Vermont Department of Financial Regulation (DFR)

Overview

The Vermont Department of Financial Regulation is the primary state regulator overseeing money transmission licensing, financial services, banking, insurance, securities, and captive insurance in Vermont. The DFR maintains regulatory authority over all money services activities, including traditional money transmitters, payment processors, and virtual currency business operations.

The Vermont Department of Financial Regulation (DFR) serves as the state-level financial regulator with comprehensive jurisdiction over money transmission and related financial services activities in Vermont. As part of the Agency of Commerce and Community Development, the DFR is composed of four operating divisions: Banking, Securities, Insurance, and Captive Insurance. The department's mission is to ensure market efficiency and integrity, consumer and investor protection, capital formation and access to credit, illicit activity prevention, financial stability, and consumer financial education.

Key Organizational Facts:

• Founded/Established: Requires verification from official sources Early 2000s (exact founding date not confirmed in current search results)

• Organizational Structure: Four divisions (Banking, Securities, Insurance, Captive Insurance) plus administrative/legal support

• Current Commissioner: Kaj Samsom (appointed April 14, 2025)

• Staff Size: Requires verification from official sources Approximately 100+ employees across all divisions (specific headcount not provided)

The Vermont Department of Financial Regulation is a robust state-level regulator with clear statutory authority over money transmission and emerging fintech activities. Key regulatory strengths include:

1. Clear Statutory Framework: 8 V.S.A. Chapter 79 provides comprehensive money transmission licensing authority

2. Proactive Virtual Currency Regulation: Vermont has adapted its regime to specifically regulate virtual currency businesses (as of 2024)

3. NMLS Integration: Use of national licensing system reduces administrative burden while maintaining state control

4. Strong Enforcement: The DFR has demonstrated enforcement capability with significant consumer restitution recoveries

5. Consumer Protection Focus: Mandatory surety bonds, net worth requirements, and authorized delegate oversight provide consumer safeguards

Regulatory Maturity: Layer 1 binding authority with 95+ confidence level due to clear statutory authority, active enforcement, and transparent regulatory framework.

Recommended Follow-up Verification:

• Current Commissioner's specific contact information

• Detailed examination procedures and frequency schedules

• Virtual currency kiosk rules (post-July 1, 2026)

• Maximum penalty amounts for specific violations

• Insurance and cybersecurity requirements for virtual currency custodians

Basic Identity

Classification

Inclusion Justification

What This Entity Oversees

On-Site Examinations

Examination Authority: The DFR Commissioner has the authority to examine any money transmitter licensee to verify compliance with the Money Services Act and related regulations.

Examination Frequency: Requires verification from official sources Typically annual or biennial for active licensees; more frequent for entities with compliance issues

Examination Scope:

• Verification of net worth and capital adequacy

• Surety bond/security compliance

• Authorized delegate oversight and monitoring

• Anti-money laundering (AML) program effectiveness

• Know-Your-Customer (KYC) procedures

• Customer fund handling and segregation

• Complaints and disputes resolution

• System integrity and cybersecurity

• Compliance with reporting requirements

Reporting Requirements

NMLS Reporting: Vermont Commissioner participates in and encourages use of the NMLS for:

• License applications and amendments

• Annual certifications and renewals

• Regulatory reporting

• Multi-state licensing coordination

Additional State Reports: Vermont does not currently require reports outside of NMLS, though the Commissioner is authorized to impose such requirements.

Financial Reporting: Requires verification from official sources Annual financial statements (audited for larger entities, certified for smaller entities)

Regulatory Bulletins and Guidance

The DFR issues regulatory bulletins, orders, and interpretive guidance on:

• Requires verification from official sources Remote work compliance for money transmitter employees

• MLO (Money Lender Officer) requirements

• Virtual currency business operational requirements

• Consumer protection best practices

Regulatory Contact and Licensing Division

Primary Contact: Banking Division / Money Services Unit

Email: [email protected]

Phone: 802-828-3307 (Banking Division)

Office Address:

Vermont Department of Financial Regulation

89 Main Street

Montpelier, VT 05620-3101

USA

Commissioner Authority

Enforcement Powers: The Commissioner of the Vermont Department of Financial Regulation has the authority to:

• Issue, renew, suspend, revoke, or condition licenses

• Conduct examinations without advance notice

• Subpoena records and compel testimony

• Impose civil penalties for violations

• Issue cease-and-desist orders

• Require restitution to harmed consumers

• Restrict or limit licensee activities

Complaint and Disciplinary Process

Complaint Filing: Consumers and industry participants can file complaints with the DFR regarding money transmitter conduct

Investigation: The DFR investigates violations of the Money Services Act

Disciplinary Actions:

• Warning letters

• Consent orders and stipulations

• Fines and penalties

• License suspension

• License revocation

• Criminal referrals to state/federal authorities

Public Disclosure: The DFR publishes disciplinary orders and settlements on its website

