SUPERVISORY MEMORANDUM - 1034

December 12, 2025

OVERVIEW

The purpose of this Memorandum is to set forth the circumstances under which enforcement actions are used by the Department of Banking (Department) with regard to licensed and unlicensed Money Services Businesses (MSBs), and to specify the general methodology which is followed. An enforcement action is designed to address and correct specific problems identified primarily within the financial and operational affairs of an MSB and is an essential element of effective regulation.

PUBLIC DISCLOSURE OF ENFORCEMENT ACTIONS

Formal enforcement actions, including final Cease and Desist Orders, Emergency Orders, Administrative Penalty Orders, Prohibition and Removal Orders, and the Suspension or Revocation of a License or Authorized Delegate Designation, are public and published on the Department’s website. On limited circumstances, informal enforcement actions may be utilized and are confidential unless the Banking Commissioner (Commissioner) finds that disclosure is reasonably necessary for the protection and interest of the public.

DEFINITIONS

“Regulatory responses” are actions taken by the Department in response to particular conditions at an MSB.

POLICY FOR IMPLEMENTING ENFORCEMENT ACTIONS

Regulatory responses are initiated whenever the Department becomes aware of situations or issues that weaken the safety and soundness of an MSB, or that arise from noncompliance with policies, procedures, regulations, or laws. To assure uniformity of action and to ensure that supervisory efforts are directed to MSBs exhibiting elevated risk profiles or other major deficiencies, the general policy of the Department is to initiate enforcement actions on MSBs with Examination Rating System ratings of “4,” or “5.” (See the definition in Supervisory Memorandum – 1022.) MSBs rated “1” or “2” generally do not warrant an enforcement action, although the Department may initiate an action on MSBs rated “1,” “2,” or “3” depending on the specific circumstances of the MSB. The Department may also pursue an enforcement action outside of a regulatory examination if it becomes aware of information on an entity that warrants an immediate response, including entities offering MSB services to Texas consumers without the required license. Enforcement actions often set forth the practices, conditions, and violations giving rise to the particular problems or weaknesses identified. The actions also outline specific corrective measures, often including appropriate time frames and goals for achievement. Specific types of enforcement actions available to the Department are outlined below in the section “Types of Enforcement Actions.”

MSB Ratings

1-Rated MSBs

MSBs rated a composite “1” are sound in every respect and any weaknesses or deficiencies are relatively insignificant or immaterial that they pose no supervisory concern. Regulatory responses are generally limited to informal requests for plans and/or a written response from the MSB regarding the examiner’s findings as indicated in the report of examination.

2-Rated MSBs

MSBs rated a composite “2” are fundamentally sound. Identified weaknesses or deficiencies are generally of a moderate nature and correction is attainable in the normal course of business. Regulatory responses are the same as for 1-rated MSBs.

3-Rated MSBs

MSBs rated a composite “3” exhibit a combination of weaknesses that range from less than satisfactory to moderately severe, and violations of laws and regulations may be evident and recurring. Regulatory responses require increased supervisory attention, including remedial action, to address the weaknesses.

4 and 5-Rated MSBs

MSBs with composite ratings of “4” or “5,” by definition, have weaknesses of sufficient severity to warrant a strong regulatory response. An enforcement action such as a Penalty, Cease and Desist, or Suspension Order may be issued when there is evidence of unsafe and unsound practices or conditions. Exceptions to this policy are considered when the condition of the MSB reflects significant improvement resulting from an effective correction program or where individual circumstances mitigate against the appropriateness or feasibility of strong enforcement actions.

Unlicensed MSBs

Unlicensed MSBs that have conducted money transmission and/or currency exchange in Texas and were not subject to an exemption under applicable statutes or rules warrant a strong regulatory response. An enforcement action such as a Cease and Desist Order may be issued. Remedial action to cease unlicensed MSB activity, obtain licensure, or qualify for an exemption must be substantiated.

TYPES OF ENFORCEMENT ACTIONS

Enforcement actions may be either formal or informal and may be voluntary or involuntary. The Commissioner may join with another state or federal regulatory agency in issuing a joint enforcement action.

A.   Informal Enforcement Actions

Memorandum of Understanding

A Memorandum of Understanding is a written agreement between an MSB and the Department or Commissioner that sets forth specific corrective actions to be undertaken by the licensee or its authorized delegate. This action is pursued on a limited basis with MSBs where the MSB or authorized delegate does not pose a significant regulatory concern, and where the Department believes the licensee or authorized delegate has the ability and willingness to correct noted deficiencies. A violation of a Memorandum of Understanding is grounds for the issuance of a formal enforcement action; however, a Memorandum of Understanding is not a condition precedent for a formal enforcement action.

