Registration & Compliance of Money Changer in India

The money changer is a facility that is a predecessor of modern banking in India which is authorized by Reserve bank of India (“RBI”) and regulated under Section 10 of Foreign Exchange Management Act, 1999 widens the access of foreign exchange facilities to residents and tourists through efficient customer services.

To get registered as a money changer it has to mandatorily take registration and get a license namely Full Fledged Money Changer (“FFMC”). To get acquainted with the money changer, the following are some of the features:

• The transaction through money changer provides complete transparency i.e., full disclosure, in the transaction.
• As money changer deals in a highly leveraged market enable easy marketability.
• It enables superior liquidity and easily availability of funds by conversion.
• Facilities through money changers are available 24/7.
• Transaction through moneychanger incurs lower trading costs as compared to other facilities.
• It is a unique market that diversifies into the exchange facility field.

A Full Fledged Money Changer (FFMC) is an authorized entity

• who may purchase foreign exchange from non-residents and residents of India and
• sell the same for private and business travel purposes only to the people visiting abroad.

To get eligible for registration as a Money changer, the following criteria have to be met, which are as follows:

• The applicant has to be a company registered under the relevant law i.e., it can be a Banking Company and so on. The company in India is registered under the Companies Act, 2013, whereas if the banking company such a company also has to take registration under the Banking Regulation Act, 1949
• Such a company must have a Minimum Net Owned Fund of Rs. 25 lakhs for a single branch and Rs. 50 lakhs for the multiple-branch license, as the case may be.

Registration as Full Fledged Money Changer

To get registered following procedure has to be followed:

• Fill the application (offline mode) as prescribed under Foreign Exchange Management Act, 1999 read with Master Direction on Money Changing Activities as updated time to time (last updated on March 29^th, 2019) with the respective Regional Office of Foreign Exchange Department of Reserve Bank of India under whose jurisdiction the registered office of the entity is situated.
• Attach the list of documents as prescribed.
• Submit information, clarification required by the department for the approval of the license.

List of documents

• Copy of Certificate of Commencement of Business and Certificate of Incorporation of the Company.
• Copy of Memorandum of Association and Articles of Association of the company containing the provisions for carrying out money changing activities or a proper amendment with the same effect.
• Audited Balance Sheet along with the Profit & Loss Account of the entity or individual for the consecutive three years before the date of application for the license, as applicable.
• Statutory auditor certificate certifying the net owned fund.
• The confidential report in a sealed cover addressed to RBI about Customer Information Report from the bank.
• A declaration that there aren’t any proceedings pending with or has been initiated by the Directorate of Revenue Intelligence (DRI) or Directorate of Enforcement (DoE) or any other law administering authorities.
• A declaration to the effect that proper policy framework on KYC (Know Your Customer)/AML (Anti-Money Laundering) / CFT (Combating the Financing of Terrorism) will be kept in place on procuring the authorization from the Reserve Bank of India and before commencing the business operations.
• A certified copy of the Board Resolution for carrying out the business of money changing.

License Issue, Renewal & Revocation

• After issuance of a license as Full Fledged Money Changer (FFMC), the entity can commence operation within 6 months from the date of issuance of the license.
• The Application for renewal of the FFMC license can be made within two months before the expiry of the license with the required documents.
• The Reserve Bank of India can anytime revoke the license if it is in the public interest or the authorized person fails to comply with the directions and conditions or contravention of provisions of the Act.

Franchise Agreement for FFMC

The Reserve Bank permits ADs Category – I, ADs Category – II and FFMCs to enter into agency or franchisee agreements at their option for the purpose of carrying restricted money changing business i.e. conversion of foreign currency notes, coins or travelers’ cheques into Indian Rupees or vice -versa.

Money Changer & Franchisee Agreement

A franchisee can be any entity that has a place of business and a minimum net owned fund of Rs. 10 lakh. Franchise Agreement for the purpose of undertaking only restricted money changing business.

Franchisee Agreement has the following features:

• A franchisee should display the name, exchange rate and authorized to purchase foreign currency in their offices.
• Foreign currency purchased by franchisee should be surrender within 7 days to franchiser from the date of purchase.
• Maintenance of proper record of a transaction
• On-site inspection of the franchisee by the franchiser should be conducted at least once a year.

Compliance by Money Changer

• FFMC required to check transactions to verify that they have done the compliance with the anti-money laundering guidelines by the concurrent auditor.
• A certificate should be obtained at the time of preparation of the Annual Report from the Statutory Auditor on the compliance with AML guidelines.

For any assistance reach us at info@cs-india.com

Also Read: Practical Insights of RODTEP Scheme

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