SINCE THE INITIATION OF THE ECONOMIC LIBERALISATION PROCESS IN 1991, BUSINESS BOUNDARIES ARE DISAPPEARING VERY FAST AND THE WORLD,  BECOMING  ONE  MARKET PLACE, PROFESSIONAL AVENUES HAVE OPENED UP BOTH FOR DOMESTIC AND OVERSEAS CLIENTS. THERE IS AMPLE OPPORTUNITIES AND SCOPE FOR CAS UNDER  THE  FOREIGN EXCHNAGE MANAGEMENT ACT (FEMA).

MONEY CHANGING ACTIVITIES -FEMA

Money changing business can be undertaken by entities authorized by the Reserve Bank under Section 10 of the Foreign Exchange Management Act, 1999. No person shall carry on money changing business without the possession of a valid licence issued by the Reserve Bank. Any person found undertaking money changing business without a valid license is liable to be penalized under the Act ibid. A full-fledged money changer (FFMC) is an authorized money changer to purchase foreign exchange from non-resident visiting India and residents and to sell foreign exchange with the FEMA- RBI regulations.

Typed of Authorized persons:

Reserve Bank, currently, issues authorization under Section 10(1) of the Foreign Exchange Management Act, 1999, to

1. Authorised Dealers Category-I
2. Authorised Dealers Category-II
3. Authorised Dealers Category-III
4. Registered as Full Fledged Money Changers (FFMC)

Who can apply for an FFMC licence?

The applicant has to be a company registered under the Companies Act, 1956/ Companies Act 2013/ Registration of Companies (Sikkim) Act, 1961, having a minimum Net Owned Funds (NOF) to apply for a single-branch/ multiple-branch FFMC licence.

Whether a licence is mandatory for carrying out money changing business?

Yes. Money changing business can be undertaken by entities authorised by the Reserve Bank under Section 10 of the Foreign Exchange Management Act, 1999. No person shall carry on money changing business without the possession of a valid licence issued by the Reserve Bank. Any person found undertaking money changing business without a valid licence is liable to be penalised under the Act.

Time frame within which a newly licensed FFMC should commence operations

A newly licensed FFMC should commence operations within a period of six months from the date of issuance of licence. 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 Reserve Bank before commencement of business.

Reserve Bank can revoke an FFMC licence under below circumstances

An authorisation granted under Section 10(1) of FEMA 1999 may be revoked by the Reserve Bank at any time if the Reserve Bank is satisfied that –

1. it is in public interest so to do; or
   1. the authorised person has failed to comply with the condition subject to which the authorisation was granted or has contravened any of the provisions of the Act or any rule, regulation, notification, direction or order made thereunder

Reserve Bank also reserves the right to revoke the authorisation of any of the offices of the authorised person for infringement of any statutory or regulatory provision. The Reserve Bank may at any time vary or revoke any of the existing conditions of an authorisation/licence or impose new conditions.

Money changing facilities presently available in India

At present, the conversion of foreign currency or travellers’ cheques designated in foreign currency into Indian Rupees and vice versa is possible through AD Category-I banks, ADs Category-II and Full Fledged Money Changers (FFMCs). Further, AD Category-I banks, ADs Category-II and FFMCs may appoint franchisees (also known as agents) to undertake purchase of foreign currency.

Guidelines in respect of Reporting, Audit and Inspection of franchisees

The franchisers, i.e. ADs Category–I Banks / ADs Category–II / FFMCs are expected 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.

Franchisee need to adhere to KYC/AML/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 case where any FFMC / non-bank AD Category – II has received one-time approval for appointing franchisees and subsequent to the date of approval, any DoE / DRI / CBI / Police case is filed, the FFMC / non-bank AD Category – II should not appoint any further franchisees and bring the matter to the notice of the Reserve Bank immediately. A decision will be taken by the Reserve Bank regarding allowing the FFMC / non-bank AD Category – II to appoint franchisees.

Professional Opportunities:

• Preparation and execution of a well-organized business plan
• Advisory on FEMA & RBI Policy and Procedures
• Compliance with FEMA & RBI
• Assistance in fulfilling the regulatory and licensing requirements
• Documentation at various level
• Risk assessment
• Ensuring compliance of various rules and regulations under FEMA/ RBI
• Various certification as required under FEMA/ RBI
• FEMA/ RBI compliance audit and due diligence