House Staff Analysis: PCS for HB 389 Money Services Businesses (Insurance & Banking Subcommittee)
- Issuer
- Congressional materials
- Document type
- 2022 3100 Insurance Banking Subcommittee Proposed Committee Bill Analyses Fn Pcs0389 Ibs
- Case
- 2022 3100 Insurance Banking Subcommittee Proposed Committee Bill Analyses Fn Pcs0389 Ibs
Summary
A Florida House of Representatives staff analysis of PCS for HB 389, Money Services Businesses, sponsored by the Insurance & Banking Subcommittee and dated January 25, 2022. It describes the Office of Financial Regulation's licensing of money services businesses under ch. 560, F.S. and the criteria under Pub. L. 92-544 for access to the FBI's criminal history record information system. It reports that the FBI's Criminal Justice Information Law Unit found the terms “responsible person” and “control of a money services business” in s. 560.141, F.S. overly broad and placed MSB fingerprinting on a grace period of unspecified length. The analysis states that the bill creates the term “control person,” repeals the definitions of “officer” and “responsible person” and the change of control application requirement, and gives an effective date of October 1, 2022.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Cite this document
“House Staff Analysis: PCS for HB 389 Money Services Businesses (Insurance & Banking Subcommittee).”
Original at www.flhouse.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2022-3100-insurance-banking-subcommittee-proposed-committee-bill-analyses-fn-pcs0389-ibs/
, SHA-256 0bb888aab5aa69adc6399f315720d50677d2efe32453b5ae213c583010402f9a.Full text
HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: PCS for HB 389 Money Services Businesses
SPONSOR(S): Insurance & Banking Subcommittee
TIED BILLS: IDEN./SIM. BILLS:
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
Orig. Comm.: Insurance & Banking Subcommittee Hinshelwood Luczynski
SUMMARY ANALYSIS
The Office of Financial Regulation’s (OFR) Division of Consumer Finance licenses and regulates various
aspects of the non-depository financial services industries, including money services businesses (MSBs)
regulated under ch. 560, F.S. MSB applicants must submit fingerprints to the Florida Department of Law
Enforcement (FDLE) for a state criminal history background check, and the fingerprints must be submitted to
the Federal Bureau of Investigation (FBI) for a federal criminal history background check. The OFR must
review the results of the state and federal criminal history background checks and determine whether the
applicant meets licensure requirements.
Access to the FBI’s criminal history record information system (CHRI) was previously authorized for
fingerprints pursuant to ch. 560, F.S. However, in order to obtain CHRI for applicants to the recently created
Financial Technology Sandbox, FDLE sent correspondence to the FBI’s Criminal Justice Information Law Unit
(CJILU) to obtain an Originating Agency Identifier (ORI). The ORI validates legal authorization to access
criminal justice information and identifies the specific agency requesting the information. CJILU responded to
this request stating that the MSB licensing statute does not qualify for CHRI because the terms “responsible
person” and “control of a money services business”, as used in that statute to specify persons who are
required to submit fingerprints, are overly broad and, thus, do not sufficiently define the categories of people
subject to the background check. The CJILU acknowledged that MSB fingerprinting was previously approved
by the CJILU and that the FBI will continue to honor fingerprints submitted for MSB licensure. However, the
CJILU has placed MSB fingerprinting on a grace period of unspecified length in order to allow Florida to amend
MSB fingerprinting statutes such that the statutes specifically identify the categories of licensees or employees
falling within the purview of the statutes; CJILU will not allow fingerprinting of additional categories of
applicants (i.e., those applying under the Financial Technology Sandbox) during this grace period.
The bill creates the term “control person”, repeals the definitions of “officer” and “responsible person”, and
repeals the statute that defines when a person has a controlling interest in an MSB. Some of the elements from
these repealed definitions and statute are made part of the “control person” definition, and the bill inserts
“control person” throughout ch. 560, F.S., in place of these repealed definitions and statute. Thus, a person
who meets the definition of “control person”, as defined in the bill, must submit fingerprints and be vetted by the
OFR.
The bill repeals the requirement that a person or group of persons proposing to acquire a controlling interest in
an MSB submit an application for licensure prior to the acquisition. The bill deletes portions of current law that
relate to the change of control application process, including a provision that caps fees when a change of
control application is filed. If a new “control person”, as defined in the bill, is added, such person must submit
fingerprints and be vetted by the OFR.
