Legislature(2007 - 2008)SENATE FINANCE 532
05/07/2007 09:00 AM FINANCE
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* first hearing in first committee of referral
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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 Committee. 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 financing. 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 note. 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 program. 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 transfers. 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 transferors. 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.