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TMI BlogMaster Direction - Money Changing Activities (Updated as on May 29, 2024)X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount transactions as per directions issued from time-to-time * select entities (as Authorised Dealers Category-II) to carry out specified non-trade related current account transactions, all the activities permitted to Full Fledged Money Changers and any other activity as decided by the Reserve Bank * select financial and other institutions (as Authorised Dealers Category-III) to carry out specific foreign exchange transactions incidental to their business / activities * select registered companies as Full Fledged Money Changers (FFMC) to undertake purchase and sale of foreign exchange for specified purposes only 3. The directions relating to the subject of money changing activities including authorisation and functioning of FFMCs, non-bank ADs Category II, and franchisees of Authorised Persons as well as the conduct of foreign exchange transactions with their customers/constituents are being issued in a consolidated form through the Master Direction enclosed herewith, under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without prejudice to permissions / approvals, if any, required under any other law. 4. The list of under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tains the various instructions relating to the subject of money changing activities including authorisation and functioning of Full Fledged Money Changers (FFMCs), non-bank Authorised Dealers Category-II and franchisees of Authorised Persons as well as the conduct of foreign exchange transactions with their customers/constituents. 2. Definitions 2.1 Authorised Person means an authorised dealer, money changer, off-shore banking unit or any other person authorised under sub-section (1) of section 10 to deal in foreign exchange or foreign securities. 2.2 'Authorised Dealer' (AD) means a person authorised as an authorised dealer under sub-section (1) of section 10 of FEMA. 2.3 'Authorised Dealer (AD) Category I' means entities which are authorised by the Reserve Bank to carry out all permissible current and capital account transactions as per directions issued from time-to-time 2.4 'Authorised Dealer (AD) Category II' means entities which are authorised by the Reserve Bank to carry out specified non-trade related current account transactions, all the activities permitted to Full Fledged Money Changers and any other activity as decided by the Reserve Bank, and shall include (i) Upg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cent of the Owned funds. (ii) Documentation Application in the prescribed form should be submitted 1through the APConnect application (https://apconnect.rbi.org.in/entity) 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: (a) Copy of the Certificate of Incorporation. (b) 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. (c) 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 company for the last three years, wherever applicable. (d) Confidential Report from the applicant's banker in a sealed cover. (e) A declaration to the effect that no proceedings have been initiated by / are pending with the Directorate of Enforcement (DoE) / Directorate of Revenue Intelligence (DRI) or any other law enforcing authorities, against the applicant company or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties 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 authorisation as Authorised Dealer Category-I / Authorised Dealer Category-II only. SECTION II Guidelines for Grant of Authorisation for Additional Branches:- 1. No FFMC/non-bank AD Category II 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/non-bank AD Category II which intends to commence money changing business at any additional place of business shall apply 2through the APConnect application to the respective Regional Office of the Foreign Exchange Department under whose jurisdiction the registered office of the applicant falls and the Reserve Bank may approve the additional place of business subject to such conditions as deem fit. It is expected that branches of Authorised Persons should be diversified and should be meeting the demand of tourists, etc. Preference will be given to applications for branches in remote are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in the 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. (b) Foreign Exchange Counters/branches 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/branches at the departure halls in the international airports may be established in the Duty Free Area/SHA beyond the Immigration/Customs desk. (c) 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 amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AD Category -II and FFMCs should apply through the APConnect application) to the respective Regional Office of the Reserve Bank, in Form RMC-F for appointment of franchisees under this Scheme. The application should be accompanied 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 (through the APConnect application by non-bank AD Category -II and FFMCs) to the Reserve Bank in Form RMC-F on a post-facto basis along with similar declaration as indicated above. 5. Due Diligence of Franchisees A franchiser, i.e. AD Category-I Bank/ AD Category-II / FFMC should undertake the following minimum checks while conducting due diligence of its franchisees: i. existing business activities of the franchisee/ its position in the area. ii. minimum Net Owned Funds of the franchisee. iii. Shops & Esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to put in place adequate arrangements for reporting of transactions by the franchisees to the franchisers on a regular basis (at least monthly). Regular spot audits of all locations of franchisees, at least once in six months, should be conducted by the franchiser. Such audits should involve a dedicated team and incognito visits should also 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 ADs 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the Currency Declaration Form (CDF) on arrival to the Custom Authorities. When foreign exchange brought in the form of currency notes or travellers' cheques does not exceed USD 10,000 or its equivalent and / or the value of foreign currency notes does not exceed USD 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 authorised 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 Persons and their 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 production of declaration in CDF should invariably be insisted upon. (ii) Requests for payment in cash in Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Authorised Persons may sell foreign exchange to persons resident in India for undertaking business travel or for attending a conference or specialised training or for maintenance expenses of a patient going abroad for medical treatment or check -up abroad or for accompanying as attendant to a patient going abroad for medical treatment / check-up up to the limits specified in Schedule III to FEMA (Current Account Transactions) Rules, 2000. (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. In this regard, it is clarified that prepaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debit/ prepaid card holder is one and the same person. v. 