Money Changer Compliance for Reserve Bank of India (RBI) |

Money Changer Compliance for Reserve Bank of India (RBI)

Are you aware of the key compliance requirements for becoming a Reserve Bank of India (RBI) authorized money changer? In this comprehensive guide, we will take you through the mandatory compliances, necessary documentation, and the process of obtaining an RBI money changer license. Get ready to navigate the complex world of money changing with ease!

What is a Money Changer?

Money changers, also known as full-fledged money changers (FFMCs), are authorized entities that facilitate foreign currency exchange. They play a crucial role in catering to the needs of non-residents visiting India, offering services for both private and business travel purposes.

Understanding Money Changer Compliance

Under Section 10 of the Foreign Exchange Management Act 1999 (FEMA), the Reserve Bank of India grants authorization to entities to operate as money changers. Without a valid money changer's license issued by the RBI, conducting the business of money changing is prohibited.

Mandatory Compliances for Money Changers

To ensure regulatory compliance, money changers must adhere to the following mandatory compliances and maintain accurate records and registers:
Daily Summary and Balance Books
Form FLM 1: Foreign currency notes/coins
Form FLM 2: Travelers' cheques

Registers
Form FLM 3: Purchases of foreign currencies from the public
Form FLM 4: Purchases of foreign currency notes/coins from authorized dealers and money changers
Form FLM 5: Sales of foreign currency notes/coins and foreign currency travelers' cheques to the public
Form FLM 6: Sales of foreign currency notes/coins to authorized dealers, full-fledged money changers, and overseas banks
Form FLM 7: Travelers' cheques surrendered to authorized dealers, money changers, or exported

Reporting
Cash Transaction Report (CTR): Submit this report to the Financial Intelligence Unit of India (FIU-IND) by the 15th of each month. For transactions below Rupees 50,000, individual details need not be furnished.
Suspicious Transaction Report (STR): Must be filed within 7 days of concluding any suspicious transaction or attempted transaction.

Simplifying the Licensing Process

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Activities and Eligibility of Full Fledged Money Changer: A Guide to Obtain FFMC License
Full Fledged Money Changers (FFMCs) play a vital role in facilitating foreign currency exchange for non-residents visiting India. To conduct the business of money changing legally, an entity must obtain a valid FFMC license from the Reserve Bank of India (RBI). In this guide, we will explain the essential activities, eligibility criteria, and compliance requirements to obtain and maintain an FFMC license.
Activities of Full Fledged Money Changer
FFMCs can perform the following activities:
Enter into franchise agreements to carry on the Restricted Money Changing business, which includes converting foreign currency notes, coins, or travelers' cheques into Indian Rupees (INR)
Purchase foreign currency notes, coins, or travelers' cheques from residents and non-residents of India.
Sell INR to foreign tourists or visitors against International Debit Cards/International Credit Cards and get reimbursements via normal banking channels.
Sell foreign exchange for business visits, private visits, and Forex prepaid cards.

Eligibility to Obtain FFMC License
To operate as a Full Fledged Money Changer, an entity must fulfill the following eligibility criteria:

The entity should be registered under the Companies Act of 2013.
The entity must have a minimum net-owned fund of 25 Lakhs rupees for a single-branch license and 50 Lakh rupees for a multiple-branch license.
The object clause of the Memorandum should reflect the money changing activity that would be undertaken by the entity.
There should not be any civil or criminal cases pending against the entity with the enforcement of the Department of Revenue Intelligence.
The FFMC should carry out the business activity within six months from the date of issuing the Forex License and should inform the Reserve Bank.

Post-Approval Requirements by FFMCs
After obtaining an FFMC license, the Full Fledged Money Changer must fulfill the following conditions:

Submit the registration copy under the Shops & Establishment Act or any other documentary evidence, like the rent receipt or the copy of the lease agreement to the Regional Office directed by the Reserve Bank of India before starting any business activity.
New FFMCs should carry out their activities as per the instructions provided by the Reserve Bank.
Display a copy of the money changing license issued by the Reserve Bank of India at each business place.
Have a system of the concurrent audit of all transactions undertaken by them.
Submit annual audited balance sheets to the respective RBI Regional Office.

Mandatory Annual Compliances in India
When a person obtains an FFMC license and commences operations, they must maintain the following mandatory money changer compliances:
Maintain a register of purchase of foreign currency, balance book of foreign currency coins, register of daily summary, travelers' cheques, etc.
Submit monthly consolidated statements about the purchase or sale of foreign currency notes to the Reserve Bank of India by the 10th of the following month.
Submit monthly statements of receipt and purchase of 10,000 US Dollars or above transactions to the concerned Regional Office of the Foreign Exchange Department, RBI, by the 10th of the following month.
Submit quarterly statements of the foreign currency account(s) maintained in India.
Submit annual audited balance sheets with a certificate from the statutory auditors associated with the Net-Owned Funds (NOFs), as on the date of the balance sheet, to the concerned Regional Office of the Reserve Bank of India.
Have a proper system of the concurrent audit of transactions.
Submit the annual statement to the respective Regional Office of the Foreign Exchange Department of the RBI.

