23.8085.01000
Sixty-eighth
Legislative Assembly SENATE BILL NO. 2119
of North Dakota
Introduced by
Industry and Business Committee
(At the request of the Department of Financial Institutions)
1 A BILL for an Act to create and enact chapter 13-09.1 of the North Dakota Century Code,
2 relating to money transmitters; to amend and reenact subsection 1 of section 6-01-01.1 of the
3 North Dakota Century Code, relating to money transmitters; to repeal chapter 13-09 of the
4 North Dakota Century Code, relating to money transmitters; and to provide a penalty.
5 BE IT ENACTED BY THE LEGISLATIVE ASSEMBLY OF NORTH DAKOTA:
6 SECTION 1. AMENDMENT. Subsection 1 of section 6-01-01.1 of the North Dakota Century
7 Code is amended and reenacted as follows:
8 1. There is created a special fund designated as the financial institutions regulatory fund.
9 The amounts received under the following chapters, and any other moneys received
10 by the department of financial institutions, must be deposited into this fund: chapters
11 6-01, 6-03, 6-05, 6-06, 6-10, 13-04.1, 13-05, 13-08, 13-0913-09.1, 13-10, and 13-11.
12 SECTION 2. Chapter 13-09.1 of the North Dakota Century Code is created and enacted as
13 follows:
14 13-09.1-01. Definitions.
15 For purposes of this chapter, the following definitions shall apply:
16 1. "Acting in concert" means persons knowingly acting together with a common goal of
17 jointly acquiring control of a licensee whether or not pursuant to an express
18 agreement.
19 2. "Anti-Money Laundering Act of 2020" is the federal act which amended subchapter II
20 of chapter 53 of title 31 United States Code, the legislative framework commonly
21 referred to as the bank secrecy act or BSA. Anti-money laundering and countering the
22 financing of terrorism has the same meaning as the previously used terminology.
23 3. "Authorized delegate" means a person a licensee designates to engage in money
24 transmission on behalf of the licensee.
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1 4. "Average daily money transmission liability" means the amount of the licensee's
2 outstanding money transmission obligations in North Dakota at the end of each day in
3 quarters ending March thirty-first, June thirtieth, September thirtieth, and December
4 thirty-first, added together and divided by the total number of days in each quarter.
5 5. "Closed loop stored value" means stored value that is redeemable by the issuer only
6 for goods or services provided by the issuer or its affiliate or franchisees of the issuer
7 or its affiliate, except to the extent required by applicable law to be redeemable in cash
8 for its cash value.
9 6. "Commissioner" means the commissioner of the department of financial institutions.
10 7. "Control" means:
11 a. (1) The power to vote, directly or indirectly, at least twenty-five percent of the
12 outstanding voting shares or voting interests of a licensee or person in
13 control of a licensee;
14 (2) The power to elect or appoint a majority of key individuals or executive
15 officers, managers, directors, trustees, or other persons exercising
16 managerial authority of a person in control of a licensee; or
17 (3) The power to exercise, directly or indirectly, a controlling influence over the
18 management or policies of a licensee or person in control of a licensee.
19 b. Rebuttable presumption of control.
20 (1) A person is presumed to exercise a controlling influence when the person
21 holds the power to vote, directly or indirectly, at least ten percent of the
22 outstanding voting shares or voting interests of a licensee or person in
23 control of a licensee.
24 (2) A person presumed to exercise a controlling influence as defined by
25 subsection 6 can rebut the presumption of control if the person is a passive
26 investor.
27 c. For purposes of determining the percentage of a person controlled by any other
28 person, the person's interest must be aggregated with the interest of any other
29 immediate family member, including the person's spouse, parents, children,
30 siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and
31 sisters-in-law, and any other person who shares the person's home.
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1 8. "Eligible rating" means a credit rating of any of the three highest rating categories
2 provided by an eligible rating service, whereby each category may include rating
3 category modifiers, such as "plus" or "minus" for S&P Global, or the equivalent for any
4 other eligible rating service. Long-term credit ratings are deemed eligible if the rating is
5 equal to A- or higher by S&P Global, or the equivalent from any other eligible rating
6 service. Short-term credit ratings are deemed eligible if the rating is equal to or higher
7 than A-2 or SP-2 by S&P Global, or the equivalent from any other eligible rating
8 service. In the event that ratings differ among eligible rating services, the highest
9 rating applies when determining whether a security bears an eligible rating.