B.   Formal Enforcement Actions

Cease and Desist Order

A Cease and Desist Order is issued pursuant to Section 152.405 of the Texas Finance Code (TFC), if necessary to protect the interests of the money services licensee, the purchasers of the licensee's money services, or the public, and may apply to the MSB, a key individual of the licensee, or an authorized delegate. Any action, violation, or condition listed in Sections 152.403 or 152.404 of the TFC may lead to the issuance of a Cease and Desist Order against an MSB or authorized delegate if deemed necessary to protect the interests of the MSB, the purchasers of the licensee's money services, or the public. Management of an MSB subject to such an order would normally have demonstrated a disregard for safe and sound practices and/or the lack of willingness or ability to correct deficiencies on its own. If the MSB agrees to enter into such an order, the order is called a Consent Order.

Emergency Order

Pursuant to Section 152.410 of the TFC, the Commissioner may issue an Emergency Order upon a finding that a person has caused or is likely to cause the insolvency of an MSB or the substantial dissipation of an MSB’s assets or earnings, has seriously weakened or is likely to seriously weaken the condition of an MSB, or has seriously prejudiced or is likely to seriously prejudice the interests of an MSB, a purchaser of a MSB’s money services, or the public; and immediate action is necessary to protect the interests of the MSB, a purchaser of the MSB's money services, or the public. An Emergency Order takes effect as soon as the person against whom the order is directed has actual or constructive knowledge of the issuance of the order. In the event an unlicensed person has engaged or is likely to engage in unlicensed activity, the Commissioner may issue an Emergency Cease and Desist Order under Section 152.410 upon finding that the person's violation or likely violation threatens immediate and irreparable harm to the public.

Administrative Penalties  

Pursuant to Section 152.407 of the TFC, the Commissioner may seek to assess an administrative penalty against a person if the person has: (1) violated Chapter 152 of the TFC, or a rule adopted or order issued under the chapter and failed to timely correct the violation upon notice; (2) if the person is a money services licensee, has engaged in conduct described in Section 152.403; (3) has engaged in a pattern of violations; or (4) has demonstrated willful disregard for the requirements of Chapter 152, or rules adopted under or order issued under the chapter. The MSB or person is notified that a hearing will be held to determine whether administrative penalties will be assessed. Section 152.407(c) sets out maximum penalty amounts, and Section 152.407(d) sets out factors the Commissioner must consider when setting the penalty.

Suspension and Revocation of Money Services License or Authorized Delegate Designation

Pursuant to Section 152.403 of the TFC, the Commissioner shall revoke a money services license upon a finding that the MSB does not provide the security required under Chapter 152, or in the case of a money transmission licensee, the MSB’s net worth is less than the amount required under Chapter 152. The Commissioner may suspend or revoke a money services license or order a money transmission licensee to revoke the designation of an authorized delegate if the Commissioner has reason to believe that any of the conditions enumerated in Section 152.403(b) exist.

Pursuant to Section 152.404 of the TFC, the Commissioner may suspend or revoke the designation of an authorized delegate by a money transmission licensee if the Commissioner has reason to believe that any of the conditions enumerated in Section 152.404(a) exist.

Order of Removal or Prohibition

A Removal or Prohibition Order may be issued pursuant to Section 152.411 of the TFC if the Commissioner finds that a current or former key individual, employee, control person or other person participating in the affairs of a money services licensee has committed or participated in violations of law or agreements, and/or unsafe and unsound banking practices, or made false entries, which caused certain effects, and which were done in other than an inadvertent or unintentional manner. A Removal or Prohibition Order may alternatively be issued pursuant to Section 152.412 of the TFC if the Commissioner finds that a current or former key individual or employee of a money services licensee from office or employment in, or a control person or other person participating in the affairs of a money services licensee, has been finally convicted of a felony offense involving: (1) a business engaged in money services; (2) dishonesty; or (3) breach of trust. Such orders have the effect of removing a person from office or employment or prohibiting a person from office, employment, or any further participation in the affairs of a licensee or any other entity chartered, registered, permitted, or licensed by the Commissioner. 

Consent Orders

The Commissioner may enter into a Consent Order with a person to resolve any matter arising under Chapter 152 or a rule adopted or order issued under the chapter.

PROCEDURE FOR IMPLEMENTING ENFORCEMENT ACTION

Informal enforcement actions are normally handled through written correspondence with the MSB. In certain instances, however, they may require a special meeting with the licensee. Other enforcement actions usually require a special meeting with the licensee and generally such meetings are conducted by senior Department officials, including members of the legal staff. Follow-up by examining personnel on enforcement actions is conducted in accordance with the Department’s examination priorities unless variance from policy is deemed necessary.