Foreign exchange dealings between licensed money changers must follow authorised representative and non-cash payment rules.

Sale and purchase of foreign exchange between licensed full fledged money changers was analysed under the Memorandum of FLM and sections 6(4) and 6(5) of the Foreign Exchange Regulation Act, 1973. Free purchases from other money changers or authorised dealers were permitted if payment was made by cheque, pay order, demand draft, or debit to bank account, and money-changing business had to be conducted through authorised representatives. On the facts stated, the dealings were negotiated and completed through representatives, with no finding that they were unauthorised. Later conduct of the purchaser after completion of the exchange was not attributable to the seller, and the higher sale rate did not itself establish contravention.

---

---

Issues: Whether the sale and purchase of foreign exchange between two licensed full fledged money changers, routed through their authorised representatives and paid by pay orders, constituted a violation of paragraph 3 of the Memorandum of FLM read with sections 6(4) and 6(5) of the Foreign Exchange Regulation Act, 1973.

Analysis: The transaction was between licensed full fledged money changers. Paragraph 9 of the Memorandum of FLM permitted free purchase of foreign currency from other money changers and authorised dealers, subject only to payment by cheque, pay order, demand draft, or debit to bank account, not cash. Paragraph 3 required that money-changing business be transacted only through authorised representatives. On the facts found, the dealings were negotiated and carried out through representatives of the two establishments, and there was no finding that those representatives were unauthorised. Any later transaction or conduct by the purchaser after completion of the exchange could not be attributed to the appellant. The higher rate of sale was not the basis of the penalty and did not establish the alleged contravention.

Conclusion: The alleged contravention was not made out, and the penalty was unjustified.

---