Legislation on Tap for Money Orders, Wire Transactions
Robinson, Robin, THE JOURNAL RECORD
To provide more protection for users of money orders, and to create uniform rules for the firms that issue money orders, Oklahoma is joining other states in drafting new legislation for the control of money orders and wire transactions, said Paul Foster, attorney for the Oklahoma Banking Department.
Oklahoma already has the Sale of Checks Act, which was passed in the early 1960s and amended in 1988.
"These types of instruments are a poor man's bank and they need the most protection," Foster said.
"We're pretty far ahead of most states in our law," Foster said, though Oklahoma is following the front runners in money order regulations that protect consumers, states like Pennsylvania, Texas and Michigan.
Oklahoma law requires the 11 money order licensees to post a minimum surety bond of $100,000 if they have between one and 15 locations. The bond increases to a maximum of $1.5 million, depending upon the number of locations. The firms have the option of posting securities with the banking department instead of bonds.
The large companies, like Citicorp., don't pose a problem because they have the net worth to cover any problems or their reputations are at stake, Foster said. Small mom-and-pop companies could use the posted bond to cover any of their money orders that are circulating, he said.
It's the mid-size companies that pose the biggest problems for regulators, he said. Those firms can have more money orders circulating than their bonds could cover if they defaulted, Foster said.
The banking department is the regulator for the licensed firms issuing money orders in Oklahoma and for the approximately 1,300 agents in the state. The department's examination procedures probably will be changed to reflect new techniques learned in Austin, Texas last week during a symposium on money transmitters, Foster said.
Security precautions must be taken from the start, where the money orders are printed, Foster said. The boxes should be secured so that the delivery person, or the printing shop employees, can't help themselves to a few of the money orders. In either event, the firm issuing the money orders wouldn't know there were documents missing for several days, he said.
Money laundering also was discussed at the symposium.
Most money laundering schemes are criminal offenses, though some regulatory offenses often are committed. Once discovered, the investigation would be turned over to the Internal Revenue Service, Foster said.
Thousands of locations in the country are issuing money orders worth multiple millions of dollars, he said. Some agents are earning interest on the money during the float time - the time between when the money is received for the money order and the time the money order recipient presents it for cash.
These agents aren't remitting the money quickly enough to meet cash flow demands, placing a strain on the money order firms, Foster said. New rules could make the agent remit the cash to the money order firm within three days, he said.
Because major money transmitter firms would rather be regulated by one set of rules and federal laws could be biased against smaller companies, the banking department attorneys from 23 states meeting in Austin decided to coordinate their regulations, hed said. …