Client Alert

Are You a Money Transmitter in Massachusetts? In Rhode Island?

06 Jan 2020

As we enter 2020, the payments and money transmission regulatory landscape continues to evolve on a state-by-state basis. One key development to kick off the year is newly adopted regulations in Massachusetts affirming that “agent of a payee” transactions meeting certain criteria, as well as funds transfer services provided to business customers, are not subject to regulation under the state’s licensing law for foreign money transmission services. Additionally, Rhode Island’s updated money transmission licensing law took effect on January 1st. While it does not provide for an express agent of a payee exemption, it does also exclude funds transfer services provided to business customers.

Money Transmission in Massachusetts

In the fall of 2019, the Massachusetts Division of Banks (the “Division”) introduced proposed amendments to the money transmission regulations, 209 CMR 45.00, to exclude from the scope of activity subject to licensing transactions processed on behalf of businesses and transactions processed as an agent of a payee. The amended regulations were adopted in final form effective January 2, 2020.[1]   

The Massachusetts money transmission law is unique in that it regulates only foreign (i.e., cross-border) money transmission, and therefore a license is not required to engage in domestic-only money transmission services. (There is a separate licensing regime for domestic check sellers.) In addition, the amended regulations affirm that a license is not required in Massachusetts to process transactions as an agent of a payee that involve cross-border settlement. Specifically, while a “Foreign Transmittal Agency” is required to be licensed in Massachusetts, agent of a payee activities “shall not constitute activities requiring licensure by the Division as a Foreign Transmittal Agency” if “the recipient of the money or other monetary value is an agent of the payee pursuant to a written contract and delivery of the money or other monetary value to the agent satisfies the payor’s obligation to the payee.” 209 CMR 45.02. For purposes of this exclusion, the regulations define a “payee” as “the provider of goods or services who is owed payment of money or other monetary value from the payor for the goods or services” and the “payor” as the “the recipient of goods or services, who owes payment of money or monetary value to the payee for the goods or services.” 

This update to the Massachusetts regulations is consistent with two opinion letters the Division issued in 2019 indicating that certain agent of a payee activity does not require a money transmission license in the state. In particular, in Divisions Opinion 19-004, the Division determined that a company (“Client”) was not be required to be licensed to engage in payment processing activities as an agent of a payee.[2] The letter stated, in part, that:

[T]he Client’s services are provided only for the purposes of processing payments for the goods and services that end-customers have purchased from merchants in the regular course of business. . . . The Client does not provide a general service of money transmittal for merchants or end-customers, and does not offer its services directly to individual consumers. In addition, funds will be transferred from the end-customer’s account to the Client’s account held with a US bank only through formal banking channels utilizing the ACH network. Lastly, the contract entered into between the Client and the merchant will: a) expressly appoint the Client as agent of the merchant; and b) provide that the end-customer’s payment obligation to the merchant is satisfied once funds are received by the Client through the ACH transaction. In light of the foregoing, it is the position of the Division that a foreign transmittal agency license would not be required.

The amended regulations also exclude from the Massachusetts licensing requirement the transmission of money “that is not primarily for personal, family, or household purposes.” As a result, Massachusetts has joined a handful of states that formally exclude payments services provided to business customers.

Money Transmission in Rhode Island

We previously noted legislation in Rhode Island (H.B. 5847) that combines the existing separate laws regulating electronic money transmission and the sale of checks in Rhode Island into a single regulatory regime for money transmission activity. This new law took effect January 1, 2020, but existing licensees were required to act before the end of the year to transition to the new currency transmitter license. With the law now in effect, a new definition of “currency transmission” activity subject to regulation is operative. While regulated activity includes the sale or issuance of payment instruments and stored value, as well as receiving money for transmission, it includes these activities only to the extent that the services are provided “primarily for personal, family, or household purposes.” R.I. Gen. Laws § 19-14-1(4). 

Looking Ahead in 2020

Almost all U.S. states regulate money transmitters under state-specific licensing regimes. Statutory definitions of money transmission are quite broad and typically cover any entity that receives money for transmission. Thus, one of the most important regulatory issues for non‑bank payments service providers is the extent to which money transmission laws apply to transactions where the intermediary acts as an agent to facilitate the receipt of payments by merchants and other payees, such as public utilities (as opposed to acting on behalf of a sender to transmit the sender’s funds to a beneficiary designated by the sender). In this regard, the applicability of state money transmission laws can dictate whether and to what extent payments services can be offered, and whether money transmission licenses may be required.

In light of this key issue, we closely track regulatory developments relating to exemptions for payee-agency transactions (see, for example, our previous Client Alerts on Vermont, Michigan and California, Hawaii and Connecticut, and Washington). Massachusetts has now joined the growing list of states that have determined – whether through legislation, regulation, guidance, opinion letter, or otherwise – that, subject to certain conditions, state money transmission licensing laws do not apply to services provided as an agent of a merchant or other payee pursuant to a direct contractual agreement. 

We anticipate that more states will formally address the applicability of their money transmission laws to agent of a payee transactions in 2020. While Massachusetts does not require entities seeking to avail themselves of the exemption to formally reach out to the Division for confirmation, other states (such as Michigan) have done so in the past. It is possible other states will adopt the approach taken by Michigan if and when they publicly establish a formal agent of a payee position. 

We also note that exemptions from money transmission licensing for payments services for non‑personal, family, or household purposes may prove to be an exception, rather than the general rule. In this regard, the draft model language for standardized regulation of multistate money services businesses proposed by the Conference of State Bank Supervisors does not include support for such an exemption (although it does support an agent of a payee exemption). And, it should be noted that the federal Bank Secrecy Act (along with most state money transmission statutes) does not distinguish money transmission services provided to businesses from those provided to individuals. 

In light of these developments, entities that rely on exemptions from money transmission licensing laws should continue to closely monitor state‑by‑state developments to assess whether their activities come within state exemptions and whether any affirmative steps need to be taken to confirm compliance with specific state regulators.

[1] The Division makes available an unofficial copy of the regulations that can be accessed here:

[2] See See also Divisions Opinion 19-005, available at: (stating that “agent of the payee” transactions that meet certain criteria do not require a foreign transmittal agency license).



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