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. Note: Instructions in the Master Direction - Liberalised Remittance Scheme (LRS) dated January 1, 2016 (updated from time to time), as applicable, shall apply. 6. Sales against Reconversion of Indian Currency Authorised Persons 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): Authorised Persons may convert at their discretion, unspent Indian currency up to Rs.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 reconversion of Indian Rupees to the extent of Rs.50,000/- to foreign tourists (not NRIs) against ATM Receipts b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchased from other FFMCs/ ADs, on a quarterly basis. Data of such sale and purchase should be maintained and made available for audit / inspection. FFMCs/ADs selling foreign currency may also ascertain the 'sale to public' requirement of the buying FFMCs/non-bank ADs Category II, by seeking relevant data from such entities. (ii) Where FFMCs/ non-bank ADs Category II are unable to replenish their stock in this manner, they may make an application to the Regional Office concerned of the Reserve Bank through an AD Category-I for permission to import foreign currency into India. The import should take place through the designated AD Category-I through whom the application is made. 13. Export / Disposal of surplus Foreign Currency Notes / Travellers' Cheques FFMCs/non-bank ADs Category II may export surplus foreign currency notes / encashed travellers' cheques to an overseas bank through designated Authorised Dealer Category - I in foreign exchange for realisation 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 realisable value is credited in advance to the AD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rve Bank (i) FFMCs/non-bank ADs Category II should submit 7through the APConnect application to the office of the Reserve Bank which has issued the licence, a monthly consolidated statement for all its offices in respect of sale and purchase of foreign currency notes in form FLM 8 so as to reach not later than the 10th of the succeeding month. (ii) 8[***] (iii) FFMCs/ non-bank ADs Category II FFMCs should submit a quarterly statement regarding Foreign Currency Account/s maintained in India in their names with AD Category-I Banks to the Regional Office concerned of the Foreign Exchange Department, Reserve Bank as per the prescribed format. (iv) An Annual Statement should be submitted by all the FFMCs/ non-bank ADs Category II 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 prescribed format. (v) FFMCs/ non-bank ADs Category II should report to the respective Regional Office of the Foreign Exchange Department of the Reserve Bank under whose jurisdiction the registered office of the applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eries of cash transactions below INR 50000, * verification that payments received in non-cash mode from customers are reflected in the bank account statements of the FFMC/non-bank AD Category II (iv) The Statutory Auditors are required to certify that the Concurrent Audit and the internal control systems are working satisfactorily. 19. Temporary Money Changing Facilities FFMCs/non-bank ADs Category II are authorised 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 9through the APConnect application for the purpose to Regional Office of the Foreign Exchange Department of the Reserve Bank under whose jurisdiction the temporary money changing facility is proposed to be opened 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 organisers making available venue for the money changing facilities, etc. should be submitted. 20. Opening of Foreign Currency Accounts FFMCs/ non- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ADs Category-II [which are not Regional Rural Banks (RRBs), Local Area Banks (LABs), Urban Co-operative Banks (UCBs) and Non-Banking Financial Companies (NBFCs)], having a minimum net worth of Rs.5 crore, may participate in the designated currency futures and currency options on exchanges recognised by the Securities and Exchange Board of India (SEBI) as clients only for the purpose of hedging their underlying 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), guidelines issued by Reserve Bank of India, Department of Banking Regulation (DBR), Central Office as referred to in their 'Master Direction - Know Your Customer (KYC) Direction, 2016' 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 franchi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the requirements indicated. (e) FFMCs / non-bank ADs Category - II should obtain annually as on 31st March a simple declaration that the information already provided has not undergone change and where there is any change, requisite details are furnished by the directors forthwith. (f) The provisions of Companies Act 2013 shall apply with regard to the age of the candidate. Further, the candidate should not be a Member of Parliament / Member of Legislative Assembly / Member of Legislative Council. (g) Any change of directors during the year should be reported to the Regional Office concerned of the Foreign Exchange Department, Reserve Bank of India as given in the Master direction on Reporting. (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. 13Annex Standard Operating Procedure (SOP) for non-bank money changers during elections The movement of foreign exchange can take place between Authorised Dealer Category I (AD Cat. I), Authorised Dealer Category II (AD Cat. II), Full Fledged Money Changers (FFMC), their offices/branches, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars which have been consolidated in the Master Direction on money changing activities Sl. No. A.P.(DIR Series) Circular Date 1 A.P. (DIR Series) Circular No.25 March 06, 2006 2. A.P. (DIR Series) Circular No.57 March 9, 2009 3. A.P. (DIR Series) Circular No.06 August 3, 2009 4 A.P. (DIR Series) Circular No.40 January 25, 2011 5 A.P. (DIR Series) Circular No.61 May 16, 2011 6 A.P.(DIR Series) Circular No.31 October 03, 2011 7 A.P.(DIR Series) Circular No.33 October 12, 2011 8 A.P.(DIR Series) Circular No.38 October 25, 2011 9 A.P.(DIR Series) Circular No.41 November 01, 2011 10 A.P.(DIR Series) Circular No.60 December 22, 2011 11 A.P.(DIR Series) Circular No.71 January 30, 2012 12 A.P.(DIR Series) Circular No.104 April 04, 2012 13 A.P.(DIR Series) Circular No.109 April 18, 2012 14 A.P.(DIR Series) Circular No.33 September 24, 2012 15 A.P.(DIR Series) Circular No.50 November 07, 2012 16 A.P.(DIR Series) Circular No.96 April 5, 2013 17 A.P.(DIR Series) Circular No. 45 September 16, 2013 18 A.P.(DIR Series) Circular No. 146 June 19, 2014 19 A.P.(DIR Series) Circular No.14 July 25, 2014 20 A.P.(DIR Series) Circular No.87 Mar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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