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TMI BlogMaster Circular on Memorandum of Instructions governing money changing activities (As updated on March 25, 2015)X X X X Extracts X X X X X X X X Extracts X X X X ..... Guidelines for Licencing and other Approvals for Authorised Money Changers (AMCs) SECTION II Guidelines for Grant of Authorisation for Additional Branches :- SECTION III Guidelines for appointment of Agents / Franchisees by Authorized Dealer Category - I Banks, Authorized Dealers Category - II and FFMCs :- SECTION IV Guidelines for Renewal of licences of existing FFMCs : SECTION V Operational Instructions SECTION VI KYC/ AML/ CFT Guidelines SECTION VII Revocation of Licence SECTION VIII Fit and proper criteria for directors of FFMCs / non-bank ADs Category - II Annex-I Application Form for FFMC licence under section 10(1) of FEMA, 1999 Annex-II Form RMC-F Annex-III ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngladesh may also sell the currency of the bordering country, with the prior approval of the Regional offices concerned of the Reserve Bank. Other franchises of AD Category -I Banks / ADs Category - II / FFMCs cannot sell foreign currency. 2. Guidelines for issuance of FFMC Licence :- The guidelines for issue of new FFMC licence and renewal of FFMC licence, branch licensing, approval for appointment of agents / franchisees and Know Your Customer (KYC) / Anti Money Laundering (AML) / Combating of Financing of Terrorism (CFT) Guidelines for Authorised Persons are given below. (i) Entry Norms The applicant has to be a company registered under the Companies Act, 1956. The minimum Net Owned Funds (NOF) required for consideration as FFMC are as follows: Category Minimum Net Owned Funds Single branch FFMC Rs.25 lakh Multiple branch FFMC Rs.50 lakh Note :- The Net Owned Funds of applicants, other than banks, should be calculated as per the following. (a) Owned Funds :- (Paid-up Equity Capital + Free reserves + Credit balance in Prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sister / associated concerns operating in the financial sector, like NBFCs, etc. A certified copy of the board resolution for undertaking money changing business. (iii) Basis for Approval (i) Since several FFMCs are already functioning, fresh licences will be issued on a selective basis to those who comply with all the licencing requirements. (ii) 'Fit and proper' criteria for the applicant FFMCs # If any case by DoE / DRI or any other case by any other law enforcing authorities, is initiated / pending against any company / its directors, the company will not be considered as 'fit and proper' and its application will not be considered for licencing as FFMC. (# Also applicable to non-bank ADs Category - II) (iii) Fit and proper criteria for directors of FFMCs * Please see SECTION- VIII for the details in this regard. (* Also applicable to non-bank ADs Category - II) (iv) Clearance by the Empowered Committee The request for issuance of FFMC licence would be considered by the Regional Office concerned of the Reserve Bank on the basis of the clearance by an Empowered Committee, set up for the purpose. (v) Reserve Bank s decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are initiated / pending against the applicant or its directors. No new branch license will be issued to any FFMC, against whom any major DoE / DRI case is pending. In DoE / DRI pending cases of a minor nature, a decision will be taken by the Reserve Bank on a case by case basis. The categorization of pending DoE / DRI cases as major / minor will be at the discretion of the Reserve Bank and the decision of the Reserve Bank will be final and binding. Where any DoE / DRI case is adjudicated and penalty is imposed, a view will be taken, on the basis of the nature of the offence, provided no fresh case is instituted by DoE / DRI. A copy of the KYC / AML/ CFT policy framework existing in the company. Brief write-up on the internal control systems, including internal and external audit. 3. A copy of the registration under Shops Establishment Act or any other documentary evidence such as rent receipt, copy of lease agreement, etc. should be submitted to the Regional Office concerned of the Reserve Bank before commencement of business at an additional branch. 4. For opening Foreign Exchange Counters (full-fledged branches/ extension counters) at the international airports i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertake only restricted money changing business. 3. Franchisee Agreement AD Category-I Banks / ADs Category-II / FFMCs as the franchisers are free to decide on the tenor of the arrangement as also the commission or fee through mutual agreement with the franchisee. The Agency / Franchisee agreement to be entered into should include the following salient features: (a) The franchisees should display the names of their franchisers, exchange rates and that they are authorized only to purchase foreign currency, prominently in their offices. Exchange Rate for conversion of foreign currency into Rupees should be the same or close to the daily exchange rate charged by the AD Category - I Banks / ADs Category - II / FFMC at its branches. (b) The foreign currency purchased by the franchisee should be surrendered only to its franchiser within 7 working days from the date of purchase. (c) The maintenance of proper record of transactions by the franchisee. (d) The on-site inspection of the franchisee by the franchiser should be conducted at least once a year. 4. Procedure for application An AD Category - I Bank / AD Category - II/ FFMC should apply to the respective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gory -I Banks / ADs Category - II / FFMCs should also obtain a Chartered Accountant's certificate confirming the maintenance of the Net Owned Funds of the franchisee, i.e., ₹ 10 lakh on an ongoing basis. 