December 6, 2022

Volume XII, Number 340


December 05, 2022

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Sensible State Coordination Allows Fintechs to Quickly Enter New Markets

Less than a year after the Conference of State Bank Supervisors (CSBS) announced Vision 2020, an initiative to modernize state regulation for non-bank financial companies, the CSBS revealed plans to establish a standardized licensing practice for money services businesses. Seven states have agreed to a compact whereby all participating states accept the findings of one state that has reviewed money transmitter licensing requirements, including IT, cybersecurity, business plan, background check, and compliance with the Bank Secrecy Act. The states that have joined the compact include Georgia, Illinois, Kansas, Massachusetts, Tennessee, Texas, and Washington.

With a multistate compact, the regulatory burdens should be significantly reduced for Fintech companies that wish to do business in multiple states. The announcement of the multistate compact follows the CSBS launch of a redesigned Nationwide Multistate Licensing System, the core licensing technology platform used by state bank regulators. The redesign permits states to access and rely on other states’ analyses, which, in turn, helps non-banks to quickly expand into new jurisdictions. Now that the technology for states to leverage other states’ analyses is available, the compact is the next outgrowth to achieve the goals of Vision 2020.

How many states will join the compact before 2020 remains to be determined. From the state perspective, the advantages of joining the compact include the ability to redeploy scarce regulatory resources towards other state regulatory priorities, and the positioning of the state as being hospitable to entry by multistate money services businesses. That said, there is the possibility that some states may prefer to retain greater authority to approve and supervise business activities occurring within their jurisdictions—or even limit out-of-state competition for their domestic licensed business—and not join the compact.

Copyright © 2022 by Morgan, Lewis & Bockius LLP. All Rights Reserved.National Law Review, Volume VIII, Number 40

About this Author

Sarah Riddell, Morgan Lewis, regulatory attorney

Leveraging her experience as a lawyer at the US Commodity Futures Trading Commission (CFTC), Sarah V. Riddell advises domestic and foreign exchanges, derivatives clearing organizations, swap execution facilities, and other financial institutions on a broad range of regulatory matters, including CFTC registration and compliance. While at the CFTC, Sarah worked on Dodd-Frank-related rulemakings and participated in examinations of derivatives clearing organizations, including those designated as systemically important.​

Charles Horn, financial services attorney, Morgan Lewis

Charles M. Horn is a partner in Morgan Lewis's Investment Management and Securities Industry Practice. Mr. Horn focuses his practice on regulatory and transactional matters, primarily in the areas of banking and financial services. He works on behalf of domestic and global financial institutions of all sizes on regulatory, supervisory, enforcement and compliance matters before all major federal financial institutions regulatory agencies, and leading state financial regulatory agencies.

Melissa R.H Hall, Financial services attorney, Morgan Lewis
Of counsel

Melissa R. H. Hall represents US and overseas banks, nonbank financial services companies, investors in financial services, and technology companies in regulatory and corporate matters. She advises them on a wide range of state and federal financial regulatory laws and regulations. She provides counsel on financial regulatory compliance and enforcement, including state and federal licensing requirements, consumer financial products and compliance, payment systems, corporate and transactional matters, financial institution investment and acquisition, and the development...