Authorized Delegate Oversight

Definition: Authorized delegates are third parties acting on behalf of the money transmitter (agents, franchisees, subagents)

Licensee Responsibility: The primary licensee is responsible for the conduct of all authorized delegates

Monitoring Requirements:

• Quarterly review of delegate compliance

• Requires verification from official sources Annual audits or verification of delegate financial condition

• Complaint tracking for delegate misconduct

• Requires verification from official sources Immediate notification to DFR if delegate violates laws

Customer Service and Complaints

Complaint Procedures:

• Consumers can file complaints with the DFR

• Money transmitters must maintain internal complaint resolution procedures

• Requires verification from official sources 30-day resolution window for consumer complaints

• DFR investigates complaints regarding fraud, unauthorized transactions, disclosure violations

Transparency Requirements:

• Clear fee disclosures

• Written agreements with customers

• Accessible complaint procedures

• Requires verification from official sources Regular statement provision (monthly minimum)

Anti-Fraud Protections

Requirements:

• Verification of customer identity (KYC procedures)

• Transaction monitoring for fraud indicators

• Requires verification from official sources Real-time fraud detection systems

• Unauthorized transaction reversal procedures

• Consumer education on scams and money transmitter risks

Disclosure Requirements

Pre-Transaction Disclosures:

• All applicable fees

• Exchange rates (if applicable)

• Service timeframe

• Terms and conditions

• Consumer rights and limitations

Post-Transaction Documentation:

• Transaction receipt

• Detailed transaction statement

• Contact information for questions/complaints

Regulatory Powers

Civil Penalties

Violation Authority: Any person who violates the Money Services Act or DFR regulations is subject to civil penalties.

Penalty Range: Requires verification from official sources Up to $10,000 per violation (specific amounts not stated in publicly available sources)

Enhanced Penalties: Requires verification from official sources Greater penalties for repeat violations or egregious conduct

License Suspension and Revocation

Grounds for Suspension/Revocation:

• Failure to maintain required net worth

• Failure to maintain required surety bond

• Violation of Money Services Act or regulations

• Consumer harm or fraud

• False statements in license application

• Inability to identify beneficial ownership

• Violation of anti-money laundering laws

• Criminal conviction of principal officers/owners

Procedure: Requires verification from official sources Notice and opportunity to be heard before revocation

Injunctive Relief

The Commissioner may seek injunctive relief to:

• Stop unauthorized money transmission activity

• Prevent continued violations

• Preserve customer funds

• Protect the financial system

Consumer Restitution

Vermont Restitution Fund: The DFR administers a restitution program to compensate consumers harmed by money transmitter misconduct or insolvency

Recovery Programs: Under Commissioner Michael Pieciak's leadership (2017-2022), the DFR recovered over $13 million for Vermont consumers through settlement enforcement

Regulatory Role and Function

Legal Foundation

Statutory Foundation

Vermont's money transmission regulatory authority is codified in Title 8, Chapter 79 of the Vermont Statutes Annotated (8 V.S.A. § 2581 et seq.), commonly referred to as the Vermont Money Services Act.

Key Statutes:

• 8 V.S.A. Chapter 79 - Money Services Act (comprehensive money transmission licensing regime)

• 8 V.S.A. § 2576 - Additional Requirements and Clarifications for Virtual-Currency Business Activities

• 8 V.S.A. § 2577 - Virtual-Currency Kiosk Operators

• 8 V.S.A. § 2571-2580 - Full Money Services regulatory framework

Regulatory Scope

The Vermont Money Services Act applies to any person or entity that:

• Sells or issues payment instruments

• Sells or issues stored value (including digital/virtual currency)

• Receives money or monetary value for transmission to any location within or outside the United States

• Engages in virtual-currency business activities (exchanges, custodians, sellers, or certain issuers)

Amendment History

Vermont amended its money transmission statute effective May 4, 2017, to explicitly include virtual currency activities, establishing that virtual currency exchange operators and custodians must obtain money transmitter licenses.

In 2024, Vermont enacted new regulations creating specific subchapters for virtual-currency business activities through amendments to 8 V.S.A. Chapter 79.

Licensing and Authorization Relevance

License Type and Scope

License Name: Money Transmitter License

Activities Requiring License:

• Money transmission services

• Payment instrument sales/issuance

• Stored value issuance

• Virtual currency exchange operations

• Virtual currency custody services

• Virtual currency sales

Application Process

Filing Method: National Multistate Licensing System and Registry (NMLS)

All applicants must submit applications through NMLS. Vermont does not require separate state-specific applications outside of the NMLS system.

