RBI Master Circular No: RBI/2013-14/10 (01-Jul-13) Master Circular on Memorandum of Instructions governing money changing activities

 
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Master Circular No. 10/2013-14

To,

All Authorised Persons in Foreign Exchange

Madam/Sir,

This Master Circular consolidates the existing instructions on the subject of Memorandum of Instructions governing money changing activities at one place. The list of underlying circulars/notifications is set out in Appendix.

2. This Master Circular is being issued with a sunset clause. It will stand withdrawn on July 1, 2014 and would be replaced by an updated Master Circular on the subject.

Yours faithfully,

Rudra Narayan Kar

Chief General Manager-in-Charge

SECTION-I

Guidelines for Licencing and other Approvals for Authorised Money Changers (AMCs)

1. Introduction

Authorised Money Changers (AMCs) are entities, authorised by the Reserve Bank under Section 10 of the Foreign Exchange Management Act, 1999. An AMC is a Full Fledged Money Changer (FFMC). In addition to Authorised Dealer Category -I Banks (AD CategoryI Banks) and Authorised Dealers Category - II (ADs Category II), Full Fledged Money Changers (FFMCs) are authorised by the Reserve Bank to deal in foreign exchange for specified purposes, to widen the access of foreign exchange facilities to residents and tourists while ensuring efficient customer service through competition. FFMCs are authorised to purchase foreign exchange from residents and non-residents visiting India and to sell foreign exchange for certain approved purposes. AD Category I Banks/ADs Category II/FFMCs may appoint franchisees to undertake purchase of foreign currency*. No person shall carry on or advertise that he carries on money changing business unless he is in possession of a valid money changers 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 ibid.

* Note:- Franchisees of AD Category I Banks/ADs Category II/FFMCs functioning within 10 kms from the borders of Pakistan and Bangladesh may also sell the currency of the bordering country, with the prior approval of the Regional offices concerned of the Reserve Bank. Other franchises of AD Category I Banks/ADs Category II/FFMCs cannot sell foreign currency.

2. Guidelines for issuance of FFMC Licence:-

The guidelines for issue of new FFMC licence and renewal of FFMC licence, branch licensing, approval for appointment of agents/franchisees and Know Your Customer (KYC)/Anti Money Laundering (AML)/Combating the Financing of Terrorism (CFT) Guidelines for Authorised Persons are given below.

(i) Entry Norms

(i) The applicant has to be a company registered under the Companies Act, 1956.

(ii) The minimum Net Owned Funds (NOF) required for consideration as FFMC are as follows:

Category  Minimum Net Owned Funds 
Single branch FFMC  Rs. 25 lakh 
Multiple branch FFMC  Rs. 50 lakh 

Note:- 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 - II, 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 certificate from the Statutory Auditors certifying the Net Owned Funds as on the date of application. Copies of the audited Balance Sheet and Profit & Loss Account of the company for the last three years, wherever applicable.

(d) Confidential Report from the applicant's banker in a sealed cover.

(e) A declaration to the effect that no proceedings have been initiated by/are pending with the Directorate of Enforcement (DoE)/Directorate of Revenue Intelligence (DRI) or any other law enforcing authorities, against the applicant company or its directors and that no criminal cases are initiated/pending against the applicant company or its directors.

(f) A declaration to the effect that proper policy framework on KYC/AML/CFT, in accordance with the guidelines issued vide A.P.(DIR Series) Circular No. 17[ A.P.(FL/RL Series) Circular No. 04] dated November 27, 2009, as amended from time to time, will be put in place on obtaining the approval of the Reserve Bank and before commencement of operations.

(g) Details of sister/associated concerns operating in the financial sector, like NBFCs, etc.

(h) A certified copy of the board resolution for undertaking money changing business.

(iii) Basis for Approval

(i) Since several FFMCs are already functioning, fresh licences will be issued on a selective basis to those who comply with all the licencing requirements.

(ii) 'Fit and proper' criteria for the applicant FFMCs #

If any case by DoE/DRI or any other case by any other law enforcing authorities, is initiated/pending against any company/its directors, the company will not be considered as 'fit and proper' and its application will not be considered for licencing as FFMC.

(# Also applicable to non-bank ADs Category - II)

(iii) Fit and proper criteria for directors of FFMCs *

Please see SECTION- VIII for the details in this regard.

(* Also applicable to non-bank ADs Category - II)

(iv) Clearance by the Empowered 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 Banks 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 of business other than its permanent place of business except with the prior approval of the Reserve Bank. An FFMC which intends to commence money changing business at any additional place of business shall apply in writing to the respective Regional Office of the Foreign Exchange Department under whose jurisdiction the registered office of the applicant falls and the Reserve Bank may approve the additional place of business subject to such conditions as deem fit. It is expected that branches of Authorised Persons should be diversified and should be meeting the demand of tourists, etc. Preference will be given to applications for branches in remote areas of tourist attraction.

2. Applications for additional locations (places of business) should be accompanied by the following:-

(a) Copy of the latest audited accounts with a certificate from the Statutory Auditors regarding the position of Net Owned Funds as on the date of application.

(b) Confidential Report from the applicant's banker in a sealed cover.

(c) A declaration to the effect that no proceedings have been initiated by/are pending at the Directorate of Enforcement (DoE)/Directorate of Revenue Intelligence (DRI) or any other law enforcing authorities against the applicant or its directors and that no criminal cases are initiated/pending against the applicant or its directors. No new branch license will be issued to any FFMC, against whom any major DoE/DRI case is pending. In DoE/DRI pending cases of a minor nature, a decision will be taken by the Reserve Bank on a case by case basis. The categorization of pending DoE/DRI cases as major/minor will be at the discretion of the Reserve Bank and the decision of the Reserve Bank will be final and binding. Where any DoE/DRI case is adjudicated and penalty is imposed, a view will be taken, on the basis of the nature of the offence, provided no fresh case is instituted by DoE/DRI.

(d) A copy of the KYC/AML/CFT policy framework existing in the company.

(e) Brief write-up on the internal control systems, including internal and external audit.

3. 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 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...

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