Legislature(2007 - 2008)SENATE FINANCE 532

05/07/2007 09:00 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved SB 168 Out of Committee
Heard & Held
Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
10:18:32 AM                                                                                                                   
     CS FOR SENATE BILL NO. 116(L&C)                                                                                            
     "An Act relating to the Uniform Money Services Act, to                                                                     
     money transmission services, and to currency exchange                                                                      
     services; and providing for an effective date."                                                                            
This was  the first hearing for  this bill in the  Senate Finance                                                               
Co-Chair  Stedman announced  intent to  not take  action on  this                                                               
legislation at this hearing.                                                                                                    
10:18:52 AM                                                                                                                   
Senator Elton moved for adoption of  CS SB 116, 25-LS0508\O, as a                                                               
working document.                                                                                                               
There was no objection and CS  SB 116, Version "O" was ADOPTED as                                                               
a working document.                                                                                                             
10:19:16 AM                                                                                                                   
Senator Elton, sponsor of the  bill, stated that it would "ensure                                                               
the safety and soundness in  financial institutions that are used                                                               
by Alaskans  who don't use  banks." These  financial institutions                                                               
are "the  money transferors". This  bill would also  address "two                                                               
of the  industries that pose  a risk for money  laundering: money                                                               
transmission  and  currency  exchange." Money  transmission  also                                                               
poses  a  risk for  terrorist  financing.  Transmission of  money                                                               
without a license  in states that require a license  is a federal                                                               
felony  offense.  Alaska is  one  state  that currently  did  not                                                               
require such a license.                                                                                                         
Senator  Elton explained  that this  legislation was  based on  a                                                               
model  legislation  adopted  in  other states  with  one  "major"                                                               
exception. The  model legislation also proposed  licensing "check                                                               
cashers".  This bill  did not  include such  provisions, as  this                                                               
activity did  not pose a  risk for money laundering  or terrorist                                                               
Senator  Elton   furthered  that  this  bill   would  ensure  law                                                               
enforcement  coordination to  ensure that  these businesses  were                                                               
"not abused  by people  who avoid banks  because they  don't want                                                               
the  scrutiny of  bank examiners."  Consumers would  be protected                                                               
through the provisions of this  bill relating to "bonding and net                                                               
worth requirements".  This bill  would require  a listing  of all                                                               
fees and terms  on the receipt supplied to the  customer, as well                                                               
as on-site  posting of  a notification  to consumers  of agencies                                                               
available to assist in the  event the customer has "problems with                                                               
the business."                                                                                                                  
10:21:11 AM                                                                                                                   
Senator  Elton  pointed out  that  this  bill would  be  "revenue                                                               
neutral"  to the  State. The  fiscal note  indicated the  cost to                                                               
implement the legislation would be  $80,000. As required of other                                                               
regulated businesses, the businesses  affected by this bill would                                                               
pay  a license  fee. The  Department of  Commerce, Community  and                                                               
Economic  Development  estimated  that  40  businesses  practiced                                                               
money  transferring  in  Alaska  and  that  "the  regulation  and                                                               
investigation component"  for the Department would  require a fee                                                               
of $2,000.                                                                                                                      
Senator  Elton reported  that despite  the significant  amount of                                                               
the license fee, the affected  businesses seek the regulation and                                                               
the "safety"  that would be assured  through licensing. Licensing                                                               
would protect legitimate businesses  and would make operations of                                                               
non legitimate businesses more difficult.                                                                                       
10:21:58 AM                                                                                                                   
Senator Elton  disclosed that this  legislation was  requested by                                                               
the industry. In consideration of  this bill by Senate committees                                                               
and its  companion bill by  House of  Representatives committees,                                                               
it had  the received  endorsement and support  of Wells  Fargo, a                                                               
large money  transmitter as well  as that of small  "store front"                                                               
money transmitters,  many of  which operate  in cruise  ship port                                                               
towns.  The  Department  of   Commerce,  Community  and  Economic                                                               
Development and consumer advocates,  including the Alaska Bankers                                                               
Association, supported this bill.                                                                                               
10:22:47 AM                                                                                                                   
Senator  Elton  remarked  that this  legislation  was  the  first                                                               
attempt to regulate the money transfer industry.                                                                                
Senator   Elton  concluded   his   presentation   of  the   bill,                                                               
reiterating  that   an  individual   involved  in   the  industry                                                               
requested it.  The more his  staff reviewed the matter,  the more                                                               
it was understood that consumers  must be protected and that this                                                               
legislation would assist in homeland security efforts.                                                                          
10:23:57 AM                                                                                                                   
Co-Chair  Stedman asked  about  any opposition  to  this bill  in                                                               
addition to money launderers.                                                                                                   
10:24:08 AM                                                                                                                   
Senator  Elton reported  that no  opposition had  been voiced  to                                                               
either this bill  or its companion bill. He attributed  this as a                                                               
"testament"  to  staff coordination  with  the  industry and  all                                                               
