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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 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 FLM 1 Annex-IV FLM 2 Annex-V FLM 3 Annex-VI FLM 4 Annex-VII FLM 5 Annex-VIII FLM 6 Annex-IX FLM 7 Annex- X FLM 8 Annex- XI Statement of Purchase transactions of USD 10,000 and above Annex- XII Statement showing summation of Foreign Currency Account opened in India out of export proceeds of Foreign Currency Notes/ encashed Travellers' Cheques Annex- XIII Statement of the amount of foreign currency written off during the financial year Appendix SECTION-I Guidelines for Licencing and other Approvals for Authorised Money Changers (AMCs) 1. Introduction Authorised Mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure and Other intangible assets) (b) Net Owned Funds :- Owned funds minus the amount of investments in shares of its subsidiaries, companies in the same group, all (other) non-banking financial companies as also the book value of debentures, bonds, outstanding loans and advances made to and deposits with its subsidiaries and companies in the same group in excess of 10 per cent of the Owned funds. (ii) Documentation Application in the form, as at Annex - I, should be submitted to the respective Regional Office of the Foreign Exchange Department of the Reserve Bank under whose jurisdiction the registered office of the applicant falls, along with the following documents: * Copy each of the Certificate of Incorporation and Certificate of Commencement of Business of the company. * Memorandum and Articles of Association containing a provision for undertaking money changing business or an appropriate amendment to this effect filed with the Company Law Board. * Copy of the latest audited accounts with a certificate from the Statutory Auditors certifying the Net Owned Funds as on the date of application. Copies of the audited Balance Sheet and Profit & Loss Account of the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l from the Reserve Bank, 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 the business. (vii) The FFMC should commence its operations within a period of six months from the date of issuance of licence and inform the Regional Office concerned of the Reserve Bank. (viii) New FFMCs should carry out their activities as per the instructions specified in SECTIONS V and VI below and other instructions issued by the Reserve Bank from time to time. [Note:- Urban Cooperative Banks (UCBs), fulfilling the eligibility norms, would be considered for authorization as Authorised Dealer Category-I / Authorised Dealer Category-II only.] SECTION II Guidelines for Grant of Authorisation for Additional Branches :- 1. No FFMC shall carry on money changing business at any additional place of business other than its permanent place of business except with the prior approval of the Reserve Bank. An FFMC which intends to commence money changing business at any additional place of business shall apply in writing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he arrival halls in international airports in India shall ideally be established after the Customs Desk (Green Channel/Red Channel). However, Foreign Exchange Counters may also be established between the Immigration Desk and the Customs Desk in international airports in India subject to the condition that these counters shall only purchase foreign currency and sell Indian Rupees (INR) and "Encashment Certificates" shall invariable be issued by the money changers to the customers. * Foreign Exchange Counters in the departure halls in international airports in India shall be established before the Customs Desk or the immigration desk, whichever comes first. However, to enable the non-residents to convert their unspent/excess Indian Rupees above the limits laid down at para (c) and (d) below, Foreign Exchange Counters at the departure halls in the international airports may be established in the Duty Free Area/SHA beyond the Immigration/Customs desk. * Resident Indians as well as those Non-residents who are - (i) not citizens of Pakistan or Bangladesh and (ii) not going to Pakistan or Bangladesh, are allowed to take Indian notes up to an amount not exceeding ₹ 25,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by a declaration that while selecting the franchisees, adequate due diligence has been carried out and that such entities have undertaken to comply with all the provisions of the franchising agreement and prevailing Reserve Bank regulations regarding money changing. Approval would be granted by the Reserve Bank for the first franchisee arrangement. Thereafter, as and when new franchisee agreements are entered into, these would have to be reported to the Reserve Bank in Form RMC-F (Annex-II) on a post-facto basis along with similar declaration as indicated above. 5. Due Diligence of Franchisees The AD Category Banks - I / ADs Category - II / FFMCs should undertake the following minimum checks while conducting the due diligence of the franchisees: * existing business activities of the franchisee/ its position in the area. * minimum Net Owned Funds of the franchisee. * Shops & Establishments / other applicable municipal certification in favour of the franchisee. * verification of physical existence of location of the franchisee, where restricted money changing activities will be conducted. * conduct certificate of the franchisee from the local police authorities. (certi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... locations of franchisees, at least once in six months, should be conducted by AD Category-I Banks / ADs Category-II / FFMCs. Such audits should involve a dedicated team and 'mystery customer' (individuals acting as potential customers to experience and measure the extent up to which people and process perform as they should) concept should be used to test the compliance level of the franchisees. A system of annual inspection of the books of the franchisees should also be put in place. The purpose of such inspection is to ensure that the money changing business is being carried out by the franchisees in conformity with the terms of the agreement and prevailing Reserve Bank guidelines and that necessary records are being maintained by the franchisees. 