Agent of Payee – International Settlement Service – Decline to Opine

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IN REPLY REFER TO: _________

FILE NO: _________

October 6, 2020

SENT VIA EMAIL

 

Re: _____________. – Request for Interpretive Opinion re Agent of the Payee Exemption under the Money Transmission Act

 

Dear Mr. ­­­________:

This is in response to your letter dated September 11, 2020, in which _____________ (________) requests a determination by the Department of Financial Protection and Innovation, formerly Department of Business Oversight (Department) that ________’ international settlement service meets the requirements of the agent of the payee exemption[1] from the Money Transmission Act (MTA).[2]  You argue that ________’s activity is exempt from the MTA under the agent of payee exemption.

I. FACTS

________ is a U.S. company that provides a cross-border settlement service to Chinese merchants (Merchant(s)) working with large U.S. e-commerce marketplaces or other sales platform (Platform(s)) located in California to sell goods or services in the United States.Each Merchant has a direct contractual relationship with the relevant Platform(s), under which each Platform, acting as the agent of the Merchant, collects payments from customers that are due to the Merchant.

Each Merchant wishing to participate in the service offered by ________ agrees to ________’ Terms of Use (Terms). Under the Terms, each Merchant appoints ________ as the Merchant’s agent for the collection of payments from each Platform on which Merchant is selling its goods or services. The Merchant directs the Platform to remit to ________ any amounts owed by the Platform to the Merchant.

In lieu of providing its own bank account number to the Platform for the purposes of settlement, each Merchant provides the Platform with an account number provided by ________ that is linked to ________’ U.S. bank account. ________ daily instructs its U.S. bank to transfer the received amount of U.S. dollars from its bank account to an omnibus bank account held by __________ in Hong Kong. ___________ subsequently converts the received U.S. dollars into the designated payout currency and remits the funds from its bank account in Hong Kong to a bank account designated by the Merchant.

II. CONCLUSION

The Department has proposed regulations concerning the agent of payee exemption.[3] The Department anticipates that these regulations will become final by the end of February 2021. While the Department engages in the rulemaking process, we decline to opine on the applicability of the exemption to ________’ proposed payment activity. However, the Department will not require ________ to be licensed under the MTA while the rulemaking is pending. The agent of payee exemption is self-executing. Nonetheless, after ________ has reviewed the final, promulgated regulation, you are welcome to contact me to discuss further, if you wish.

This letter is limited to the facts and circumstances presented to the Department in the correspondence listed above. Should any of the facts or circumstances change, the Department’s opinion may also change. If you have any questions, please feel free to contact me at ____________or __________________.

 

Sincerely,

Manuel P. Alvarez

Commissioner

Department of Financial Protection and Innovation

 

By

_____________

Senior Counsel

cc: Robert Venchiarutti, Department of Financial Protection and Innovation, San Francisco Jonathan Lee, Department of Financial Protection and Innovation, Los Angeles


[1] Fin. Code, § 2010, subd. (l).

[2] Fin. Code, § 2000, et seq.

[3] https://dbo.ca.gov/MONEY-TRANSMISSION-ACT-PRO-07-17/

Last updated: Oct 8, 2020 @ 12:26 pm