affected   parties.  He   repeated   that   the  Alaska   Bankers                                                               
Association, large  and small  businesses and  consumer interests                                                               
supported the bills.                                                                                                            
10:24:51 AM                                                                                                                   
Co-Chair  Stedman requested  Senator  Elton speak  to the  fiscal                                                               
10:24:55 AM                                                                                                                   
Senator  Elton  explained that  as  required  of other  regulated                                                               
businesses,  the costs  of regulating  the currency  exchange and                                                               
money transfer  businesses would  be borne  by the  industry. The                                                               
Department  estimated the  annual cost  to implement  the program                                                               
would be $80,000  and that each business would pay  an annual fee                                                               
of $2,000. Although this would be  a higher license fee than most                                                               
other  businesses  paid,  the affected  businesses  support  this                                                               
10:25:53 AM                                                                                                                   
MARK  DAVIS,  Director,  Division   of  Banking  and  Securities,                                                               
Department  of  Commerce,  Community  and  Economic  Development,                                                               
testified via  teleconference from an offnet  location in support                                                               
of  the bill.  The  revenues  collected from  the  fees would  be                                                               
utilized to  regulate the businesses and  for investigations. The                                                               
$2,000 licensee  fee was  calculated based  on the  37 businesses                                                               
currently registered  with the "federal financial  crime center";                                                               
however,   additional  businesses   could  be   practicing  money                                                               
transfers or currency exchange activities.                                                                                      
Mr.  Davis  informed that  upon  implementation  of a  regulatory                                                               
program for some industries, more  licenses were applied for than                                                               
had been estimated.  This was likely because  some businesses had                                                               
been "reluctant" to practice in an unregulated industry.                                                                        
10:27:12 AM                                                                                                                   
Senator Thomas asked examples of  businesses that practiced money                                                               
10:27:30 AM                                                                                                                   
Mr.  Davis gave  as examples,  Money Gram  and Western  Union. He                                                               
also  told of  a small  business  that operated  in the  election                                                               
district  represented  by  Senator Elton.  Most  businesses  were                                                               
affiliated  with a  large  company such  as  Western Union.  This                                                               
legislation would  allow the smaller companies  to "work through"                                                               
the  larger affiliates,  which would  result in  "less regulatory                                                               
burden" in the industry.                                                                                                        
10:28:09 AM                                                                                                                   
Senator  Thomas   asked  if  all  banks   were  considered  money                                                               
10:28:17 AM                                                                                                                   
Mr.  Davis  responded  that  banks   would  be  exempt  from  the                                                               
provisions  of  this  legislation.  Consumers  could  have  funds                                                               
transferred from  one bank  to another.  This bill  would address                                                               
business  conducted  by  those consumers  that  did  not  utilize                                                               
banks, such as cruise ship crew members.                                                                                        
10:28:46 AM                                                                                                                   
Co-Chair Stedman asked  if security broker dealers  would also be                                                               
excluded from the provisions of this bill.                                                                                      
10:28:54 AM                                                                                                                   
Mr.  Davis answered  in the  affirmative,  explaining that  these                                                               
dealers provided money services  and were regulated through other                                                               
licensing  programs.  Money  transferors  and  currency  exchange                                                               
providers were regulated in 47 states.                                                                                          
10:29:28 AM                                                                                                                   
Senator  Olson asked  if the  implementation  of this  regulatory                                                               
program  could  interrupt  fund transfers  intended  for  college                                                               
students and for other legitimate purposes.                                                                                     
10:30:03 AM                                                                                                                   
Senator Elton  responded that  no provision  of this  bill should                                                               
delay access to funds.                                                                                                          
10:30:38 AM                                                                                                                   
Mr.  Davis   agreed.  This  legislation  would   not  change  the                                                               
industry, rather it  would require the businesses  to be licensed                                                               
and  comply   with  federal  reporting  procedures.   However,  a                                                               
business already licensed in another  state would not be required                                                               
to  secure an  additional  license. This  would  avoid causing  a                                                               
"regulatory burden" for large  companies. Additionally, this bill                                                               
would  provide  for  "a  timely   transmission  of  the  consumer                                                               
rights", which did not currently exist.                                                                                         
10:31:19 AM                                                                                                                   
Senator  Olson asked  if charges  had been  filed or  should have                                                               
been filed  against a party  attempting to launder  money through                                                               
such a business.                                                                                                                
10:31:45 AM                                                                                                                   
Mr. Davis  was unaware of  any violation in this  state, although                                                               
failures in transmitting money had  occurred. The US Congress and                                                               
federal   law  enforcement   agencies  urged   states  to   adopt                                                               
regulatory programs to comply with the federal Bank Secrecy Act.                                                                
10:32:17 AM                                                                                                                   
Co-Chair Stedman ordered the bill HELD in Committee.                                                                            

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