9. Anti Money Laundering (AML) / Know Your Customer (KYC) / Combating of Financing of Terrorism (CFT) Guidelines Franchisees are required to strictly adhere to the AML / KYC/ CFT guidelines, as applicable to AD Category-I Banks / ADs Category - II / FFMCs. Note:- No licence for appointment of franchisees will be issued to any FFMC / non-bank AD Category - II, against whom any major DoE / DRI / CBI / Police case is pending. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authorities. When foreign exchange brought in the form of currency notes or travellers' cheques does not exceed US$ 10,000/- or its equivalent and / or the value of foreign currency notes does not exceed US$ 5,000/- or its equivalent, declaration thereof on CDF is not insisted upon. (ii) Taking out foreign exchange in any form, other than foreign exchange obtained from an authorized dealer or a money changer is prohibited unless it is covered by a general or special permission of the Reserve Bank. Non-residents, however, have general permission to take out an amount not exceeding the amount originally brought in by them, subject to compliance with the provisions of sub-para (i) above. 2. Purchases of Foreign Currency from Public (i) Authorised Money Changers (AMCs) / franchisees may freely purchase foreign currency notes, coins and travellers cheques from residents as well as non-residents. Where the foreign currency was brought in by declaring on form CDF, the tenderer should be asked to produce the same. The AMC should invariably insist on production of declaration in CDF. (ii) AMCs may sell Indian Rupees to foreign tourists / visitors against International Credit Cards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... III) Forex Pre-paid Cards Authorised Dealers Category-II may issue forex pre-paid cards to residents travelling on private/business visit abroad, subject to KYC/AML/CFT requirements. However, the settlement in respect of forex pre-paid cards may be effected through AD Category-I banks. Conditions * The Reserve Bank will not generally, prescribe the documents which should be verified by the AMCs while releasing foreign exchange. In this connection, attention of AMCs is drawn to sub-section (5) of Section 10 of FEMA, 1999. * In case of issue of travellers' cheques, the traveler should sign the cheques in the presence of an authorized official and the purchaser's acknowledgement for receipt of the travellers' cheques should be held on record. * AMCs may release foreign exchange for travel purposes on the basis of a declaration given by the traveler regarding the amount of foreign exchange availed of during the financial year. * AMCs may accept payment in cash up to ₹ 50,000/- (Rupees fifty thousand only) against sale of foreign exchange for travel abroad (for private visit or for any other purpose). Wherever the sale of foreign exchange exceeds the amount equivalent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o travellers to whom foreign currency is sold by them. The cash memo may be required for production to emigration authorities while leaving the country. 8. Rates of Exchange AMCs may put through transactions relating to foreign currency notes and travellers' cheques at rates of exchange determined by market conditions and in alignment with the ongoing market rates. 9. Display of Exchange Rate Chart AMCs should display at a prominent place in or near the public counter, a chart indicating the rates for purchase/sale of foreign currency notes and travellers' cheques for all the major currencies and the card rates for any day, should be updated, latest by 10:30 a.m. 10. Foreign Currency Balances * AMCs should keep balances in foreign currencies at reasonable levels and avoid build up of idle balances with a view to speculating on currency movements. * Franchisees should surrender foreign currency notes, coins and travellers' cheques purchased only to their franchisers within seven working days. * The transactions between authorized dealers and FFMCs should be settled by way of account payee crossed cheques / demand drafts. Under no circumstances should settlemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n currency notes / coins and foreign currency travellers' cheques to the public in form FLM 5 (Annex-VII). * Register of sales of foreign currency notes / coins to authorized dealers / Full Fledged Money Changers / overseas banks in form FLM 6 (Annex-VIII). * Register of travellers' cheques surrendered to authorized dealers / authorized money changers / exported in form FLM 7 (Annex-IX). (ii) All registers and books should be kept up-to-date, cross-checked and balances verified daily. (iii) Transactions not pertaining to money changing business of the AMC should not be mixed up with money changing transactions. In other words, the registers and books of account should show clearly the trail of transactions pertaining to money changing business. (iv) Separate registers should be maintained for each establishment, if the AMC maintains more than one place of business. Note :- Inter-branch transfer of foreign currencies should be accounted as stock transfer and not as sales. 15. Submission of Statements to the Reserve Bank * AMCs should submit to the office of the Reserve Bank which has issued the license, a monthly consolidated statement for all its offices in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scretion of the AMCs. The concurrent auditors should check all the transactions of the AMCs and ensure that all the instructions issued by the Reserve Bank from time to time have been complied with. The Statutory Auditors are required to certify that the Concurrent Audit and the internal control systems are working satisfactorily. 18. Temporary Money Changing Facilities AMCs are authorized to transact money changing business only at the location or locations specifically indicated in the licence. If it is intended to provide money changing facilities on a temporary basis on certain special occasions, a separate application should be made for the purpose to the Regional Office concerned of the Foreign Exchange Department of the Reserve Bank. Full details such as period for which the exchange counter will be operated, volume of business expected, manner of accounting of the transactions, letter from organizers making available venue for the money changing facilities, etc. should be submitted. 