Required Application Documentation:

1. Legal entity name and operating addresses

2. State and federal tax identification numbers

3. Ownership structure and principal officers/directors

4. List of criminal convictions over the previous 10 years (if any)

5. Material litigation history (previous 10 years)

6. Detailed description of money services to be provided

7. List of proposed authorized delegates (third-party service providers)

8. States where the applicant is licensed or seeking licenses

9. Banking and financial institution relationships

10. Surety bond or letter of credit documentation

11. Net worth certification

12. Sample agreements with authorized delegates

13. Sources of operating funds

14. Requires verification from official sources Background checks and character assessment information

Processing Timeline: Requires verification from official sources Typically 30-90 days for initial review; may extend based on completeness of application

License Requirements

Net Worth Requirements

Money transmitter licensees must maintain tangible net worth at all times according to a tiered structure:

• Greater of $100,000 OR:

• 3% of total assets (for assets up to $100,000,000)

• 2% of assets ($100,000,000 to $1,000,000,000)

• 0.5% of assets (over $1,000,000,000)

Example: A company with $50,000,000 in assets must maintain tangible net worth of at least $1,500,000 (3% of $50M)

Verification: Tangible net worth must be certified through audited financial statements or attestations by licensed accountants.

Surety Bond / Security Requirements

Base Security Amount: Minimum $100,000 surety bond, letter of credit, or equivalent security acceptable to the DFR Commissioner

Additional Locations: For each location where money services are provided through authorized delegates or otherwise, add $10,000 to the security requirement

Maximum Cap: Total security does not exceed $500,000 unless the Commissioner authorizes higher amounts (up to $2,000,000 maximum)

Formula:

• 1 location: $100,000

• 2-41 locations: $100,000 + ($10,000 × [number of locations - 1])

• 41+ locations: Capped at $500,000 (unless Commissioner increases to maximum $2,000,000)

Accepted Forms:

• Surety bonds issued by companies authorized to do business in Vermont

• Irrevocable letters of credit from FDIC-insured institutions

• Other security acceptable to the Commissioner

Additional Requirements

• Capitalization: Capital injection from owner/investors (specific percentage not defined in statute, but Commissioner expects reasonable equity stake)

• Audited Financials: Audited annual financial statements required for licensees exceeding certain asset thresholds

• Insurance: Requires verification from official sources General liability and E&O insurance (standard in industry but not explicitly stated in statute)

• Compliance Infrastructure: Systems for money laundering prevention, KYC/AML procedures, fraud prevention

• Records Retention: 5-7 years (standard regulatory requirement)

Capital Adequacy

Tangible Net Worth (See section above for detailed calculations)

Vermont requires ongoing maintenance of tangible net worth, calculated quarterly or annually depending on entity size.

Prohibited Deductions from Net Worth

• Requires verification from official sources Intangible assets (goodwill, brand value, trademarks)

• Requires verification from official sources Uncollected receivables over 90 days

• Requires verification from official sources Related-party receivables without strong collateral

• Requires verification from official sources Unsecured loans to affiliates

Customer Fund Segregation

Statutory Requirement: Money transmitters must segregate customer funds from operating funds.

Minimum Safeguards:

• Maintain separate bank accounts for customer money

• Use FDIC-insured depository institutions (preferred)

• Maintain liquidity reserves to cover all outstanding obligations

• Requires verification from official sources Weekly reconciliation of customer accounts

• Requires verification from official sources Monthly attestation of fund segregation to Commissioner

Surety Bond/Security Maintenance

• Security must remain in force at all times

• Annual renewal verification

• Increase in security amount if location count increases

• Requires verification from official sources Commissioner notification required if security is reduced, cancelled, or becomes subject to claims

Virtual Currency Definition and Scope

Definition (8 V.S.A.): Virtual currency means digital currency that can be used as a medium of exchange but is not fiat currency of the United States or any other government.

Activities Requiring License:

• Virtual currency exchange (buying/selling for fiat or other virtual currencies)

• Virtual currency custody (storing, safeguarding customer virtual currency)

• Virtual currency sales (selling to consumers)

• Virtual currency issuance (creating new virtual currency - limited scope)

Virtual Currency Business Activity Regulations

New Regulatory Framework (2024): Vermont enacted new subchapters to 8 V.S.A. Chapter 79 creating specific requirements for virtual-currency business activities:

Covered Entities:

• Virtual currency exchanges

• Virtual currency custodians

• Virtual currency sellers

• Certain virtual currency issuers

Requirements:

• Money transmitter license (standard requirements apply)

• Net worth and security requirements (same as traditional money transmitters)

• Customer fund segregation

• AML/KYC compliance specific to virtual currency

• Requires verification from official sources Insurance or bonding for virtual currency holdings

• Requires verification from official sources Cold storage/offline security requirements for custody

Virtual Currency Kiosk Operations

New Restrictions (Effective July 1, 2026): Virtual-currency kiosk operators are prohibited from operating in Vermont prior to July 1, 2026.

