TMI BlogMaster Circular on Memorandum of Instructions governing money changing activitiesX 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 othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Net Owned Funds of applicants, other than banks, should be calculated as per the following. (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 am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wered Committee The request for issuance of FFMC licence would be considered by the Regional Office concerned of the Reserve Bank on 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lease agreement, etc. should be submitted to the Regional Office concerned of the Reserve Bank before commencement of business at an additional branch. 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. (c) The maintenance of proper record of transactions by the franchisee. (d) The on-site inspection of the franchisee by the franchiser should be conducted at least once a year. 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 diligen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce restriction given in point (i) above is not applicable. 7 . Training Franchisers are expected to impart training to the franchisees as regards operations and maintenance of records. 8. Reporting, 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th, or such other period as the Reserve Bank may prescribe, before the expiry of the licence. Where a person submits an application for the renewal of his money changer s licence, the licence shall continue in force until the date on which the licence is renewed or the application is rejected, as the case may be. No application for renewal 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 Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anently 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 AMCs may sell foreign exchange to persons resident in India for undertaking business travel or for attending a conference 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) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 50,000/- to foreign tourists ( not NRIs ) against ATM Receipts based on the following documents. Valid Passport and VISA Ticket confirmed for departure within 7 days. Original ATM slip (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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. Registers and Books of Accounts of Money-changing Business (i) AMCs shall maintain the following Registers in respect of their money-changing transactions : (a) Daily Summary and Balance Book (Foreign currency notes / coins) in form FLM 1 ( Annex-III ). (b) Daily Summary and Balance Book (Travellers' cheques) in form FLM 2 ( Annex-IV ). (c) Register of purchases of foreign currencies from the public in form 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 ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the provisions of the Act ibid. 17 . Concurrent Audit (i) AMCs should put in place a system of Concurrent Audit of the transactions undertaken by them. (ii) All single branch AMCs having a turnover of more than US $ 100,000 or equivalent per month. Single branch AMCs having turnover of less than US $ 100,000 or its equivalent may institute a system of quarterly audit. AMCs having multiple branches, may put in place a system of Concurrent Audit 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 indicate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it to the notice of the Reserve Bank immediately along with a detailed time bound plan for restoring the Net Owned Funds to the minimum required level. 21. Participation by Full Fledged Money Changers (FFMCs) and Authorised Dealers Category-II (ADs Category-II) in the Currency Futures and Exchange traded Currency Options markets FFMCs and 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 ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of due diligence should be undertaken by the FFMCs / non-bank ADs Category - II at the time of appointment / renewal of appointment. (c) The Boards of the FFMCs / non-bank ADs Category - II should constitute Nomination Committees to scrutinize the declarations. (d) Based on the information provided in the signed declaration, Nomination Committees should decide on the acceptance or otherwise and may make references, where considered necessary to the appropriate authority / persons, to ensure their 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 respectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Full name of the applicant 2. Address in full 3. Name of location/s to where the applicant proposes to conduct Money Changing Business (Please enclose copies of the Licences under Shops and Establishment Act) 4. (a) Date of establishment of the company (b) Name/s and address/es of the Directors of the company 5. Copy of the Certificate of Registration (Certificate of Incorporation Certificate of Commencement of Business) of the company 6. Copy of Memorandum of Association together with a letter indicating the clause which provides for taking up money changer's business. 7. Confidential report from the applicant's bank/s in CIR format. 8. Net Owned Funds A copy of the latest Audited Balance Sheet of the applicant company together with a certificate from their Statutory Aud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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/ partners 9. Arrangements in place to surrender the foreign exchange 10. AML, Reporting, Audit and Inspection arrangements We declare 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/prevailing RBI regulations regarding money changing. Place:- Date :- Authorized Signatory Annex-III [See ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ily basis. Annex-V [See SECTION V , Paragraph 14 (i) (c)] FLM 3 Register of purchases of foreign currencies from the public Date Sr. No. Name of the tenderer Nationality Full Address 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any Total amount received Cash Memo No. Date Remarks Name of Currency Amount in 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:______ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of money changer 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 (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 RBI Licence No.________ Name and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... USD 10,000 and above for the month of Date of transaction Name and address of the person surrendering the foreign currency Amount Currency/ TCs Signature of Authorized Official with Seal Annex- XII [See SECTION V , Paragraph 15 (iii)] Statement showing summation of Foreign Currency Account opened in India out of export proceeds of Foreign Currency Notes/ encashed Travellers' Cheques for the quarter ended ___________ (Value in USD) Opening Balance in the Account Value of foreign currency notes/ encashed TCs exported Amount realized in foreign currency Of Column 3 amount credited to Foreign Currency Account Amount remitted to TC issuing organization from TCs sold/ Debited for purchase of foreign currency notes from ADs Maximum balance maintained on any day in the foreign currency account during the quarter Closing balance in the Foreign Currency Account Remarks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) Circular No. 43 [ A.P.(FL Series) Circular No. 1] November 12, 2002 2. A.P. (DIR Series) Circular No.57[ A.P.(FL/ RL Series) Circular No. 04] March 9, 2009 3. A.P. (DIR Series) Circular No.06 [A.P.(FL/ RL Series) Circular No. 01] August 3, 2009 4. A.P. (DIR Series) Circular No. 17 [ A.P.(FL Series) Circular No. 04] November 27, 2009 5 A.P.(DIR Series) Circular No.18 [ A.P.(FL Series ) Circular No. 01] November 25, 2010 6 A.P. (DIR Series) Circular No.20 [A.P. (FL/RL Series) Cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 012 27 A.P.(DIR Series) Circular No.107 April 17, 2012 28 A.P.(DIR Series) Circular No.109 April 18, 2012 29 A.P.(DIR Series) Circular No.17 August 23, 2012 30 A.P.(DIR Series) Circular No.33 September 24, 2012 31 A.P.(DIR Series) Circular No.42 October 12, 2012 32 A.P.(DIR Series) Circular No.50 November 07, 2012 33 A.P.(DIR Series) Circular No.51 November 15, 2012 34 A.P.(DIR Series) Circular No.68 January 02, 2013 35 A.P.(DIR Series) Circular No.70 January 10, 2013 36 A.P.(DIR Series) Circular No.72 January 10, 2013 37 A.P.(DIR Series) Circular No.84 February 22, 2013 38 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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