HBA-ATS C.S.H.B. 2320 76(R)BILL ANALYSIS
Office of House Bill AnalysisC.S.H.B. 2320
By: Cuellar
Financial Institutions
4/13/1999
Committee Report (Substituted)
BACKGROUND AND PURPOSE
Criminal organizations began to use financial institutions other than banks
to launder money when federal and state regulators focused their efforts on
stopping money laundering through banks. In response to this activity, the
Texas Legislature enacted the Currency Exchange Act (Act) in 1991. The
Act's primary means to detect illegal money laundering are licensing and
recordkeeping requirements. Despite these safeguards, it became apparent
that criminals were laundering money by transporting the money across the
Texas-Mexico border. Again, the legislature responded, by amending Chapter
153 of the Texas Finance Code to require the licensing of persons engaged
in currency transportation, except for persons who operated armored cars
licensed under Section 6-dd, Article 9.11b, V.T.C.S.
C.S.H.B. 2320 redefines "currency exchange, transportation, or transmission
business" to include offering currency exchange, transportation, or
transmission as a service or for profit. It also redefines
"currency transportation" to mean receiving currency or an instrument
payable in currency to physically transport the currency or its equivalent
from one location to another by motor vehicle or other means of
transportation or through the use of the mail or a shipping, courier, or
other delivery service. A person who is both a registered motor carrier
under Chapter 643, Transportation Code, and a licensed armored car company
or courier company under the Private Investigators and Private Security
Agencies Act is not required to be licensed. In addition, the following
entities are not required to hold a license under the Finance Code: a
federally insured financial institution; a foreign bank branch or agency in
the United States established under the federal International Banking Act
of 1978; a check seller; an attorney or title company that in connection
with a real property transaction receives and disburses only domestic
currency on behalf of a party to the transaction; a Federal Reserve bank; a
clearinghouse exercising bank payment, collection, and clearing functions,
and a person that the banking commissioner of Texas (commissioner) may
exempt by rule. The commissioner is authorized to inspect the business
records of a license holder or a principal of the license holder and to
issue an order to seize the assets and records that relate to a currency
exchange, transmission, or transportation business if the commissioner
finds that the business has violated or refused to comply with this
chapter, a rule, or any other law or regulation applicable to the business.
RULEMAKING AUTHORITY
It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the Finance Commission of Texas in
SECTION 3 (Section 153.002, Finance Code) and to the banking commissioner
of Texas in SECTION 7 (Section 153.117, Finance Code) of this bill. It is
the opinion of the Office of House Bill Analysis that rulemaking authority
previously delegated to the banking commissioner of Texas is modified in
SECTION 9 (Section 153.205, Finance Code) of this bill.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 59. 201(a), Finance Code, to provide that the
authorized installation, maintenance, and operation of electronic terminals
for the convenience of depository institutions' customers is subject to
Chapter 153 (Currency Exchange, Transportation, or Transmission).
SECTION 2. Amends Section 153.001, Finance Code, by amending Subdivisions
(5), (6), (7), and (10) and by adding Subdivision (11), as follows:
(5) Includes offering currency exchange, transportation, or transmission as
a service or for profit in the definition of "currency exchange,
transportation, or transmission business."
(6) Includes receiving an instrument payable in currency in the definition
of "currency transmission."
(7) Redefines "currency transportation" to mean receiving currency or an
instrument payable in currency to physically transport the currency or its
equivalent from one location to another by motor vehicle or other means of
transportation or through the use of the mail or a shipping, courier, or
other delivery service.
(10) Defines "instrument" as having the same meaning assigned by Section
3.104 (Negotiable Instrument), Business & Commerce Code.
Redesignates Subdivision (10) to Subdivision (11).
SECTION 3. Amends Section 153.002, Finance Code, as follows:
Sec. 153.002. RULES. Includes desirable rules among the necessary rules
the Finance Commission of Texas (commission) is required to adopt to
implement this chapter. Includes exemption from the licensing
requirements of this chapter among the applicable rules regarding
requirements for or conditions to those which the commission is required to
adopt. Makes conforming changes.