The bill has an indeterminate negative fiscal impact on the state, an indeterminate positive fiscal impact on the
private sector, and no fiscal impact on local governments.
The bill provides an effective date of October 1, 2022.
This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives .
STORAGE NAME: pcs0389.IBS
DATE: 1/25/2022
FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Background
The Office of Financial Regulation (OFR) regulates banks, credit unions, other financial institutions,
finance companies, and the securities industry.1 The Division of Consumer Finance within the OFR
licenses and regulates various aspects of the non-depository financial services industries, including
money services businesses (MSBs) regulated under ch. 560, F.S. An MSB is any person located in or
doing business in this state, from this state, or into this state from locations outside this state or country
who acts as the following:2
Payment instrument seller: A payment instrument seller sells, issues, provides, or delivers
payment instruments.3
Foreign currency exchanger: A foreign currency exchanger exchanges, for compensation,
currency4 of the United States or a foreign government to currency of another government. 5
Check casher: A check casher sells, issues, provides, or delivers currency6 in exchange for
payment instruments 7 received, except travelers checks.8
Money transmitter: A money transmitter receives currency,9 monetary value,10 or payment
instruments 11 for the purpose of transmitting the same by any means, including transmission by
wire, facsimile, electronic transfer, courier, the Internet, or through bill payment services or other
businesses that facilitate such transfer within this country, or to or from this country. 12
An MSB may engage in deferred presentment transactions, commonly known as “payday loans”, by
filing a declaration of intent with the OFR.13 A money transmitter or payment instrument seller may
engage in the activities authorized for check cashers and foreign currency exchangers without paying
additional licensing fees.14 State and federally chartered depository institutions, such as banks and
credit unions, are exempt from licensure as an MSB.15
An applicant for an MSB license must submit the following to the OFR:
An application;16
A nonrefundable application fee;17
1 S. 20.121(3)(a)2., F.S.
2 S. 560.103(22), F.S.
3 S. 560.103(30) and (34), F.S. The term “payment instrument” means a check, draft, warrant, money order, travelers
check, electronic instrument, or other instrument, payment of money, or monetary value whether or not negotiable. The
term does not include an instrument that is redeemable by the issuer in merchandise or service, a credit card voucher, or
a letter of credit. S. 560.103(29), F.S.
4 The term “currency” means the coin and paper money of the United States or of any other country which is designated
as legal tender and which circulates and is customarily used and accepted as a medium of exchange in the country of
issuance. Currency includes United States silver certificates, United States notes, and Federal Reserve notes. Currency
also includes official foreign bank notes that are customarily used and accepted as a medium of exchange in a foreign
country. S. 560.103(11), F.S.
5 S. 560.103(17), F.S.
6 Definition of “currency”, supra note 4.
7 Definition of “payment instrument”, supra note 3.
8 S. 560.103(6) and (34), F.S.
9 Definition of “currency”, supra note 4.
10 The term “monetary value” means a medium of exchange, whether or not redeemable in currency. S. 560.103(21), F.S.
11 Definition of “payment instrument”, supra note 3.
12 S. 560.103(23), F.S.
13 S. 560.403, F.S.
14 S. 560.204(2), F.S.
15 S. 560.104, F.S.
16 S. 560.141(1)(a), F.S.
17 Ss. 560.141(1)(b) and 560.143, F.S.
STORAGE NAME: pcs0389.IBS PAGE: 2
DATE: 1/25/2022
A copy of the applicant’s written anti-money laundering program required by federal law;18 and
Fingerprints for the following individuals:19
o An officer, which is defined as an individual, other than a director, who participates in, or
has authority to participate in, the major policymaking functions of an MSB, regardless
of whether the individual has an official title or receives a salary or other
compensation.20
o A director.
o A responsible person, which is defined as an individual who is employed by or affiliated
with an MSB and who has principal active management authority over the business
decisions, actions, and activities of the MSB in this state.21 In turn, “affiliated party”
means a director, officer, responsible person, employee, or foreign affiliate of a money
services business, or a person who has a controlling interest in a money services
business.22
o The compliance officer, which is defined as the individual in charge of overseeing,
managing, and ensuring that an MSB is in compliance with all state and federal laws
and rules relating to MSBs, as applicable, including all money laundering laws and
rules.23
o A controlling shareholder.
o Any other person who has a controlling interest, meaning a person who:24
Possesses the power, directly or indirectly, to direct the management or policies
of the MSB, whether through ownership, by contract, or otherwise;
Directly or indirectly may vote 25 percent or more of a class of a voting security
or sell or direct the sale of 25 percent or more of a class of voting securities; or
In the case of a partnership, may receive upon dissolution or has contributed 25
percent or more of the capital.
