Full Fledged Money Changers

The acronym FFMC stands for fully fledged money changer. A business will be regarded as a full-fledged money changer if it plans to engage in FX currency exchange after receiving the Reserve Bank of India’s prior approval (FFMC).

The Reserve Bank of India grants permission to companies to transact in foreign exchange for particular reasons under Section 10 of the Foreign Exchange Management Act, 1999. Authorized Money Changers are the name for these organizations (AMCs).

The Three types of Authorised Money Changers

The three categories of authorized money changers described above are there to provide residents and visitors with greater access to foreign exchange services. Along with increasing competition, the goal is to guarantee that clients receive the best and most effective service.

  1. Authorized Dealer Category – I Banks ( AD Category – I Banks)
  2. Authorized Dealer Category – II (AD Category – II)
  3. Fully Fledged Money Changers.

Licensing a Full-Fledged Money Changer in India:

The Reserve Bank of India issues fully fledged money changer licenses, which must be obtained in order to operate as an authorized money changer in India. Anyone discovered engaging in money-changing activities without the required license will be subject to legal repercussions.

The company must be registered under the 2013 Companies Act in order to receive this license in India.

The RBI annually publishes the applicable guidelines for Fully Fledged Money Changer in the form of a master circular called the Memorandum of Instruction on Money Changing Activities. Every entity intending to enter or already involved in money-changing activities in India must follow these guidelines and the provisions mentioned in the Foreign Exchange Management Act, 1999.

Qualifications for an Indian Fully Fledged Money Changer License

Companies must meet the following requirements in order to qualify for a Fully Fledged Money Changer licence:

According to the 2013 Companies Act, the firm must be registered with the Registrar of Companies.

For a single branch licence, the company’s net owned fund (NOF) must be at least Rs. 25 lakh. The company’s minimum net-owned fund requirement for a multiple branch licence is Rs. 50 lakh. It is crucial that the FFMC consistently maintains this minimal NOF. The standards linked amount needed for the specific branch must also be met in order to operate as a full-fledged money changer.

  • 25 lakhs for a single branch
  • $50 for several branches

It is also crucial that the primary operation of the firm, as stated in the object clause, involve the exchange of money. Last but not least, the Department of Enforcement or the Department of Revenue Intelligence should not have any active cases against the company.

The fundamental conditions for a fully-fledged money licence

  • Every year, the licence for Fully Fledged Money must be renewed.
  • The business must begin operations no later than six months after the fully-fledged money licence was issued.
  • All three categories of AMC—AD Category I Bank, AD Category II, and FFMC—appoint their franchisees through a franchise agreement to expand their network and offer money-changing services, such as converting foreign currency, notes, coins, and traveler’s checks into Indian currency to tourists, NRIs, and other travelers.
  • The proposed company must have a minimum net owned fund of Rs. 10 lakh in order to be appointed as a franchise, and its primary objective must be engaging in the money-changing activity.
  • The franchisee’s records must be examined yearly to make sure that its operations adhere to RBI’s established terms and conditions.

Primary Regulatory Body for Fully Licensed Money Changer Licensing

According to Section 10 of the Foreign Exchange Management Act, 1999, the Reserve Bank of India in India regulates the Fully Fledged Money Changer structure. A licence holder must adhere to the instructions and regulations given by the RBI. The legitimate lender of money The licence holder is not permitted to conduct any business that is against the terms of the authorisation. If it is in the public interest, RBI may at any moment withdraw the licence for the FFMC.

 

  • Examining Documents: According to FEMA, 1999, the Reserve Bank of India has the authority to examine the fully licenced money changer’s books of accounts and other documentation. The investigating authority must get complete support and cooperation in order to conduct the inspection. However, it will be regarded as a violation of the requirements if the entity refuses to provide books of accounts or any other document, or refuses to respond to any inquiry made by the authority.

How to apply for a fully-fledged money changer licence

The application for the licence to operate as a Fully Fledged Money Changer must be acquired from the RBI website. The application form must be delivered to the Foreign Exchange Department of the Reserve Bank of India at the regional office that oversees the applicant’s registered office, along with the necessary supporting documentation.

  • A business must first and foremost be established in accordance with the 2013 Companies Act’s criteria.
  • documenting and organizing all required paperwork in accordance with RBI regulations in order to submit a fully-fledged money changer licencing application;
  • application for an FFMC licence must be submitted to the relevant RBI department together with the required supporting documentation;
  • In the event of a resubmission, respond;
  • until the licence is granted, communication with the RBI;

After the RBI conducted a thorough assessment, a Fully Fledged Money Lender License was granted. After the RBI conducted a thorough assessment, a Fully Fledged Money Lender License was granted.

