On June 9, South Carolina Governor Nikki Haley signed into law the South Carolina Anti-Money Laundering Act. The South Carolina AML Act, among other requirements, imposes a licensing requirement for persons and entities engaged in money transmission in the state. South Carolina is now the 49th state to implement a law regulating money transmitters, leaving Montana as the only state without a money transmitter law.
Under the new South Carolina law, which will take effect in one year, a license is required for persons that “engage in the business of money transmission or advertise, solicit, or hold himself out as providing money transmission.” The law defines money transmission as including “selling or issuing payment instruments, stored value, or receiving money or monetary value for transmission.”
Importantly, the law provides a number of exclusions from the money transmission rules. For example, federal and state banks are excluded from the law as long as they do not engage in “money transmission” through non-bank agents. Also excluded from the law are operators of those payment systems that provide processing and clearing or settlement services between or among persons excluded under the law in connection with wire transfers, credit card transactions, debit card transactions, stored-value transactions, ACH transfers and similar funds transfers.
The law also contains a potential exception for persons already licensed as a money transmitter in at least one other state if: (1) the person obtains approval of the South Carolina Securities Commissioner; (2) the state in which the person or entity is licensed as a money transmitter has enacted the Uniform Money Services Act or the commissioner determines that the money transmission laws of that state are substantially similar to those proposed in the bill; and (3) the person or entity submits an application for approval to operate without a license in the state along with a non-refundable $1,000 fee and a certification of license history in the other state.
The Act imposes various financial obligations on applicants and licensees. An applicant is required to submit a nonrefundable $1,500 application fee and a $750 license fee, which will be returned if the application is denied. An application must also be accompanied by “a surety bond, letter of credit, or other similar security acceptable to the commissioner” of $50,000 plus $10,000 for each location, not exceeding a total of $250,000. However, the commissioner may increase the amount of security required to a maximum of $1,000,000 “if the financial condition of a licensee so requires, as evidenced by reduction of net worth, financial losses, or other relevant criteria.”
Licensees are required to pay an annual renewal fee of $750 and maintain a net worth of at least $250,000 and comply with a permissible investment requirement. Additionally, the new law will subject licensees to various examination and reporting obligations.
The South Carolina Securities Commissioner is able to assess a daily civil penalty of $1,000 for each violation of the act, plus costs, expenses, and attorneys’ fees. The new law also imposes felony liability for certain knowing and intentional acts.
The law takes effect one year after approval of the governor or upon the publication in the State Register of final regulations implementing the law, whichever occurs later.