10 9. "Eligible rating service" means any nationally recognized statistical rating organization
11 as defined by the United States securities and exchange commission, and any other
12 organization designated by the commissioner by rule or order.
13 10. "Federally insured depository financial institution" means a bank, credit union, savings
14 and loan association, trust company, savings association, savings bank, industrial
15 bank, or industrial loan company organized under the laws of the United States or any
16 state of the United States, when such bank, credit union, savings and loan
17 association, trust company, savings association, savings bank, industrial bank, or
18 industrial loan company has federally insured deposits.
19 11. "In this state" means at a physical location within North Dakota for a transaction
20 requested in person. For a transaction requested electronically or by phone, the
21 provider of money transmission may determine if the person requesting the
22 transaction is "in this state" by relying on other information provided by the person
23 regarding the location of the individual's residential address or a business entity's
24 principal place of business or other physical address location, and any records
25 associated with the person that the provider of money transmission may have that
26 indicate the location, including an address associated with an account.
27 12. "Individual" means a natural person.
28 13. "Key individual" means any individual ultimately responsible for establishing or
29 directing policies and procedures of the licensee, such as an executive officer,
30 manager, director, or trustee.
31 14. "Licensee" means a person licensed under this chapter.
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1 15. "Material litigation" means litigation, that according to United States generally
2 accepted accounting principles is significant to a person's financial health and would
3 be required to be disclosed in the person's annual audited financial statements, report
4 to shareholders, or similar records.
5 16. "Monetary value" means a medium of exchange, whether or not redeemable in money.
6 17. "Money" means a medium of exchange that is authorized or adopted by the United
7 States or a foreign government. The term includes a monetary unit of account
8 established by an intergovernmental organization or by agreement between two or
9 more governments.
10 18. "Money service business accredited state" means a state agency that is accredited by
11 the conference of state bank supervisors and money transmitter regulators association
12 for money transmission licensing and supervision.
13 19. "Money transmission" means any of the following:
14 a. Selling or issuing payment instruments to a person located in this state.
15 b. Selling or issuing stored value to a person located in this state.
16 c. Receiving money for transmission from a person located in this state.
17 The term includes payroll processing services. The term does not include the provision
18 solely of online or telecommunications services or network access.
19 20. "Multistate licensing process" means any agreement entered by and among state
20 regulators relating to coordinated processing of applications for money transmission
21 licenses, applications for the acquisition of control of a licensee, control
22 determinations, or notice and information requirements for a change of key individuals.
23 21. "Nationwide system" means the nationwide multistate licensing system and registry
24 developed by the conference of state bank supervisors and the American association
25 of residential mortgage regulators and owned and operated by the state regulatory
26 registry, LLC, or any successor or affiliated entity, for the licensing and registration of
27 persons in financial services industries.
28 22. "Outstanding money transmission obligations" means:
29 a. Any payment instrument or stored value issued or sold by the licensee to a
30 person located in the United States or reported as sold by an authorized delegate
31 of the licensee to a person that is located in the United States that has not yet
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1 been paid or refunded by or for the licensee, or escheated in accordance with
2 applicable abandoned property laws; or
3 b. Any money received for transmission by the licensee or an authorized delegate in
4 the United States from a person located in the United States that has not been
5 received by the payee or refunded to the sender, or escheated in accordance
6 with applicable abandoned property laws.
7 For purposes of this subsection, "in the United States" includes, to the extent
8 applicable, a person in any state, territory, or possession of the United States; the
9 District of Columbia; the Commonwealth of Puerto Rico; or a United States military
10 installation that is located in a foreign country.