Fingerprints are not required if the applicant is a publicly traded corporation. 25 If fingerprints are
required, the fingerprints must be submitted for live-scan processing.26 Live-scan is a device that
electronically takes fingerprints and other information and uploads that information to the Florida
Department of Law Enforcement (FDLE) who, in turn, sends the fingerprints to the Federal Bureau of
Investigation (FBI) for a fingerprint background check.27 The fingerprints may be submitted through a
third-party vendor authorized by FDLE to provide live-scan fingerprinting.28 FDLE must conduct the
state criminal history background check, and a federal criminal history background check must be
conducted through the FBI.29 The costs of fingerprint processing, including the cost of retaining the
fingerprints, must be borne by the person subject to the background check. 30 The OFR must review the
results of the state and federal criminal history background checks and determine whether the applicant
meets licensure requirements.31
An MSB license must be renewed every two years.32
18 S. 560.141(d), F.S.
19 Ss. 560.141(c) and 560.127, F.S.
20 S. 560.103(26), F.S.
21 S. 560.103(33), F.S.
22 S. 560.103(1), F.S.
23 S. 560.103(8), F.S.
24 S. 560.127, F.S.
25 S. 560.141(1)(c)6., F.S.
26 S. 560.141(1)(c), F.S.
27 Florida Live Scan,
https://livescanflorida.com/#:~:text=LiveScan%20is%20a% 20device%20t hat,for%20a%20fingerprint%20background%20c
heck. (last visited Jan. 25, 2022).
28 S. 560.141(1)(c)1., F.S.
29 S. 560.141(1)(c)2., F.S.
30 S. 560.141(1)(c)4., F.S.
31 560.141(1)(c)5., F.S.
32 Ss. 560.141(2) and 560.142, F.S.
STORAGE NAME: pcs0389.IBS PAGE: 3
DATE: 1/25/2022
Once licensed, an MSB is required to report any change in the partners, officers, members, joint
venturers, directors, controlling shareholders, or responsible persons. 33 If such person does not have a
controlling interest in the MSB, then the person must simply comply with fingerprint requirements and
be vetted by the OFR.34 If any person, directly or indirectly or acting by or through one or more persons,
proposes to purchase or acquire a controlling interest in an MSB, such person or group must submit a
new application for licensure at least 30 days before such purchase or acquisition.35 Such a change of
control application is not required where the person or group of persons has previously complied with
applicable licensing provisions, provided that they are currently affiliated with the MSB, or where the
person or group of persons is currently licensed with the OFR as an MSB.36 A change of control
application must be accompanied by the payment of an initial licensing fee and a fee per branch or
authorized vendor, up to a maximum of $20,000.37
As previously mentioned, when fingerprinting is required, the fingerprints must be submitted to FDLE
for a state and federal criminal history background check. The federal background check is conducted
through the FBI’s criminal history record information (CHRI) system. Federal law Pub. L. 92-544
authorizes the exchange of CHRI with officials of state and local governmental agencies for licensing
and employment purposes.38 One of the primary purposes for enacting Pub. L. 92-544 was to establish
a national policy with adequate sanctions and administrative safeguards regarding the dissemination of
FBI’s CHRI to state and local governments for non-criminal justice licensing and employment
purposes.39 The FBI, with the assistance of the United States Department of Justice, has determined
the parameters of Pub. L. 92-544.40 The criteria for granting access to the FBI’s CHRI are as follows:
a. The statute must exist as a result of a legislative enactment;
b. It must require the fingerprinting of applicants who are to be subjected to a national criminal
history background check;
c. It must, expressly (“submit to the FBI”) or by implication (“submit for a national check”),
authorize the use of FBI records for the screening of applicants;
d. It must identify the specific category(ies) of licensees/employees falling within its purview,
thereby avoiding over breadth;
e. It must not be against public policy; and
f. It may not authorize receipt of the CHRI by a private entity.