6. Selection of Centers (i) The AD Category-I banks / AD Category -II / FFMCs may appoint franchisees within a distance of 100 kms. from their controlling branches concerned. (ii) However, this distance criterion is exempted in case of a recognized group/ chain of hotels appointed as franchisees, provided the headquarters of the group/ chain of hotels falls within a distance of 100 kms. of the controlling branch of the AD Category - I banks / AD Category - II/ FFMCs (franchiser) concerned. (iii) Further, in case of areas declared as hilly areas (as defined by the respective State Governments/ Union Territories) and the North-Eastern States, the distance restriction given in point (i) above is not applicable. 7. Training Franchisers are expected to impart training to the franchisees as regards operations and maintenance of records. 8. Reporting, Audit and Inspection The franchisers, i.e. the AD Category-I Banks / ADs Category-II / FFMCs, are expec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Applications for renewal should be submitted along with the documents, mentioned below. (a) Copy of the latest audited accounts with a certificate from the Statutory Auditors regarding the position of Net Owned Funds as on date. (b) Confidential Report from the applicant's banker in a sealed cover. (c) A declaration to the effect that no proceedings have been initiated by/ are pending with the Directorate of Enforcement / Directorate of Revenue Intelligence or any other law enforcing authorities against the applicant company or its directors and that no criminal cases are initiated/ pending against the applicant company or its directors. (d) A copy of the KYC / AML / CFT policy framework existing in the company. Note :- An application for the renewal of a money-changer s licence shall be made not later than one month, or such other period as the Reserve Bank may prescribe, before the expiry of the licence. Where a person submits an application for the renewal of his money changer s licence, the licence shall continue in force until the date on which the licence is renewed or the application is rejected, as the case may be. No application for renewal of a m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foreign currency notes, coins and encashed travellers cheques tendered in the normal course of business. Rupee equivalent of the amount of foreign exchange purchased should be paid only by way of crossed account payee cheque/Demand Draft/Bankers' cheque / Pay order. 5. Sale of foreign exchange (I) Private Visits AMCs may sell foreign exchange up to the prescribed ceiling (currently US $ 10,000) specified in Schedule III to the Foreign Exchange Management (Current Account Transaction) Rules, 2000 during a financial year to persons resident in India for undertaking one or more private visits to any country abroad (except Nepal and Bhutan). Exchange for such private visits will be available on a self-declaration basis to the traveller regarding the amount of foreign exchange availed during a financial year. Foreign nationals permanently resident in India are also eligible to avail of this quota for private visits provided the applicant is not availing of facilities for remittance of his salary, savings, etc., abroad in terms of extant regulations. (II) Business visits AMCs may sell foreign exchange to persons resident in India for undertaking business travel or for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AML / CFT guidelines are complied with, (ii) sale of foreign currency/ issue of foreign currency travellers cheques is within the limits (credit/ prepaid cards) prescribed by the bank, (iii) the purchaser of foreign currency/ foreign currency travellers cheque and the credit/ debit/ prepaid card holder is one and the same person. The sale of foreign currency notes and coins within the overall entitlement of foreign exchange should be restricted to the limits prescribed by the Reserve Bank from time to time for the country of visit of the traveller. 6. Sales against Reconversion of Indian Currency AMCs may convert into foreign currency, unspent Indian currency held by non-residents at the time of their departure from India, provided a valid Encashment Certificate is produced. Note (1) : AMCs may convert at their discretion, unspent Indian currency up to ₹ 10,000 in the possession of non-residents if, for bonafide reasons, the person is unable to produce an Encashment Certificate after ensuring that the departure is scheduled to take place within the following seven days. Note (2) : ADs Category - I, ADs Category - II and FFMCs may provide facility for reconv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plus foreign currency notes / encashed travellers' cheques to an overseas bank through designated Authorized Dealer Category - I in foreign exchange for realization of their value through the latter. FFMCs may also export surplus foreign currency to private money changers abroad subject to the condition that either the realizable value is credited in advance to the AD Category - I bank s nostro account or a guarantee is issued by an international bank of repute covering the full value of the foreign currency notes / coins to be exported. 