limit of $300,000. Money transmitters must purchase and maintain a surety bond with a limit between $200,000 to $300,000 (see the above section to calculate your customer’s required limit).

How Do Indiana 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 address of entity/individual(s) buying the bond
• All branch locations
• Surety company’s name and address
• Bond amount
• Date the bond goes into effect

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

In order to avoid claims made against their bond, money transmitters in Indiana 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 from consumers
• Promptly pay all funds owed to consumers

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

Indiana requires money transmitters to purchase errors and omissions insurance as a prerequisite to obtaining a license. 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 Indiana Money Transmitter Customers?

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