MTL License: What it is, Who Needs it & How to Get One

Fintech and digital payments have grown fast. So has regulatory scrutiny around them, especially in the United States.

If your business moves money in any way, be it through a payment app, crypto platform, or remittance service, the Money Transmitter License (MTL) is something you can't afford to ignore. It's a legal requirement without which you can’t operate as a money transmitter in the US.

Here, we break down everything about the MTL licenses, from what it is and who needs one, to how to apply, what it costs, and what ongoing compliance looks like.

MTL, or Money Transmitter License, is a regulatory license that businesses operating in the USA need to transmit money and process payments. If you operate in different states, you’ll need to apply for a separate license for each state, and every state has different requirements for its issuance. 

The issuance of an MTL license depends on your business’s financial standing, ability to maintain minimum capital reserves, adherence to federal standards like KYC/AML enforced by FinCEN, and an in-depth background check of key members of your business. 

The purpose of an MTL license is to ensure that money transfer businesses operate in a legal and secure way. Beyond this, it helps build trust, meet compliance requirements, and easily partner with banks and financial institutions. 

MTL (Money Transmitter License) is a legal requirement for Money Services Businesses (MSBs). Regardless of the volume of transactions your business handles, obtaining an MTL is mandatory. MSB here is an umbrella term under which the following entities come:

• Currency exchange providers 
• Peer-to-peer payment platforms 
• Money order providers 
• Wire transfer companies 
• Payment processing companies 
• Check-cashing businesses 
• Remittance services providers
• Mobile money services 
• Prepaid card issuers
• Crypto exchange businesses 

For crypto businesses, depending on the state, additional licensing may be required. For instance, in New York, the New York State Department of Financial Services (NYDFS) issues a separate license specifically for crypto businesses called the BitLicense.

Getting your MTL license requires you to comply with both the federal and state-level rules. There are separate obligations for each: 

1. Federal layer

At the federal level, you need to register with the Financial Crimes Enforcement Network (FinCEN) as an MSB.  FinCEN is an organization of the US Department of the Treasury that’s in charge of preventing financial crimes. This registration basically sets the baseline rules that every MSB must follow.

One important thing to understand is that this federal registration is not a license. It does not authorize you to operate. It is simply a mandatory federal prerequisite that brings your business into the regulatory framework and subjects it to AML and KYC obligations at the national level.

2. State layer

The second layer of licensing is at the state level. State licensing is coordinated through the Conference of State Bank Supervisors (CSBS). It’s also a national organization that represents state financial regulators. The purpose is to standardize the licensing process across states through a platform called the Nationwide Multistate Licensing System (NMLS).

As mentioned before, a separate MTL is a must for every state you operate in. MTLs are also not a one-time obligation. You need to renew them every year, and you maintain ongoing reporting and compliance obligations throughout the year. 

There is another notable development on the standardization front. Most of the states have now adopted the Money Transmission Modernization Act (MTMA). The goal is to align requirements like minimum net worth, surety bonds, and permissible investments across participating states. This makes managing multi-state licensing somewhat more straightforward than it used to be.

Follow the given steps in order to apply for your MTL license:

1. Business formation

Before anything else, your business needs to be properly formed and registered. First, incorporate your entity, register with the Secretary of State in your target states, and have a clear ownership and management structure in place.

2. Federal Registration with FinCEN

Post business formation, you need to register with FinCEN as an MSB using FinCEN Form 107 through the BSA e-Filing System. This must be completed within 180 days of establishing your business. 

3. Set up your compliance program

Before applying, you need to have your AML and KYC policies and procedures in place. States will ask for this as part of the application.

4. Surety bond procurement 

Most states require you to secure a surety bond as a condition of licensure. The amount varies by state and is influenced by your business volume and credit history.

5. Background checks 

All key personnel, such as owners, directors, and major shareholders, have to undergo thorough background checks, including criminal record checks and fingerprinting.

6. Financial statement submission 

Submit audited financial statements, proof of minimum capital reserves, and personal financial documents for anyone owning 10% or more of your business. Some states also require a detailed multi-year business plan at this stage.

7. State-specific review 

Post submission through NMLS, each state conducts its own independent review. This can take anywhere from 3 to 18 months, depending on the state.

8. Approval & ongoing reporting 

Once licensed, you must renew your MTL annually, submit regular compliance reports, maintain your AML/KYC program, and notify regulators of any major changes to your business, such as new ownership, new products, or key personnel changes. Your FinCEN registration also needs to be renewed every two years.