19. (A) Opening of Foreign Currency Accounts by AMCs AMCs, with the approval of the respective Regional Offices of the Foreign Exchange Department, may be allowed to open Foreign Currency Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng foreign exchange exposures. FFMCs and ADs Category-II which are RRBs, LABs, UCBs and NBFCs, may be guided by the instructions issued by the respective regulatory Departments of the Reserve Bank in this regard. SECTION VI KYC/ AML/ CFT Guidelines Detailed Know Your Customer (KYC) /Anti-Money Laundering (AML) Standards /Combating of Financing of Terrorism (CFT)/ Obligations under Prevention of Money-laundering Act (PMLA), 2002 guidelines issued by Reserve Bank of India, Department of Banking Regulation (DBR), Central Office as referred to in their latest Master Circular - 'Know Your Customer (KYC) norms / Anti-Money Laundering (AML) standards/Combating of Financing of Terrorism (CFT)/Obligation of banks under PMLA, 2002' and other instructions in this regard so far and from time to time in future shall, mutatis mutandis, be applicable to all Authorised Persons (APs), their agents and franchisees. SECTION VII Revocation of Licence The Reserve Bank reserves the right to revoke the licence granted to an AMC at any time if the Reserve Bank is satisfied that (a) it is in public interest to do so or (b) the AMC has failed to comply with any condition subject to which the authorisa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, the candidate should normally not exceed 70 years of age, should not be a Member of Parliament / Member of Legislative Assembly / Member of Legislative Council. (g) Any change in directors during the year should be reported to the Regional Office concerned of the Foreign Exchange Department, Reserve Bank of India in the Proforma given below. (h) Comments of respective Departments of the Reserve Bank will be obtained on the operations of an applicant who / whose parent organisation is already licenced / authorised by the Reserve Bank. Proforma Information about New Directors / Change of Directors of the FFMC / non-bank AD Category - II 1. Name : 2. Designation : 3. Nationality : 4. Age : 5. Business Address : 6. Residential Address : 7. Educational / professional qualifications : 8. Line of business or vocation : 9. Name/s of other companies in which the person has held the post of Chairman / Managing Director / Director / Chief Executive Officer : 10. (i) Whether associated as promoter, Managing Director, Chairman or Director with any other FFMC / AD Category - II? : (ii) If yes, the name/s of the company/ies : 11. (i) Whether prosecuted/c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich Reserve Bank may from time to time issue in this behalf. Place: Date: Signature of the applicant with seal Enclosures: 1. Bankers' confidential Report 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 the local police authorities. (certified copy of Memorandum and Articles of Association and Certificate of Incorporation in respect of incorporated entities) 7. Declaration regarding past criminal case, if any, cases initiated/ pending against the franchisee or its directors/ partners by any law enforcing agency, if any 8. PAN Numbers of the franchisee and its directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Details of Identification documents Pound Sterling U.S. Dollar Euro 1. 2. 3. 4. 5. 6. 7. 8. Japanese Yen Others (Pl. specify) Rate Rupee Equivalent Encashment certificate No. and date Remarks 9. 10. 11. 12. 13. 14. NOTES:(1) If the money-changer is dealing in a large number of currencies, two or more registers currency- wise or otherwise may be maintained, as convenient. (2) If travellers cheques are purchased, the prefix, "TC" may be indicated in the amount column. (3) If more than one currency is purchased from the same tenderer, separate entries may be made. Date: Name:__________________________ Designation:____________________ Annex-VI [See SECTION V, Paragraph 14 (i) (d)] FLM 4 Register of purchases of foreign currency notes/coins from Authorised dealers and authorised money-changers Date Sr. No. Name and address of the authorised dealer/ authorised money-changers from whom purchased Currency Amount Rate Rupee equivalent Remarks 1. 2. 3. 4. 5. 6. 7. 8. Date: Name:_______________________________ Designation:__________________________ Annex-VII [See SECTION V, Paragraph 14 (i) (e)] FLM 5 Reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) A. Opening balance Purchases of foreign currency notes from (a) Public (b) RMCs/FFMCs/ADs including imports. (c) Agents/Franchisees B. Total Purchases (a) + (b) + (c) Sales of foreign currency notes under (a) BTQ (b) Business Visits (c) Sales to other FFMCs/ADs including exports C. Total Sales [ (a) + (b) + (c) ] 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 Authorized Official) Place: Date: Stamp Name:________________________ Designation ____________________ FLM 8 (For ADs Category-II) Summary statement of purchases and sales of foreign currency notes during the month of __________20 Name and address of the Authorised Dealer Category-II____________________ 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 Purchases (a) + (b) + (c) Sales of foreign currency notes under( with purpose codes) (a) (i) BTQ /(ii) Private Visits (S0302) ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aximum balance maintained on any day in the foreign currency account during the quarter Closing balance in the Foreign Currency Account Remarks 1. 2. 3. 4. 5. 6. 7. 8. Certified that the above particulars are correct as per our records. Name and address of the AD Category - I Signature of Authorized Official of the AD Category - I with Seal Annex- XIII [See SECTION V, Paragraph 15 (iv)] Statement of 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 Circular on Memorandum of Instructions governing money changing activities Sl. No. A.P.(DIR Series) Circular Date 1. A.P. (DIR Series) Circ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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