Understanding
Money Transmission
in the United States
How licensed money transmitters operate. What FinCEN requires. What state licenses apply. What the Dodd-Frank Act says about remittance fees. What the CFPB does to protect you.
> Federal oversight: FinCEN + CFPB
> State licensing: 50 jurisdictions
> Consumer law: Dodd-Frank Act Title X
> Transfer disclosures: required by law
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A Reference for People Sending Money Internationally
Money transmission in the United States operates under overlapping federal and state frameworks. This platform explains each layer without providing financial advice or handling any funds.
FinCEN Registration
Money service businesses operating in the US must register with the Financial Crimes Enforcement Network. This federal requirement applies regardless of state licensing status.
Read moreState Licensing
Each state maintains its own money transmitter licensing regime. Requirements vary by jurisdiction, covering net worth, bonding, examination, and reporting obligations.
Read moreDodd-Frank Remittances
Title X of the Dodd-Frank Act established specific disclosure and error resolution rights for consumers sending remittance transfers. These protections apply to transfers above $15.
Read moreCFPB Protections
The Consumer Financial Protection Bureau enforces remittance transfer rules, handles complaints, and publishes consumer-facing guidance on international money transfers.
Read moreThe Mechanics of Licensed Money Transmission
A money transmitter accepts funds from a sender in one location and arranges for equivalent value to be delivered to a recipient in another location. The transmitter does not necessarily move physical currency. Instead, it settles obligations through correspondent banking relationships, internal ledgers, or payment networks.
Licensed transmitters must maintain sufficient net worth and surety bonds to protect consumer funds in transit. They are required to implement anti-money laundering programs, file suspicious activity reports, and conduct customer due diligence under the Bank Secrecy Act.
Consumers interacting with money transmitters are protected by both federal disclosure requirements and state-level consumer protection statutes. Knowing these protections helps consumers identify compliant providers and understand their rights when transfers go wrong.
Full Exchange Guide
Federal and State Oversight Structure
Bank Secrecy Act (BSA)
The foundational federal anti-money laundering statute. Requires money service businesses to register with FinCEN, maintain AML programs, file Currency Transaction Reports for cash transactions over $10,000, and file Suspicious Activity Reports when transactions suggest illegal activity.
FinCEN MSB Registration
Any business that qualifies as a money service business under 31 CFR Part 1010 must register with FinCEN within 180 days of establishment. Registration must be renewed every two years. The MSB definition covers money transmitters, currency dealers, check cashers, and issuers of stored value.
State Money Transmitter Laws
Separate from federal registration, most states require a money transmitter license to operate within their borders. The Uniform Money Services Act provides a model framework, but states have adopted varying versions. Some states exempt certain transaction types or volume thresholds.
Dodd-Frank Act, Subpart B
Codified in 12 CFR Part 1005 Subpart B, these rules require remittance transfer providers to disclose exchange rates, fees, and the amount to be received before and at the time of transfer. Consumers have cancellation rights within 30 minutes and error resolution rights for up to 180 days.
Key Milestones in US Remittance Regulation
Bank Secrecy Act Enacted
Congress passed the Currency and Foreign Transactions Reporting Act, establishing the first federal framework requiring financial institutions to assist government agencies in detecting and preventing money laundering. The BSA created the foundation for all subsequent MSB regulation.
Money Transmitter Licensing Expands
State-level money transmitter licensing gained significant momentum through the 1990s. California, New York, and Texas established comprehensive licensing frameworks that became models for other jurisdictions as wire transfer services grew in consumer use.
USA PATRIOT Act Strengthens BSA
Following September 11, the USA PATRIOT Act significantly expanded BSA requirements, adding customer identification program rules and extending anti-money laundering obligations to a broader range of financial service providers including informal money transfer operators.
Dodd-Frank Act Creates CFPB
The Dodd-Frank Wall Street Reform and Consumer Protection Act established the Consumer Financial Protection Bureau and included dedicated provisions for remittance transfers in Section 1073, which amended the Electronic Fund Transfer Act to create new consumer rights for international money transfers.
Remittance Transfer Rule Takes Effect
The CFPB's Remittance Transfer Rule became effective in October 2013, implementing Section 1073 of Dodd-Frank. The rule required pre-payment disclosures, post-payment receipts, error resolution procedures, and cancellation rights for consumers sending money internationally.
How Remittance Transfer Fees Are Structured
Exchange Rate Margin
Transmitters typically apply a markup to the interbank exchange rate. The difference between the rate offered to consumers and the rate at which the transmitter acquires currency represents a revenue component that is not always labeled as a fee but is disclosed under Dodd-Frank rules.
Flat Transaction Fee
A fixed charge applied per transfer regardless of amount. This structure is common in retail money transfer locations and online platforms. Under the Remittance Transfer Rule, this fee must be disclosed before payment is made.
Payment Method Surcharge
Funding a transfer by credit card or debit card may carry a surcharge compared to bank account funding. These additional costs must be itemized in required disclosures so consumers can compare total costs across payment methods.
Correspondent Bank Fees
Intermediary banks involved in routing international transfers may deduct fees from the transfer amount. The Dodd-Frank rule requires disclosure of taxes and fees imposed in the recipient country, though third-party bank deductions present ongoing disclosure challenges.
Under 12 CFR Part 1005 Subpart B, remittance transfer providers must disclose the exchange rate, all fees and taxes, and the amount to be received by the designated recipient before and at the time of payment. Consumers have the right to receive this information in writing.
What the CFPB Provides to Consumers
Pre-Payment Disclosure
Before a consumer pays for a remittance transfer, the provider must disclose the transfer amount in the foreign currency, the exchange rate used, all fees and taxes charged, and the total amount to be received by the recipient.
Receipt Requirements
At the time of payment, the consumer must receive a receipt containing the same information plus the date funds will be available and contact information for the provider and for the CFPB.
Cancellation Rights
Consumers may cancel a remittance transfer within 30 minutes of payment and receive a full refund, provided the funds have not yet been picked up or deposited by the recipient.
Error Resolution
If a transfer is not delivered as promised, consumers have up to 180 days to report the error. Providers must investigate and resolve errors within specific timeframes defined by regulation.
CFPB Protections DetailRecognizing Fraudulent Transfer Schemes
Advance Fee Fraud
Requests for upfront payment to release a larger sum. Legitimate money transmitters do not ask for fees to unlock transfers. Any such request indicates fraud.
Learn to identify
Unlicensed Operators
Operating without a state money transmitter license is illegal. Consumers using unlicensed operators have no regulatory recourse if funds are lost or misappropriated.
Verify providers
Phishing and Impersonation
Fraudulent websites and emails impersonate licensed transmitters. Always verify the provider's license status through official state regulator databases before sending funds.
Protection stepsHave Questions About a Transfer?
This platform provides educational information about money transmission regulation. For questions about a specific transfer or provider, use the contact form to reach the editorial team.