Access to the FBI’s CHRI was previously authorized for fingerprints pursuant to ch. 560, F.S. However,
in order to obtain CHRI for applicants to the recently created Financial Technology Sandbox under s.
559.952, F.S., created in the 2020 legislative session,41 FDLE sent correspondence to the FBI’s
Criminal Justice Information Law Unit (CJILU) to obtain an Originating Agency Identifier (ORI). The ORI
validates legal authorization to access criminal justice information and identifies the specific agency
requesting the information. CJILU reviewed s. 559.952, F.S., which derives its fingerprinting authority
from s. 560.141, F.S. CJILU responded to this request stating that s. 560.141, F.S., does not qualify for
CHRI because the terms “responsible person” and “control of a money services business” as used in s .
560.141, F.S., are overly broad and, thus, do not sufficiently define the categories of people subject to
the background check.42 The CJILU acknowledged that MSB fingerprinting was previously approved by
the CJILU and that the FBI will continue to honor fingerprints submitted for MSB licensure.43 However,
the CJILU has placed MSB fingerprinting on a grace period of unspecified length in order to allow
33 S. 560.126(3), F.S.
34 S. 560.126(3)(b), F.S.
35 S. 560.126(3)(a), F.S.; r. 69v-560.201(3), F.A.C.
36 S. 560.126(3)(c), F.S.; r. 69v-560.201(6), F.A.C.
37 Ss. 560.126(3) and 560.143(1), F.S.
38 20 C.F.R. § 20.33.
39 Federal Bureau of Investigation, Testimony of Dennis Lormel Before the House Financial Services Committee (Mar. 06,
2001), https://archives.fbi.gov/archives/news/testimony/fbis-pers pective-on-criminal-history-record-information-checks-on-
individuals-conducting-insuranc e-business (last visited Jan. 25, 2022).
40 Email from Heather R. Postlethwait, FBI Office of the General Counsel, to Nathan Pate, Florida Department of Law
Enforcement, RE: ORI Request - Florida Office of Financial Regulation (Mar. 22, 2021).
41 Ch. 2020-161, Laws of Fla.
42 Email from Heather R. Postlethwait, supra note 40.
43 Id.
STORAGE NAME: pcs0389.IBS PAGE: 4
DATE: 1/25/2022
Florida to amend MSB fingerprinting statutes such that the statutes specifically identify the categories
of licensees or employees falling within the purview of the statutes; CJILU will not allow fingerprinting of
additional categories of applicants (i.e., those applying under the Financial Technology Sandbox)
during this grace period.44
Effect of the Bill
The bill creates the term “control person” and defines the term as:
A person that possesses the power, directly or indirectly, to direct the management or policies
of a money services business, whether through ownership of securities, by contract, or through
other means, and regardless of whether such person has an official title or receives a salary or
other compensation. The following persons are each presumed to be a control person:
o The president, chief executive officer, chief financial officer, chief operations officer,
chief legal officer, and compliance officer.
o A person holding any of the officer positions named in the money services business's
governing documents.
o A person holding any position named by the money services business's liability
insurance coverage for directors and officers, if the business has such coverage.
o A director of the money services business's board of directors.
For a corporation that is not publicly traded,45 all shareholders that, directly or indirectly, own 25
percent or more or that have the power to vote 25 percent or more of a class of voting
securities.
For a partnership, all general partners, and those limited or special partners that have
contributed 25 percent or more or that have the right to receive, upon dissolution, 25 percent or
more of the partnership's capital.
For a trust, all trustees.
For a limited liability company, all managers, and those members that have contributed 25
percent or more or that have the right to receive, upon dissolution, 25 percent or more of the
limited liability company's capital.
The bill repeals the definitions of “officer” and “responsible person” and repeals s. 560.127, F.S., which
defines when a person has a controlling interest in a money services business. Some of the elements
from these repealed definitions and statute are made part of the “control person” definition, and the bill
inserts “control person” throughout ch. 560, F.S., in place of these repealed definitions and statute.
Thus, a person who meets the definition of “control person”, as defined in the bill, must submit
fingerprints and be vetted by the OFR.
