North Dakota Money Transmitter Bond: A Comprehensive Guide

July 16, 2021

North Dakota Money Transmitter Bond

This guide provides information for insurance agents to help their customers obtain North Dakota Money Transmitter Bonds

At a Glance:

  • Average Cost: Between 1% to 12.5% of the bond amount per year based on the applicant’s credit
  • Bond Amount: Between $150,000 to $500,000 (more on this later)
  • Who Needs it: All money transmitters operating in North Dakota
  • Purpose: To ensure the public will receive compensation for any damages should the money transmitter engage in any acts of fraud
  • Who Regulates Money Transmitters in North Dakota: The North Dakota Department of Financial Institutions

Background

North Dakota statute 13-09-01 requires all money transmitters operating in the state to obtain a license with the Department of Financial Institutions. The North Dakota 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 North Dakota Money Transmitter Bond?

North Dakota 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 regulations set forth in the North Dakota Statute Chapter 13-09. Specifically, the bond protects the public in the event the money transmitter engages in any acts of fraud or fails to pay funds owed to consumers. In short, the bond is a type of insurance that protects the public if the money transmitter breaks licensing laws.

North Dakota Money Transmitter Bond Form

North Dakota Money Transmitter Bond Form

How Can an Insurance Agent Obtain a North Dakota Money Transmitter Bond?

BondExchange makes obtaining a North Dakota 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?

North Dakota Statute 13-09-05 dictates that the limit on the North Dakota Money Transmitter bond be a minimum of $150,000. The Department of Financial Institutions may increase the bond to a maximum limit of $500,000 if they have “good cause” to do so. When determining a money transmitter’s bond limit, the Department of Financial Institutions will examine factors such as the money transmitter’s financial condition and volume of transmissions completed.

Is a Credit Check Required for the North Dakota 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 North Dakota Money Transmission bond. Owners 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 North Dakota Money Transmitter Bond Cost?

The North Dakota Money Transmitter 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 $150,000 bond requirement.

$150,000 Money Transmitter Bond Cost

Credit Score Bond Cost (1 year)
720+ $1,500
680 – 719 $2,250
650 – 679 $3,000
600 – 649 $6,000
550 – 599 $11,250
500 – 549 $18,750

How Does North Dakota Define “Money Transmitter?”

North Dakota statute 13-09-02 defines a money transmitter as any business entity who sells or issues payment instruments, stored value, or receives money or monetary value for transmission to a location within or outside the United States.

How do Money Transmitters Apply For a License in North Dakota?

Money Transmitters in North Dakota 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 North Dakota 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 North Dakota Money Transmitter License must have a company net worth (assets – liabilities) of at least $100,000. Applicants must submit a financial statement verifying their net worth when submitting their license application.

Step 2 – Purchase a Surety Bond

Money transmitters must purchase and maintain a surety bond (limits outlined above)

Step 3 – Hire a Qualifying Individual

License applicants must employ a qualifying individual who is capable of handling the day to day operations of the money transmission business. It is recommended that the qualifying individual be placed in a managerial role and have a minimum of three years industry experience.

Step 4 – Request a NMLS Account

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

    • Company financial statements indicating a net worth of at least $100,000
    • Locations of all company authorized agents
    • The following company contacts:
      • Primary
      • Primary consumer complaint
      • Legal
      • Pre-Exam Contact
      • Exam Delivery/Billing
      • Licensing
    • Company’s FinCEN registration confirmation number and filing date
    • Information on all bank accounts used for the transmission of money
    • Company disclosure questions
    • Company’s AML/BSA policy
    • Company’s IT/Cybersecurity policy
    • Company business plan containing the following information:
      • Executive Summary
      • Marketing strategies/Target markets
      • Products/Services
      • Fee schedule
      • Management/Organization Structure
      • Operational Plan
    • Certificate of Good Standing
    • Sample contract used with authorized agents
    • Sample form of payment instrument (if applicable)
    • Flow of funds structure
    • Company formation documents
    • Management chart detailing the company’s hierarchy
    • Organization chart detailing the company’s ownership structure
    • List of the company’s permissible investments
    • Personal financial statements of all company owner’s with at least a 25% stake

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

    • $400 license fee
    • $450 application fee
    • $36.25 background check fee (per person)
    • $15 credit report fee (per person)
    • $0.25 annual fee for all company authorized agents (companies with 100 agents or less are exempt)

How Do North Dakota 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 North Dakota 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 North Dakota Money Transmitter License?

North Dakota does not require money transmitters to purchase any form of liability insurance as a prerequisite to obtaining a business license. Money transmitters must purchase and maintain a surety bond (limits outlined above).

How Do North Dakota 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:

  • Name of entity/individual(s) buying the bond
  • Surety company’s name and state of incorporation
  • Bond amount
  • Date the bond goes into effect

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

To avoid claims on their bond, money transmitters in North Dakota must follow all license regulations in the state, including some of the most important issues below that tend to cause claim

  • Do not engage in any acts of fraud
  • Pay all funds owed to consumers

What Other Insurance Products Can Agents Offer Money Transmitters in North Dakota?

North Dakota does not require money transmitters to purchase any form of liability insurance as a prerequisite to obtaining a business 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 North Dakota Money Transmitter Customers?

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

2021-07-19T19:29:59+00:00

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