The requirements are obviously different for every state, but here's what you can generally expect:

1. Financial requirements

• Minimum net worth or capital reserves, depending on the state
• Audited financial statements
• Personal financial documents for anyone owning 10% or more of the business

2. Surety bond

• Required by most states as a condition of licensure
• Amount varies based on state and business volume
• Serves as a financial guarantee to protect customers if the business misuses funds or commits fraud

3. Background checks

• Required for major stakeholders in your business
• Includes criminal record verification and fingerprinting
• Must disclose any litigation or criminal complaints from the last 15 years

4. AML/KYC compliance program

• Written AML policy must be in place before applying
• KYC procedures for verifying customer identities
• Transaction monitoring systems
• Staff training protocols
• Suspicious activity reporting mechanisms

5. Business documentation

• Multi-year business plan
• Certificate of Good Standing
• Registered agent details

6. Ongoing requirements

• Annual license renewal per state
• Regular reporting through NMLS
• Maintain a minimum net worth and surety bond throughout
• Notify regulators of any major changes

There are several factors that go into determining the cost of acquiring an MTL license. 

1. Application fees: Vary depending on the state, but it usually ranges from a few hundred to several thousand dollars per state. 

2. Surety bond: This again depends on the state, and the amount typically ranges from $10,000 to $1 million+ per state. 

3. Capital reserves: It's the amount states require you to hold. This can be anywhere between $100,000 and $2 million. 

4. Annual renewal fees: Renewals every year can cost you between $250 and $1,000 per state. 

5. Investigation and audits: This basically covers the fees associated with state regulators reviewing and auditing your business. Can be done during the application process and even after licensing. This will cost you around $50 to $1,000 per state. 

Apart from these estimates, you should also prepare for legal and consulting fees, compliance staff and officer salary, and accounting fees for annual audits and financial statements.

The overall processing time is roughly 6 to 14 months, depending on the state. Some of the states can even take it up to 24 months. FinCEN registration itself can take around 2 to 6 weeks. Then, you also have to prepare documents, which can take weeks or months. 

If you’re applying in many states, it can even take up to 1-2 years. Many times, delays can happen because of incomplete documentation. So, it’s better to spend enough time on document preparation to keep everything in order. 

Crypto and fintechs require a separate discussion as there are additional layers of complexity and scrutiny associated with them. Here are some things you should consider: 

1. FinCEN will consider you a money transmitter if you deal in virtual currencies. Even if your platform doesn't convert crypto to fiat, activities like safeguarding or transmitting crypto assets on behalf of others can still trigger MTL requirements.

2. New York demands from crypto businesses to obtain a separate BitLicense from the New York State Department of Financial Services (NYDFS) along with the standard MTL. 

3. Stablecoin issuers face more scrutiny at both the federal and state levels. The Consumer Financial Protection Bureau (CFPB), for instance, has said that stablecoins come under the ambit of the Electronic Fund Transfer Act. This means companies need to follow stricter rules for reserves, management, and audits.

A bank charter, in simple terms, is an authorization from the government to operate as a bank. It allows an entity to accept deposits, issue loans, create credit, and access the Federal Reserve payment system directly. 

Here’s how this specific authorization differs from MTL:

Once your MTL licence is approved, all is not done. Post that, you’ll have to meet a series of ongoing compliance obligations: 

Suspicious Activity Reports (SARs): You’ll have to monitor transactions and file SARs with FinCEN whenever any activity seems suspicious or potentially linked to money laundering, fraud, or other financial crimes. 

AML audits: Your Anti-Money Laundering program must be audited regularly to verify it is functioning properly. Audits check that your transaction monitoring, KYC procedures, and reporting mechanisms are working as per the requirements of both federal and state regulators.

Annual financial filings: Licensed businesses have to submit annual financial statements and reports through NMLS. This is done to show continued financial health and that minimum net worth and capital reserve requirements are being met. 

Consumer complaint handling: Another state-level requirement is to have a proper process to receive, track, and resolve consumer complaints. If you fail to handle complaints properly, it can result in regulatory scrutiny and risk your license.

Regulatory exams: State regulators have periodic examinations of licensed businesses. It involves reviewing your financial records, AML program, transaction history, and internal controls. These exams can happen at any time, and the costs are often borne by the business being examined.

Now that we’ve covered what an MTL is, how to obtain one, and the time and cost involved, it’s worth exploring some alternative ways to operate without getting one directly.

1. Sponsor bank partnership

You can partner with an already-licensed bank or financial institution that can allow you to operate under their license. You move money through their infrastructure while they handle the regulatory front. Many fintechs use this as a faster route to market while building their own licensing stack.

2. Payments-as-a-Service (PaaS) providers

You can also leverage payment providers that are already licensed across multiple states. You simply plug into their infrastructure via API, and they handle compliance and licensing on your behalf.

3. Licensed fintech infrastructure companies 

These are similar to PaaS but more focused on providing the backend compliance and licensing infrastructure. Here, you build your product on top of their already-licensed framework.

An MTL is a US-specific mandatory state-level authorization for any business that transmits money or handles customer funds. To obtain it, companies must register federally with FinCEN and apply for it in each state where they operate.

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