SECTION 4. Amends Section 153.102(d), Finance Code, to provide that an
applicant for a license to engage in a currency exchange, transportation,
or transmission business (applicant) must demonstrate that the applicant
has not failed, rather than recklessly failed, to file or evade the
obligation to file a currency transaction report during the preceding three
years. Provides that an applicant must demonstrate that the applicant has
not accepted, rather than recklessly accepted, currency derived from an
illegal activity, for exchange, transportation, or transmission during the
preceding three years. Includes the requirement that an applicant who
engages in currency transmission transactions at multiple locations in this
state must demonstrate that the applicant has and will maintain a minimum
net worth of $25,000 multiplied by the number of locations. Deletes the
requirement that the computation of an applicant who has a net worth of
more than $1,000,000 must be done according to generally accepted
accounting principles. Makes a conforming change.
SECTION 5. Amends Section 153.105, Finance Code, to authorize a license
holder to conduct currency exchange, transmission, or transportation
business at multiple locations if each location, whether it is owned and
operated directly by the licensee or by a principal appointed by the
licensee, is separately licensed under an application submitted in
accordance with this chapter. Deletes the provision that an applicant must
submit a separate application for each location at which the business is to
be operated.
SECTION 6. Amends Section 153.109, Finance Code, by adding Subsection (f),
as follows:
(f) Authorizes the banking commissioner of Texas (commissioner), on a
case-by-case basis in the exercise of discretion, to reduce the amount of
the minimum $25,000 bond or letter of credit for a person conducting a
currency exchange business and the minimum $300,000 bond or letter of
credit for a person conducting a currency transmission or currency
transportation business if the commissioner finds that the amount of the
reduced bond or letter of credit is sufficient to protect the public
interest and an application is filed for the reduction. Requires the
commissioner to consider the following when making a determination under
this subsection:
_the nature and type of business the license holder conducts;
_the nature and degree of liquidity in assets held by the license holder
in a corporate capacity;
_the competence, character, general fitness, and experience of management;
_the extent and adequacy of internal controls maintained by the license
holder;
_the presence or absence of annual unqualified audits by an independent
certified public accountant; and
_the existence and adequacy of other insurance obtained or held by the
license holder to protect its customers.
SECTION 7. Amends Sections 153.117(a) and (e), Finance Code, as follows:
(a) Provides that a federally insured financial institution, as that term
is defined by state law governing bank holding companies and interstate
bank operations, rather than a bank, foreign bank agency, credit union,
savings bank, or savings and loan association, that is organized under the
laws of this state, another state, or the United States is not required to
be licensed under this chapter. Includes a foreign bank branch or agency
in the United States established under the federal International Banking
Act of 1978 (12 U.S.C. Section 3101 et seq.) among the persons who are not
required to be licensed under this chapter. Provides that a license
holder under Chapter 152 (Check Sellers) who engages in currency exchange,
transportation, or transmission is not required to be licensed under this
chapter, except that the license holder is expected to comply with the
other provisions of this chapter. Includes an attorney or title company
that in connection with a real property transaction receives and disburses
only domestic currency on behalf of a party to the transaction among the
persons who are not required to be licensed under this chapter. Includes a
Federal Reserve bank among the persons who are not required to be licensed
under this chapter. Includes a clearinghouse exercising bank payment,
collection, and clearing functions among the persons who are not required
to be licensed under this chapter. Includes another person that the
commissioner may exempt, by rule, if the commissioner finds that the
licensing of the person is not necessary or appropriate to achieve the
objectives of this chapter among the persons who are not required to be
licensed under this chapter. Makes conforming changes.
(e) Provides that a person who is both a registered motor carrier under
Chapter 643 (Motor Carrier Registration), Transportation Code, and a
licensed armed car company or courier company under the Private
Investigators and Private Security Agencies Act (Article 4413(29bb),
V.T.C.S.), rather than a registered motor carrier, is not required to be
licensed under this chapter. Makes conforming changes.
