Micro Finance Institution (MFI) is one type of NBFC which caters to the financial needs of the...
It is required to obtain a full-fledged money changer license from the Reserve Bank of India by every company which intends to do a forex currency exchange activity or money changing activity in India. Full Fledged Money Changers entities are authorized by Reserve Bank of India to do money changing activities according to section 10 of the Foreign Exchange Management Act, 1990.
Guidelines regarding full fledge money changer’s vide the RBI annually publishes a master circular on a memorandum of instruction on money changing activities. Every company which intends to obtain FFMC license in India from RBI and all FFMC license holders are obliged to follow this circular and provision of Foreign Exchange Management Act, 1999. Even the entities other than banks can be a full fledge money changer, and they fall under the Authorized Dealer Category II whereas banks fall under the Authorized Dealer Category I.
Companies registered under the Companies Act 2013 are eligible to apply for the FFMC license in India.
Company registered under the companies act having a minimum net owned fund of Rs. 10 lakhs and the main object in its memorandum are money changing business can obtain a franchise license from an existing FFMC. The franchise is allowed to do only restricted money changing activities according to the master circular of RBI.
Franchisers are expected to impart training to franchisees in relation to the maintenance of records and operations.
Franchises such as authorized dealer category I / authorized dealer class II / FFMCs are expected to arrangements for reporting of a transaction by the franchise to franchisor on a regular basis. Regular spot audits should be conducted by authorized dealer category I / authorized dealer category II / FFMCs in six months. To test the compliance level of the franchise, a dedicated team and ‘mystery customer’ concept should be used.
A system of annual inspection of the books of the franchise should be placed. The main purpose of the inspection is to ensure that the money changing activities are being carried out in conformity with the terms of the agreement and RBI guidelines by the franchise.
Franchisees are required to adhere to the KYC guidelines as applicable to authorized dealer category I / authorized dealer class II / FFMCs.
It is required to check transactions to verify that they have been done in compliance with the anti-money laundering guidelines by the concurrent auditor. In the case of compliances on the lapse, it should be put up to the board 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.
Reserve Bank of India authorizes FFMCs to deal in foreign exchange as per section 10(1) of the Foreign Exchange Management Act 1999. No person shall carry a business activity related to money changing activity unless they possess license otherwise they will be liable to be penalized under this act.
To apply for the FFMC license application is required to be submitted along with the necessary documents to the foreign exchange department of the regional office of Reserve Bank of India where the registered office of the company is situated.
FMCC license is required to be renewed every year by providing appropriate documents to the Reserve bank of India.
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