Renewal of FFMC License
To renew an FFMC license, an application must be made one month before the license's expiry date. No request for the restoration of the money changer license will be accepted once the FFMC license has expired.

Conclusion

Obtaining an FFMC license can be a crucial step towards unlocking a world of opportunities in the money changing business. However, it is essential to comply with all the necessary regulations and requirements set forth by the Reserve Bank of India to maintain the license and avoid any legal issues. At [Your Company Name], we offer comprehensive FFMC advisory services to help you navigate the licensing process with ease. Contact us today to learn more!

FAQ

What is an FFMC compliance?

FFMC compliance refers to the adherence and fulfillment of all regulatory requirements and obligations set by the Reserve Bank of India (RBI) for Full Fledged Money Changers (FFMCs).

Who needs to comply with FFMC regulations?

Entities or individuals engaged in the business of money changing, specifically those operating as Full Fledged Money Changers, need to comply with FFMC regulations.

What are the activities covered under FFMC compliance?

The activities covered under FFMC compliance include foreign currency exchange, purchase and sale of foreign currency notes, coins, travelers’ cheques, and other related services.

How can I obtain an FFMC license?

To obtain an FFMC license, you need to apply to the Regional Office of the RBI, fulfilling the eligibility criteria, submitting required documents and paying the requisite fees.

What are the eligibility criteria for obtaining an FFMC license?

The eligibility criteria include registration under the Companies Act, a minimum net-owned fund requirement, absence of pending cases with the enforcement of the Department of Revenue Intelligence, and compliance with RBI guidelines.

What is the minimum net-owned fund requirement for an FFMC license?

The minimum net-owned fund requirement for a single-branch FFMC license is 25 Lakhs INR, while it is 50 Lakhs INR for a multiple-branch license.

What is the process for renewing an FFMC license?

You must submit a renewal application one month before the license’s expiry date, along with the necessary documents and fees for the renewal process.

Can I operate a single-branch FFMC or do I need multiple branches?

You can operate as a single-branch FFMC if you fulfill the eligibility criteria and comply with the regulatory requirements. Multiple branches are not mandatory.

Is there a timeline for starting business activities after obtaining an FFMC license?

Yes, you must commence business activities within six months from the date of obtaining the FFMC license and inform the RBI accordingly.

What are the mandatory compliances for FFMCs in India?

Mandatory compliances include maintaining various registers and records, submitting monthly consolidated statements, quarterly statements of foreign currency accounts, annual audited balance sheets, etc.

Do I need to maintain specific registers or books for FFMC compliance?

Yes, you need to maintain specific registers such as purchase register, balance book of foreign currency coins, register of daily summary, travelers’ cheques, etc., as per RBI guidelines.

How frequently do I need to submit consolidated statements to the RBI?

Monthly consolidated statements about the purchase or sale of foreign currency notes should be submitted to the RBI by the 10th of the following month.

What is the deadline for submitting monthly statements of receipt and purchase?

Monthly statements of receipt and purchase for transactions of 10,000 USD or above should be submitted to the RBI’s Regional Office by the 10th of the following month.

How often should I submit quarterly statements of foreign currency accounts?

Quarterly statements of foreign currency accounts maintained in India should be submitted to the RBI’s Regional Office as per their prescribed timelines.

What documents are required for submission of annual audited balance sheets?

Annual audited balance sheets, including a certificate from the statutory auditors associated with the Net-Owned Funds, should be submitted to the RBI’s Regional Office.

Is it necessary to have a concurrent audit system for FFMC transactions?

Yes, it is mandatory to have a concurrent audit system in place to ensure the accuracy and validity of all FFMC transactions.

What is the procedure for submitting the annual statement to the RBI?

The annual statement should be submitted to the respective Regional Office of the RBI’s Foreign Exchange Department, as per their prescribed guidelines and timelines.

Are there any penalties for non-compliance with FFMC regulations?

Yes, non-compliance with FFMC regulations may attract penalties, including fines or suspension/cancellation of the FFMC license.

Can I apply for an FFMC license if there are pending civil or criminal cases against my entity?

No, an entity with pending civil or criminal cases with the enforcement of the Department of Revenue Intelligence may not be eligible to apply for an FFMC license.

Where can I find more information and guidance on FFMC compliance?

More information and guidance on FFMC compliance can be obtained from the Reserve Bank of India (RBI) website, including their circulars, guidelines, and notifications specific to FFMCs.