TaxTMI 
TaxTMI 
Master Circular on Memorandum of Instructions governing money changing activities
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....orised 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 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 SECTIO....
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..... (a) Owned Funds :- (Paid-up Equity Capital + Free reserves + Credit balance in Profit & Loss A/c) minus (Accumulated balance of loss, Deferred revenue expenditure 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: (a) Copy each of the Certificate of Incorporation and Certificate of Commencement of Business of the company. (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 c....
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....the basis of the clearance by an Empowered Committee, set up for the purpose. (v) Reserve Bank's decision in the matter of granting approval or otherwise will be final and binding. (vi) On obtaining approval 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 o....
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.... 4. For opening Foreign Exchange Counters (full-fledged branches/ extension counters) at the international airports in India, AD Category-I banks/ AD Category - II/ FFMCs should adhere to following conditions. (a) Foreign Exchange Counters 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 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....
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....r. 4. Procedure for application An AD Category - I Bank / AD Category - II/ FFMC should apply to the respective Regional Office of the Reserve Bank, in Form RMC-F (Annex-II) 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 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 applic....
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....eporting, Audit and Inspection The franchisers, i.e. the AD 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 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 requi....
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.... of a money-changer's licence shall be made after the expiry of the licence. SECTION V Operational Instructions 1. Bringing in and taking out of Foreign Exchange (i) Foreign exchange in any form can be brought into India freely without limit provided it is declared 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 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 t....
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....nce or specialized 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. Conditions i. 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. ii. 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. iii. AMCs may release foreign exchange for travel purposes on the basis of a declaration given by the traveler regardi....
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.... (to be verified with the original debit/ credit card). 7. Cash Memo AMCs may issue a cash memo, if asked for, on official letterhead to 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 (i) 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. (ii) Franchisees should surrender foreign currency notes, coins and travellers' cheques purchased only to their franchisers within seven working days. (iii) The t....
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....rm FLM 3 (Annex-V). (d) Register of purchases of foreign currency notes / coins from authorized dealers and authorized money changers in form FLM 4 (Annex-VI). (e) Register of sales of foreign currency notes / coins and foreign currency travellers' cheques to the public in form FLM 5 (Annex-VII). (f) Register of sales of foreign currency notes / coins to authorized dealers / Full Fledged Money Changers / overseas banks in form FLM 6 (Annex-VIII). (g) 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 n....
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....which will cover 80 per cent of the transactions value-wise under a system of monthly audit and rest 20 per cent of the transactions value-wise under quarterly audit. (iii) Appointment / selection of concurrent auditors is left to the discretion 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 m....
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....ng Financial Companies (NBFCs)], having a minimum net worth of Rs. 5 crore, may participate in the designated currency futures and currency options on exchanges recognized 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), 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....
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....compliance with 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) Further, 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 b....
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.... 10. Undertaking to post competent staff to handle the money changer's business. 11. Name, designation of persons authorised to deal in foreign exchange. 13. A brief write up of the activities of the applicant/nature of business. 14. Whether the applicant had applied earlier for FFMC / RMC licence. If so, the particulars thereof. 15. Any other particulars / special reasons the applicant may wish to state in support of the application. We undertake that in the conduct of money changing business, we shall at all time abide by the rules/regulations/orders/directions/notifications which 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 Rs. 25 lakhs while FFMCs intending to operate through more than one branch will have to maintain Net Owned Funds not less than Rs. 50 lakhs. Annex-II [See SECTION III, Paragraph 4] Form RMC-F 1. Na....
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...._________ 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 , Paragraph 14 (i) (c)] ....
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....Notes/ Coins Amount in TCs/ cards By Cash By Cheque 10 11 12 13 14 15 16 17 18 19 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 more than one currency is sold, separate entries may be made (3) The columns 6 and 9 to be filled in case of release of exchange for business purpose Date: Name:_________________________ Designation:__________________ Annex-VIII [See SECTION V , Paragraph 14 (i) (f)] FLM 6 Register of sales of foreign currency notes/coins to authorised dealers / full fledged money changers/overseas banks Date Sr. No. Name and address of the authorised dealer/full fledged Money changer/ overseas bank to whom sold Currency Amount Rate Rupee Equivalent received Remarks 1. 2. 3. 4. 5. 6. 7. 8. ....
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....FMCs/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) (b) (i) Business Visits/(ii) Business Travel (S0301) (c) Remittance by tour operators / travel agents to overseas agents / principals / hotels( S0306) (d) Film shooting(S1101) (e) Medical Treatment abroad(S0304) (f) Disbursement of crew wages(S1401) (g) Overseas Education(S0305) (h) (i) Fee for participation in global conferences and specialized training / (ii) Remittance for participation in international events / competitions (towards training, sponsorship and prize money)/ (iii) Remittance under educational tie up arrangements with universities abroad/(iv) Remittance towards fees for examinations held in India and abroad and additional score sheets for GRE, TOEFL etc./ (v) Employment and processing, assessment fees for overseas job applications/(vi) Skills / credential assessment fees for intending migrants/(vii) Visa fees /(viii) Processing fees for registration of documents as required by the Portuguese / other Governments/ (ix) Registration / Subscription / Mem....
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....r 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 : A. Total amount written-off (in equivalent USD) :- B. 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 ....