South Dakota Money Transmitter Bond: A Comprehensive Guide

August 25, 2021

South Dakota Money Transmitter Bond

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

At a Glance:

  • Average Cost: Between $1,500 to $7,500 per year based on the applicant’s credit
  • Bond Amount: $100,000
  • Who Needs it: All money transmitters operating in South Dakota
  • Purpose: To ensure the public will receive compensation for any damages should the money transmitter violate licensing law
  • Who Regulates Money Transmitters In South Dakota: The South Dakota Division of Banking

Background

South Dakota statute 51A-17-4 requires all money transmitters operating in the state to obtain a license with the Division of Banking. The South 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 South Dakota Money Transmitter Bond?

South 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 South Dakota statute 51A-17. Specifically, the bond protects the public in the event the money transmitter engages in any acts of fraud or fails to transmit funds owed to consumers. In short, the bond is a type of insurance that protects the public if the money transmitter breaks licensing laws.

South Dakota Money Transmitter Bond Form

South Dakota Money Transmitter Bond Form

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

BondExchange makes obtaining a South 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.

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

The South Dakota Money Transmitter Bond can cost anywhere between $1,500 to $7,500 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 the $100,000 bond requirement.

$100,000 Money Transmitter Bond Cost

Credit Score Bond Cost (1 year)
800+ $1,500
650 – 799 $2,000
600 – 649 $4,000
450 – 599 $7,500

How Does South Dakota Define “Money Transmitter?”

South Dakota statute 51A-17-1 defines a money transmitter as any business entity who sells or issues payment instruments or stored value or who receives money for transmission.

How Do Money Transmitters Apply for a License in South Dakota

Money transmitters in South 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 South Dakota Money Transmitter License expires on December 31 of each year and must be renewed before the expiration date

Step 1 – Purchase a Surety Bond

Money transmitters must purchase and maintain a $100,000 surety bond

Step 2 – Meet the Net Worth Requirements

Applicants for the South Dakota Money Transmitter License must maintain a company net worth (assets – liabilities) of at least $100,000. Money transmitters must submit audited company financial statements, prepared by a CPA, verifying their net worth when submitting their license application.

Step 3 – Request a NMLS Account

The South 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 4 – Complete the Application

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

    • Audited company financial statements indicating a net worth of at least $100,000
    • Locations of all company authorized agents
    • Primary company and consumer complaint contact information
    • Company’s FinCEN registration confirmation number and filing date
    • Bank account information for the company’s letter/line of credit, operating, and/or trust primary account(s)
    • Disclosure questions
    • Company’s independently reviewed AML/BSA policy
    • Company business plan containing the following information:
      • Marketing strategies
      • Products
      • Target markets
      • Fee schedule
      • Operating structure
    • Certificate of good standing
    • Company staffing and internal policies
    • The following document samples:
      • Authorized agent contract
      • Form of payment instrument
      • Virtual currency kiosk agreement
    • Flow of funds structure
    • Company formation documents
    • Company management and organizational charts
    • List of the company’s permissible investments
    • Trust account authorization
    • Personal financial statements for all company owners
    • Detailed resumes for all control persons

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

    • $1,000 license fee
    • $500 application fee
    • $100 NMLS processing fee
    • $36.25 background check fee (per person)
    • $15 credit report fee (per person)

How Do South 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 South 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 South Dakota Money Transmitter License?

South 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 $100,000 surety bond.

How Do South 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 and NMLS number of entity/individual(s) buying the bond
  • Surety company’s name
  • Bond amount
  • Date the bond is signed
  • Date the bond goes into effect

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

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

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

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

South 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 other types of 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 South Dakota Money Transmitter Customers?

The NMLS conveniently provides a public database to search for active money transmitters in South 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.

2021-12-29T09:49:56-05:00