Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committees on Consumer Protection and Commerce and Judiciary, to which was referred S.B. No. 2903, S.D. 2, entitled:

beg leave to report as follows:

The purpose of this bill is to ensure that money transmitter businesses are not used to launder the proceeds of drug, gambling, prostitution, and other illegal activities, and to enhance the government's ability to detect the movement of terrorist funds, by establishing a new chapter:

Testimony in support of this measure was submitted by the Office of the Lieutenant Governor, Department of Commerce and Consumer Affairs, Department of the Attorney General, Department of the Prosecuting Attorney of the City and County of Honolulu, Non-Bank Funds Transmitters Group, and Philippine National Bank - Honolulu Agency.

Your Committees find that nationally, two money transmitters dominate the marketplace, and there are approximately 8,000 other businesses in the industry. Locally, it is not possible to quantify the number of money transmitters because no system of registration or regulation of money transmitters currently exists.

Your Committees appreciate the seriousness of the connection between money transmission, drug trafficking, and international terrorism, and note that these are national problems that may not benefit from piecemeal state regulation. In addition, the federal government appears to be moving preemptively in this area.

Your Committees further recognize that the bill as received contained sections that went beyond registration and would have subjected the previously unregulated vocation of money transmitter to regulatory controls. Your Committees therefore felt that it was appropriate to utilize the normal "sunrise" review process, established by section 26H-6, Hawaii Revised Statutes (HRS).

For this reason, a concurrent resolution is being drafted by the Commissioner of Financial Institutions to initiate a sunrise study by the State Auditor that will address the need for regulation and assess alternative forms of regulation. Your Committees find that any state regulation of money transmitters should be carefully designed to complement federal efforts, and that this objective may be appropriately accomplished by utilizing the process established in section 26H-6, HRS.

Your Committees have amended this bill by:

Thus, after the issuance of the State Auditor's report, it will be incumbent upon the proponents of this bill to reenact such provisions as are determined to be useful.

As affirmed by the records of votes of the members of your Committees on Consumer Protection and Commerce and Judiciary that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 2903, S.D. 2, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 2903, S.D. 2, H.D. 1, and be referred to the Committee on Finance.