July 8, 1992

Re: _______ — Reporting of Transmission-Money

Dear Mr. _______:

This is in response to your letter of March 17, 1992.

As we understand your letter, _______ (“_______”), among other things, assists banks in completing transactions involving the transmission of money to foreign countries. In connection with such transactions, the bank, pursuant to its banking powers, enters into an agreement with its customer to transmit money to a foreign country by wire or otherwise. The bank thereupon delivers the transmission money to _______, and _______ wires or otherwise transmits the money to the foreign country for the bank. The bank is responsible to its customer for completion of the transmission transaction. The bank’s customer is unaware of the involvement of _______ in processing the transaction, and _______ has no direct contractual relationship with the bank’s customer. An agreement between _______ and the bank provides that _______ is responsible to the bank, not to the retail customer, for completion of the transmission transaction.

You contend that banks are not the type of customer intended to be protected by Chapter 14 (commencing with Section 1800) of the Financial Code (the “Transmitters Law”), and that _______ should therefore not be required to report money transmitted for banks pursuant to the conditions in its license which require it to periodically report to the Superintendent total transmission money received.

We disagree.

You contend that Section 1800(b) of the Transmitters Law indicates that the purpose of the Transmitters Law is to protect persons unfamiliar with the varied and intricate financial systems of this State. You argue that banks are sophisticated in financial matters and that they are therefore not among the class of persons intended to be protected by the Transmitters Law.

Your argument assumes that, if _______ failed to properly deliver transmission money, it would under no circumstances be directly responsible to the retail customer of the bank that initiated the transaction. However, your letter states that _______ is aware of the identity of the bank’s retail customer In connection with a transmission it facilitates for a bank. Particularly under these circumstances, _______ may be liable to the retail customer for any loss the customer suffers due to negligent handling of the transaction by _______. See 6 Witkin, Summary of California Law, Torts Section 889 (9th Ed. 1988). Thus, _______ may be responsible to retail customers, a class of persons whom you admit the Transmitters Law was intended to protect.

Furthermore, while protection of financially unsophisticated persons may be one objective of the Transmitters Law, it does not appear to be the only objective. For example, Section 1800(a) states that it is the purpose of the Transmitters Law, among other things, “to establish a minimum level of financial responsibility and corporate integrity for all entities engaging in the business of receiving money for transmission to foreign countries without regard to the method of transmission.” (Emphasis added.)

In addition, Section 1800.3(a) of the Transmitters Law provides that “No person shall engage in the business of receiving money for the purpose of transmitting the same or its equivalent to foreign countries without first obtaining a license from the superintendent.” Nothing in this section or elsewhere in the Transmitters Law specifically limits application of the licensing requirement to receipt of money from retail customers or excludes from coverage money received from a bank.

Accordingly, _______ could not lawfully provide the service it provides for banks unless it were licensed under Section 1800.3(a). Thus, all of the conditions in _______’s license, including the condition that it report the receipt of transmission money to the Superintendent, are applicable to the receipt of transmission money from banks.

If you have any questions, please feel free to call me.

Very truly yours,

Superintendent of Banks


Senior Counsel

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