11 23. "Passive investor" means a person that:
12 a. Does not have the power to elect a majority of key individuals or executive
13 officers, managers, directors, trustees, or other persons exercising managerial
14 authority of a person in control of a licensee;
15 b. Is not employed by and does not have any managerial duties of the licensee or
16 person in control of a licensee;
17 c. Does not have the power to exercise, directly or indirectly, a controlling influence
18 over the management or policies of a licensee or person in control of a licensee;
19 and
20 d. Either:
21 (1) Attests to subdivisions a, b, and c, in a form and in a medium prescribed by
22 the commissioner; or
23 (2) Commits to the passivity characteristics of subdivisions a, b, and c, in a
24 written document.
25 24. "Payment instrument" means a written or electronic check, draft, money order,
26 traveler's check, or other written or electronic instrument for the transmission or
27 payment of money or monetary value, whether or not negotiable. The term does not
28 include stored value or any instrument that:
29 a. Is redeemable by the issuer only for goods or services provided by the issuer or
30 its affiliate or franchisees of the issuer or its affiliate, except to the extent required
31 by applicable law to be redeemable in cash for its cash value; or
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1 b. Not sold to the public but issued and distributed as part of a loyalty, rewards, or
2 promotional program.
3 25. "Payroll processing services" means receiving money for transmission pursuant to a
4 contract with a person to deliver wages or salaries, make payment of payroll taxes to
5 state and federal agencies, make payments relating to employee benefit plans, or
6 make distributions of other authorized deductions from wages or salaries. The term
7 "payroll processing services" does not include an employer performing payroll
8 processing services on its own behalf or on behalf of its affiliate, or a professional
9 employment organization subject to regulation under applicable state law.
10 26. "Person" means any individual, general partnership, limited partnership, limited liability
11 company, corporation, trust, association, joint stock corporation, or other corporate
12 entity identified by the commissioner.
13 27. "Receiving money for transmission" or "money received for transmission" means
14 receiving money or monetary value in the United States for transmission within or
15 outside the United States by electronic or other means.
16 28. "Stored value" means monetary value representing a claim against the issuer
17 evidenced by an electronic or digital record, which is intended and accepted for use as
18 a means of redemption for money or monetary value, or payment for goods or
19 services. The term includes "prepaid access" as defined by title 31, Code of Federal
20 Regulations, Section 1010.100. The term "stored value" does not include a payment
21 instrument or closed loop stored value, or stored value not sold to the public but
22 issued and distributed as part of a loyalty, rewards, or promotional program.
23 29. "Tangible net worth" means the aggregate assets of a licensee excluding all intangible
24 assets, less liabilities, as determined in accordance with United States generally
25 accepted accounting principles.
26 13-09.1-02. Exemptions.
27 This chapter does not apply to:
28 1. An operator of a payment system to the extent that it provides processing, clearing, or
29 settlement services, between or among persons exempted by this section or
30 licensees, in connection with wire transfers, credit card transactions, debit card
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1 transactions, stored-value transactions, automated clearing house transfers, or similar
2 funds transfers.
3 2. A person appointed as an agent of a payee to collect and process a payment from a
4 payor to the payee for goods or services, other than money transmission itself,
5 provided to the payor by the payee, provided that:
6 a. There exists a written agreement between the payee and the agent directing the
7 agent to collect and process payments from payors on the payee's behalf;
8 b. The payee holds the agent out to the public as accepting payments for goods or
9 services on the payee's behalf; and
10 c. Payment for the goods and services is treated as received by the payee upon
11 receipt by the agent so that the payor's obligation is extinguished and there is no
12 risk of loss to the payor if the agent fails to remit the funds to the payee.
13 3. A person that acts as an intermediary by processing payments between an entity that
14 has directly incurred an outstanding money transmission obligation to a sender, and
15 the sender's designated recipient, provided that the entity:
16 a. Is properly licensed or exempt from licensing requirements under this chapter;
17 b. Provides a receipt, electronic record, or other written confirmation to the sender
18 identifying the entity as the provider of money transmission in the transaction;
19 and
20 c. Bears sole responsibility to satisfy the outstanding money transmission obligation
21 to the sender, including the obligation to make the sender whole in connection
22 with any failure to transmit the funds to the sender's designated recipient.
23 4. The United States or a department, agency, instrumentality, or its agent.
24 5. Money transmission by the United States postal service or by an agent of the United
25 States postal service.
26 6. A state, county, city, or an