New law regulates transmitters of money
It calls for annual license fees of up to $2,000 as well as potential audits
A new law to regulate the money transmitter industry in Hawaii is going to cost Jorge Disuanco, owner of Kwik Money Remittance, more money to run his business. But as a former victim of an unreliable money transmitter, he supports the legislation.
"Before I ventured into this business, I myself have been a victim of an unreliable money remitter which in fact has closed down four years ago," Disuanco said. "It took four weeks before my money reached my relatives in the Philippines."
It's tales like Disuanco's as well as the support of many of the larger money transmitters that has resulted in the first regulation of this industry in Hawaii. Gov. Linda Lingle recently signed Act 153, establishing the first licensing system within the state Division of Financial Institutions to regulate the money transmitter industry. Hawaii was one of only five states without any regulation on the books.
"I'd venture a guess that 99 percent of the money transmitters operating in Hawaii are doing a good job, but there are some bad apples," said Nick Griffin, commissioner of the state Division of Financial Institutions. "The money transmitter industry in Hawaii is growing and we needed a means to offer consumers more protection."
The new law, which will go into effect on July 1, 2007, provides for enforcement action, civil remedies and criminal penalties, said Marvin S.C. Dang, an attorney who lobbied on behalf of the Non-Bank Funds Transmitters Group for the legislation.
The bill also gives the state additional means to target Hawaii-based money transmitter businesses that are used for the benefit of criminals or money launderers, he said.
Consumers entrust hundreds of millions of dollars each year in Hawaii to money transmitters, ranging from large international companies to local "mom and pop" businesses, who sell money orders or receive monies to send to other locations, Dang said. But while the state's banks have been among the most regulated businesses in Hawaii, nearly anyone has been able to become a remittance agent within the unregulated money transmitter industry -- and consumers who wished to lodge a complaint had few places to turn, he said.
"Some Hawaii consumers have been the victims of certain transmitters: Money doesn't get delivered when promised, less money is received at the destination than was agreed and money doesn't get delivered at all," Dang said.
Rep. Anne Stevens (R-Waikiki, Ala Moana), who used to work in the shipping industry, testified in favor of regulating Hawaii's money transmitters because of people she saw preying on sailors.
"I saw some pretty shady characters coming down to the docks here in Hawaii promoting their services," Stevens said. "I testified in favor of regulation because I didn't want to see the young sailors who are trying to send money back home to their families continue to get ripped off."
As a result of his experience with an unsavory money remitter, Disuanco opened his own money transmitter company and now remits about $20.3 million annually from Hawaii to the Philippines.
The new legislation will require Disuanco and other money transmitters to pay a one-time application fee, which is capped at $4,000, and an annual license fee not to exceed $2,000. They also will be subject to audit by the state Division of Financial Institutions.
"I am aware that if money remittance will be regulated by the state, the cost for operation will increase because of the requirements needed such as bonding, auditing and compliance," Disuanco said. "However this is such a small price to pay for the protection of consumers and the security of our country."
Larger money transmitters operating in the state that belong to the Non-Bank Funds Transmitters Group also supported legislative efforts, Dang said. They include Western Union Financial Services Inc., MoneyGram International, Travelex Americas, American Express Travel Related Services, RIA Financial Services, Comdata Network Inc. and Sigue Corp.
"They felt that it was only a matter of time before consumer complaints resulted in legislation, and they wanted regulation in Hawaii to be consistent with regulation in other states," he said.
Sen. Gordon Trimble (R, Downtown-Waikiki) cast the sole dissenting vote against Hawaii's first regulation of the money transmitters industry because he said he felt it would raise costs for consumers and put some small operations out of business.
"Many people chose to use unregulated money transmitters because they provide better service for a lower price," said Trimble, who first got exposed to the cottage side of the industry while serving as a peace corps volunteer in the Philippines.
"This legislation is only going to force people to pay a lot more to send money home."