Future Requirements: After July 1, 2026, virtual-currency kiosk operators must comply with licensing requirements to the extent they engage in virtual-currency business activity.

Definition: A virtual-currency kiosk is a physical machine or device that allows consumers to exchange fiat currency for virtual currency (similar to a Bitcoin ATM).

Cryptocurrency Exchange Oversight

DFR Enforcement Examples:

• Settlement with Uphold HQ for compliance violations

• Enforcement against unlicensed virtual currency platforms

• Ongoing supervision of licensed cryptocurrency services providers

Key Supervision Areas:

• Consumer protection for volatile assets

• Fraud prevention in virtual currency transactions

• Prevention of use in illegal activities

• Cybersecurity requirements for holdings

• Consumer disclosure of risks

Fintech and Payment Innovation

DFR Position: The DFR recognizes fintech innovation in payment systems and has expanded supervision of:

• Online securities trading platforms

• Digital payment processors

• Blockchain-based services

• Mobile money applications

• Requires verification from official sources Stablecoin issuers (emerging regulation)

Payments and Money Movement Relevance

The Vermont Department of Financial Regulation (DFR) has the following relevance to payments and money movement in United States:

Payment Systems Governed or Overseen

The Vermont Department of Financial Regulation (DFR) does not directly operate payment systems. Its payment-related role includes:

Money transmitters, payment processors, and fintech companies operating in this jurisdiction require licensing or registration with this entity.

Relationship to Other Regulators

Multistate Licensing System (NMLS)

Participation: Vermont actively participates in the NMLS to facilitate multi-state money transmitter licensing and supervision.

NMLS Coordination:

• Standardized application and renewal processes

• Coordinated examination and supervision

• Information sharing with other state regulators

• Uniform reporting standards

Interstate Compact and Reciprocity

Money Transmitter Reciprocity: Requires verification from official sources Vermont recognizes money transmitter licenses issued by other states but requires separate Vermont licensure for operations in Vermont.

Multi-State Operations: Entities licensed in multiple states must:

• Maintain separate compliance infrastructure for each state

• Comply with the most restrictive requirement across all jurisdictions

• Requires verification from official sources Report material changes to all state regulators simultaneously

Regulatory Information Sharing

Consumer Complaint Database: The DFR participates in interstate complaint-sharing initiatives through NMLS

Enforcement Coordination: The DFR coordinates with:

• Federal regulators (FinCEN, OFAC, Federal Reserve)

• Other state regulators

• Law enforcement agencies

• International financial intelligence units (via FinCEN)

Commissioner Participation

NMLS Leadership: The DFR Commissioner participates in multistate processes designed to:

• Facilitate licensing and administration

• Support State Regulatory Registry, LLC initiatives

• Develop uniform guidance and standards

• Coordinate AML/KYC enforcement

Geography and Jurisdiction Notes

Important Departments and Divisions

Key Public Resources

Main Office

Vermont Department of Financial Regulation

89 Main Street

Montpelier, VT 05620-3101

United States

General Phone: 802-828-3301

Toll-Free: 833-337-4685

Website: https://dfr.vermont.gov/

Office Hours: 7:45 AM - 4:00 PM, Monday-Friday (Eastern Time), except state holidays

Division-Specific Contacts

Banking Division (Money Services/Money Transmitters):

• Phone: 802-828-3307

• Email: [email protected]

• Website: https://dfr.vermont.gov/industry/banking/financial-services/money-services

Money Services Licensing & Compliance:

• Phone: 802-828-3307

• Email: [email protected]

• Applications: Submit via NMLS (https://www.nmls.org/)

Leadership

Commissioner: Kaj Samsom (appointed April 14, 2025)

• Background: Former Tax Commissioner, Insurance Department Chief Examiner (2011), Deputy Commissioner of Insurance (2014)

• Contact: Requires verification from official sources Available through DFR main office

Previous Commissioners:

• Michael Pieciak (January 2017 - April 2022) - Now Vermont State Treasurer

• Kevin Gaffney (predecessor, retired early 2025)

Regulatory Documents and Resources

Official Guidance:

• Regulatory Bulletins: https://dfr.vermont.gov/view/regbul

• Money Services Regulations: https://legislature.vermont.gov/statutes/chapter/08/079

• Virtual Currency Guidance: https://dfr.vermont.gov/industry/banking/financial-services/money-services

Applications and Forms:

• NMLS Portal: https://www.nmls.org/

• Vermont-specific forms: Requires verification from official sources Available through banking division contact

Consumer Resources:

• Complaint Filing: https://dfr.vermont.gov/consumers

• Financial Literacy: https://dfr.vermont.gov/consumers

• Restitution Fund Information: Available through DFR main office

Notes on Naming and Language