13. Write-off of fake foreign currency notes In the event of foreign currency notes purchased being found fake/forged subsequently, AMCs may write- off up to US $ 2000 per financial year after approval of their Top Management after exhausting all available options for recovery of the amount. Any write-off in excess of the above amount, would require the approval of the Regional Office concerned of the Foreign Exchange Department of the Reserve Bank. 14. Registers and Books of Accounts of Money-changing Business (i) AMCs shall maintain the following Registers in respect of their money-changing transactions: Daily Summary and Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e format in Annex-XII. An Annual Statement should be submitted by all the AMCs to the respective Regional Offices of the Foreign Exchange Department, Reserve Bank which have issued the licenses within one month of the financial year-end, giving the details of the amount written off during the financial year, as per the format as at Annex-XIII. 16. Inspection of Transactions of AMCs Section 12(1) of Foreign Exchange Management Act 1999, empowers any officer of Reserve Bank specially authorized in this behalf to inspect the books and accounts and other documents of AMCs. The AMCs should provide all assistance and co-operation to Inspecting Officers in carrying out their inspection. Failure to produce any books of account or other document or to furnish any statement or information or to answer any question relating to the money changing transactions to the Inspecting Officers, shall be deemed to be a contravention of the provisions of the Act ibid. 17. Concurrent Audit (i) AMCs should put in place a system of Concurrent Audit of the transactions undertaken by them. (ii) All single branch AMCs having a turnover of more than US $ 100,000 or equivalent per month . Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditions. i) Only one Nostro account for each currency may be opened; ii) Balances in the account should be utilized only for the settlement of remittances sent for permissible purposes and not for the settlement in respect of forex prepaid cards; iii) No idle balance shall be maintained in the said account; and iv) They will be subject to reporting requirements as prescribed from time to time. 20. Submission of Balance Sheet and maintenance of NOF All AMCs are required to submit their annual audited balance sheet to the respective Regional office of the Reserve Bank for the purpose of verification of their Net Owned Funds along-with a certificate from the statutory auditors regarding the NOF as on the date of the balance sheet. As AMCs are expected to maintain the minimum NOF on an ongoing basis, if there is any erosion in their NOF below the minimum level, they are required to bring it to the notice of the Reserve Bank immediately along with a detailed time bound plan for restoring the Net Owned Funds to the minimum required level. 21. Participation by Full Fledged Money Changers (FFMCs) and Authorised Dealers Category-II (ADs Category-II) in the Currency Fut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termine the suitability of the person for appointment / continuing to hold appointment as a director on the Board, based upon qualification, expertise, track record, integrity and other fit and proper criteria. For assessing integrity and suitability, factors like criminal record, if any, financial position, civil action initiated to pursue personal debts, refusal of admission to or expulsion from professional bodies, sanctions imposed by regulators or similar bodies, previous questionable business practices, etc. should be considered. The Board of Directors should assess fit and proper status by calling for information by way of self-declaration, verification reports from market, etc. FFMCs / non-bank ADs Category - II should obtain necessary information and declaration from the proposed / existing directors for the purpose in Proforma given at the end. (b) The process of due diligence should be undertaken by the FFMCs / non-bank ADs Category - II at the time of appointment / renewal of appointment. (c) The Boards of the FFMCs / non-bank ADs Category - II should constitute Nomination Committees to scrutinize the declarations. (d) Based on the information provided in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any firm / company : (ii) If yes, particulars thereof : 12. Experience in money changing business (number of years) : 13. Equity shareholding in the company No. of shares Face value Percentage to total equity share capital of the company: : : : Signature Date Place : : : Name Designation (Chief Executive Officer) Company : : : Annex-I [See SECTION I, Paragraph 2 (ii)] Application