SECTION 8. Amends Section 153.204, Finance Code, as follows:
Sec. 153.204. New title: PROHIBITED ACTIONS. Authorizes the commissioner
to take an action authorized under Section 153.407 (Cease and Desist
Orders), rather than requires the commissioner to give written notice and
to call a meeting with a license holder, if the commissioner finds that a
person, rather than a principal or a license holder acting through an
authorized person, violated certain laws and regulations. Deletes a
provision which states that the notice must include a statement of the
alleged misconduct of the license holder or principal. Deletes the
requirement that the commissioner, at the meeting, state the commissioner's
findings and require the discontinuation of the misconduct.
SECTION 9. Amends Section 153.205(b), Finance Code, to include
requirements regarding content among the requirements regarding the size
and type of lettering used in an advertisement for prices or rates
authorized to be established, by rule, by the commissioner.
SECTION 10. Amends Section 153.301(a), Finance Code, to include any
principal of a license holder among the persons whose business records the
commissioner is authorized to examine periodically. Includes a provision
authorizing the commissioner to require a license holder with multiple
locations in this state licensed under Section 153.105 (Operating in More
Than One Location) to make business records for all licensed locations
available for examination at a specified license location.
SECTION 11. Amends Section 153.305(c), Finance Code, to include a foreign
country or a law enforcement agency of a municipality or political
subdivision of this state or another state among the entities to whom
information may only be released if the commissioner finds that the release
of that information is reasonably necessary to protect the public and is in
the interest of justice.
SECTION 12. Amends Section 153.401, Finance Code, by adding Subsection
(c), as follows:
(c) Provides that it is a defense to prosecution under this section if the
alleged violation was committed by a peace officer, as defined by Article
2.12 (Who Are Peace Officers), Code of Criminal Procedure, or a person
acting on request of a peace officer with the intent to facilitate a
legitimate law enforcement investigation conducted under the laws of this
state.
SECTION 13. Amends Section 153.407, Finance Code, as follows:
Sec. 153.407. New title: CEASE AND DESIST ORDERS; SEIZURE ORDER. (a)
Deletes the reference to a meeting conducted under Section 153.204
(Prohibited Actions; Notice and Meeting). Includes the provision that if a
person is a license holder or a principal of a license holder the
commissioner is required to serve the order on the license holder, the
board of directors of the license holder, and any offending principal.
Makes nonsubstantive changes.
(d) Adds this subsection to authorize the commissioner to issue an order
to seize the assets and records that relate to a currency exchange,
transmission, or transportation business if the commissioner finds, by
examination or other credible evidence, that the currency exchange,
transmission, or transportation business has violated or refused to comply
with this chapter, a rule adopted under this chapter, or any other law or
regulation applicable to a currency exchange, transportation, or
transmission business.
(e) Adds this subsection to provide that the actions authorized by this
section are in addition to and not in lieu of other actions the
commissioner considers appropriate under applicable law, including action
under Subchapter C (Unauthorized Activity: Investigation and Enforcement),
Chapter 35 (Enforcement Actions).
SECTION 14. Repealer: Sections 153.003 (exempting an attorney or title
company that in connection with a real property transaction receives and
disburses only domestic currency on behalf of a party to the transaction)
and 153.108(c) (authorizing the commissioner to issue a single license to a
person who operates 10 or more currency exchange, transportation, or
transmission businesses that allows the person to operate all locations),
Finance Code.
SECTION 15. Emergency clause.
Effective date: upon passage.
COMPARISON OF ORIGINAL TO SUBSTITUTE
C.S.H.B. 2320 modifies the original bill in SECTION 4 (existing Section
153.102(d)(5), Finance Code) by including the requirement that an applicant
for a license to engage in a currency exchange, transportation, or
transmission business who engages in currency transmission transactions,
rather than in currency exchange, transmission, or transportation
transactions, at multiple locations in this state must demonstrate that the
applicant has and will maintain a minimum net worth of $25,000 multiplied
by the number of locations.
C.S.H.B. 2320 modifies the original bill in SECTION 12 (proposed Section
153.401(c), Finance Code) by providing that it is a defense to prosecution
under existing Section 153.401 (Criminal Penalty) if the alleged violation
was committed by a peace officer, as defined by Article 2.12 (Who Are Peace
Officers), Code of Criminal Procedure, or a person acting on request of a
peace officer, rather than a police officer, with the intent to facilitate
a legitimate law enforcement investigation conducted under the laws of this
state.