On September 15, 2020, the Conference of State Bank Supervisors (“CSBS”) announced the launch of a new program intended to streamline the exam process required by state regulatory agencies for the nation’s payments firms and money transmitters. Known as the MSB Networked Supervision, the state-initiated program seeks to make the examination process more predictable and consistent for the nation’s largest payments and cryptocurrency companies—whose transactions total more than $1 trillion each year. The initiative was an outcome of the CSBS Fintech Industry Advisory Panel, which fielded suggestions from those in the industry who collectively called for multistate examination coordination of the nation’s payment firms and money transmitters.
By making the exam protocol consistent among the more than forty member states, regulators will be able to better understand the risks associated in each company’s payments model and address compliance issues as they arise. Increased state cooperation will decrease the likelihood of perpetual compliance pitfalls, as all regulators will be kept apprised of a payment firm’s regulatory status. The single exam will be led by one state that will oversee a group of examiners sourced from regulatory bodies across the country.
Cyber security and anti-money laundering experts will be included in the exam process as well, meaning that state regulators will gain additional insight into the operations of the country’s payments firms and money transmitters, while also freeing up already scarce state resources to focus their regulatory efforts elsewhere.