Form for FFMC licence under section 10(1) of FEMA, 1999 1. Full name of the applicant 2. Address in full 3. Name of location/s to where the applicant proposes to conduct Money Changing Business (Please enclose copies of the Licences under Shops and Establishment Act) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port 2. Attested copies of audited accounts for the past 3 years. Note: Single branch FFMCs shall have Net Owned Funds not less than ₹ 25 lakhs while FFMCs intending to operate through more than one branch will have to maintain Net Owned Funds not less than ₹ 50 lakhs. Annex-II [See SECTION III, Paragraph 4] Form RMC-F 1. Name of the AD/ FFMC 2. Name and address of the franchisee Details of locations (i) (ii) (iii) Etc. 3. Existing business activity of the franchisee 4. Net Owned Funds 5. Shop Establishment/ other applicable municipal certification in favour of the franchisee 6. Conduct certificate of the franchisee from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pound Sterling U.S. Dollar Euro Yen Other (Pl. specify) I. Opening Balance II. Add: 1) Purchases from the public 2) Purchases from others (including fresh stock received) Total (I + II) III. Less :1) Sales to public 2) Surrender to ADs/FFMCs 3) Exports IV. Closing Balance (I + II - III) Pre-paid cards sold No. Amount. Date: Name:__________________________ Designation:______________________ ___________________________________________________________________________________________________________ Note:- Stock register of blank travellers cheques/ smart cards in various denominations obtained from authorized dealers/ TC issuers/ other agencies for sale to travellers under Basic Travel Quota or for business visit should be maintained and balanced on a daily basis. Annex-V [See SECTION V, P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ______________________ Designation:__________________________ Annex-VII [See SECTION V, Paragraph 14 (i) (e)] FLM 5 Register of sales of foreign currencies to the public Date Sr. No. Name of the tenderer Nationality Full Address Details of Identification Document Name of the sponsoring Organisation Country/ies of visit Purpose of visit Duration of stay abroad (No. of days) 1. 2. 3. 4. 5. 6. 7. 8. 9. Particulars of foreign currency notes/coins/ TCs/pre-paid cards Rate Rupee equivalent Commission charged, if any Total amount received Cash Memo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheque No.(s) Amount Rate Rupee Equivalent received Remarks 1. 2. 3. 4. 5. 6. 7. 8. Date: Name:__________________________ Designation:______________________ Annex- X [See SECTION V, Paragraph 15 (i)] FLM 8 (For FFMCs) Summary statement of purchases and sales of foreign currency notes during the month of __________20 Name and address of money changer RBI Licence No.________ USD GBP EURO JPY Others (Specify) A. Opening balance Purchases of foreign currency notes from (a) Public (b) RMCs/FFMCs/ADs including imports. (c) Agents/Franchisees B. Total Purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Governments/ (ix) Registration / Subscription / Membership fees to International Organizations (S1102) (h) Emigration Fees (S1202) (i) Emigration Consultancy Fees (S1006) (k) Sales to other FFMCs/ADs including exports C. Total Sales [ (a) + (b) + (c) + (d) + (e) + (f) + (g) + (h )+ (i) + (j)+ (k) ] Closing balance (A+B - C) We hereby certify that the statement is a true and correct account of all transactions undertaken during the month in accordance with the Foreign Exchange Regulations. (Signature of Authorised Official) Place: Date: Name: __________________________ Designation : _____________________ Annex- XI [See SECTION V, Paragraph 15 (ii)] Statement of Purchase transactions of USD 10,000 and above for the month of ______ Date of transaction Name and address of the person surrendering the foreign currency Amount Currency/ TCs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of foreign currency written off during the financial year ended ______________ Name of the FFMC/ AD Category-II: Total amount written-off (in equivalent USD) :- Details of the amount written-off :- Sr. No. Date of write-off Amount of foreign currency (with currency-wise break-up) On account of * Approved by FFMC/AD Category-II/ Reserve Bank 1. 2. 3. 4. 5. Total : * Please indicate whether on account of being found to be fake or forged/ theft/ lost in transit, etc. Signature of Authorized Official with Seal Appendix List of A.P.(DIR Series) Circulars which have been consolidated in the Master Cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 19, 2011 18 A.P.(DIR Series) Circular No.31 October 03, 2011 19 A.P.(DIR Series) Circular No.33 October 12, 2011 20 A.P.(DIR Series) Circular No.38 October 25, 2011 21 A.P.(DIR Series) Circular No.41 November 01, 2011 22 A.P.(DIR Series) Circular No.60 December 22, 2011 23 A.P.(DIR Series) Circular No.71 January 30, 2012 24 A.P.(DIR Series) Circular No.77 February 15, 2012 25 A.P.(DIR Series) Circular No.86 February 29, 2012 26 A.P.(DIR Series) Circular No.104 April 04, 2012 27 A.P.(DIR Series) Circular No.107 April 17, 2012 28 A.P.(DIR Series) Circular No.109 April 18, 2012 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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