The bill repeals the requirement that a person or group of persons proposing to acquire a controlling
interest in an MSB submit an application for licensure prior to the acquisition. The bill deletes portions
of current law that relate to the change of control application process, including a provision that caps
fees when a change of control application is filed. If a new “control person”, as defined in the bill, is
added, such person must submit fingerprints and be vetted by the OFR.
The bill provides an effective date of October 1, 2022.
B. SECTION DIRECTORY:
Section 1. Amends s. 560.103, F.S., relating to definitions.
Section 2. Amends s. 560.118, F.S., relating to reports.
Section 3. Amends s. 560.123, F.S., relating to Florida Control of Money Laundering in Money
Services Business Act.
44 Id.
45 The term “publicly traded” is currently defined s. 560.141(1)(c)6., F.S., and only applies to paragraph (c). The bill
relocates the definition of “publicly traded” to s. 560.103, F.S., which contains definitions applicable to the entire chapte r.
STORAGE NAME: pcs0389.IBS PAGE: 5
DATE: 1/25/2022
Section 4. Amends s. 560.126, F.S., required notice by licensee.
Section 5. Repeals s. 560.127, F.S., relating to control of a money services business.
Section 6. Amends s. 560.141, F.S., relating to license application.
Section 7. Amends s. 560.143, F.S., relating to fees.
Section 8. Reenacts s. 559.952, F.S., relating to Financial Technology Sandbox.
Section 9. Reenacts s. 560.114, F.S., disciplinary actions; penalties.
Section 10. Provides an effective date of October 1, 2022.
II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT
A. FISCAL IMPACT ON STATE GOVERNMENT:
1. Revenues:
The repeal of the requirement to submit a change of control application may result in a decrease in
revenue to the OFR. As such, this change may have an indeterminate negative fiscal impact on the
state.
2. Expenditures:
None.
B. FISCAL IMPACT ON LOCAL GOVERNMENTS:
1. Revenues:
None.
2. Expenditures:
None.
C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR:
The repeal of the requirement to submit a change of control application will have a positive but
indeterminate fiscal impact on the private sector.
D. FISCAL COMMENTS:
None.
III. COMMENTS
A. CONSTITUTIONAL ISSUES:
1. Applicability of Municipality/County Mandates Provision:
Not applicable. The bill does not appear to affect county or municipal governments.
2. Other:
None.
STORAGE NAME: pcs0389.IBS PAGE: 6
DATE: 1/25/2022
B. RULE-MAKING AUTHORITY:
The Financial Services Commission (commission)46 will need to amend rules to conform to changes
made by the bill.
C. DRAFTING ISSUES OR OTHER COMMENTS:
The changes proposed by the bill have not yet been reviewed by the FBI. Continued access to national
criminal history record information for persons required to submit fingerprints pursuant to ch. 560, F.S.,
is reliant upon the FBI’s approval of the changes made by the bill.47 FDLE has stated that, based on
past FDLE legislative analysis, the FBI may continue to consider the term “control person” to be overly
vague and not acceptable (as they did with “responsible person”) when re-evaluating the fingerprinting
provisions of ch. 560, F.S.48
IV. AMENDMENTS/ COMMITTEE SUBSTITUTE CHANGES
46 S. 657.028(6), F.S. The commission is composed of the Governor, Attorney General, Chief Financial Officer, and
Commissioner of Agriculture. S. 20.121(3), F.S. The commission members are the OFR’s agency head for the purpose of
rulemaking. S. 20.121(3)(c), F.S.
47 Florida Department of Law Enforcement, Agency Analysis of 2022 Senate Bill 1536 (Jan. 10, 2022).
48 Id.
STORAGE NAME: pcs0389.IBS PAGE: 7
DATE: 1/25/2022
File and source
- File
- 2022_3100_insurance-banking-subcommittee_proposed-committee-bill-analyses_fn-pcs0389-ibs.pdf
- Size
- 233,108 bytes
- SHA-256
- 0bb888aab5aa69adc6399f315720d50677d2efe32453b5ae213c583010402f9a
- Our copy
- 2022_3100_insurance-banking-subcommittee_proposed-committee-bill-analyses_fn-pcs0389-ibs.pdf
- Original
- www.flhouse.gov