Documents that must be kept ready

A business must first and foremost be established in accordance with the 2013 Companies Act’s criteria.

  • documenting and organising all required paperwork in accordance with RBI regulations in order to submit a fully-fledged money changer licencing application;
  • application for an FFMC licence must be submitted to the relevant RBI department together with the required supporting documentation;
  • In the event of a resubmission, respond;
  • until the licence is granted, communication with the RBI;
  • A statement to the effect that DOE or DRI are not looking into the company or its directors.
  • Information about the business’s type.
  • Information on the applicant’s prior application for an FFMC/RMC licence
  • A Board Resolution for engaging in money-changing activity and filing for a Full Fledged Money Changers licence.

The following conditions must be met in order to obtain a Fully Fledged Money Changer License

To obtain a Fully Fledged Money Changer licence in India, you must meet the following requirements:

  • If the DoE (Directorate of Enforcement) or DRI (Directorate of Revenue Intelligence) has filed a case against the applicant company or its directors or promoters, the licence application will not be taken into consideration;
  • The applicant corporation must abide by the Reserve Bank of India’s decision regarding the approval of the FFMC licence;
  • A copy of the applicant’s registration under Shop and Establishment, a rent receipt, or any other documentary evidence must be given after the applicant has obtained the Fully Fledged Money Changer licence from the Reserve Bank of India;
  • Upon receiving the licence, the Reserve bank of India should be commenced within a six (6) months period and such commencement of business shall be informed to the concerned Regional Office of the RBI.

The different regulations that apply to the Fully Fledged Money Changer’s keeping of books of accounts are as follows:

In India, the following registers must be kept in relation to money-changing actions for these entities

FLM 1 Daily Summary and Balance Book (Foreign currency notes/coins)
FLM 2 Daily Summary and Balance Book (Travellers’ cheques)
FLM 3 Register of purchases of foreign currencies from the public
FLM 4 Register of purchases of foreign currency notes/coins from authorized dealers and authorized money changers
FLM 5 Register of sales of foreign currency notes/coins and foreign currency travelers’ cheques to the public
FLM 6 Register of sales of foreign currency notes/coins to authorized dealers / Full Fledged Money Changers / overseas banks
FLM 7 Register of travelers’ cheques surrendered to authorized dealers / authorized money changers / exported

The conditions under which a License can be revoked by RBI

The Reserve Bank of India maintains the authority to cancel the licence given to an AMC at any time if, in its judgment, the following conditions exist, It is in the public interest to do so, or The AMC has violated any provisions of the Foreign Exchange Management Act, 1999, or any rule, regulation, notification, instruction, or order made thereunder, or The AMC has not complied with any requirement under which the authorization is granted. Additionally, the Reserve Bank retains the power to revoke the approval of any office for violating any legal or regulatory requirements. Anytime, the Reserve Bank may revoke any of the existing conditions of a money changer’s license or impose new conditions.

Who is eligible to apply for a franchise licence with the current Fully Fledged Money Changer?

There are two prerequisites that must be met in order to get the franchise licence from the current FFMC, including:

  • a company with a physical location for doing business and
  • Minimum 10 lakh Indian rupees in net owned funds;

The franchise agreement will be signed if the aforementioned conditions are satisfied. The tenure, which will be determined by the FFMC, and the commission and fees due to the franchise will be outlined in the franchisee agreement and will be mutually agreed upon by the parties.

The Franchise Agreement’s characteristics

Franchisees are required to prominently display the names of the Franchisers and the exchange rates, which must be in accordance with the daily exchange rates charged by FFMC and their branches; Within seven working days of the date of purchase, the franchisee must turn over any foreign money they have purchased to the franchisor; they must keep accurate records of all transactions, and the franchisor must inspect them on-site at least once per year.

How can one apply for a franchise licence with the current FFMC?

A Form RMC-F application must be submitted together with a statement attesting to the entity’s thorough due diligence before the Franchise Agreement is signed in order to be considered for a franchise licence.

How franchisees are subjected to due diligence

The following factors need to be taken into account when performing the franchisees’ due diligence:

  • a brief description of the franchisee and its current operations;
  • Verify the minimal Net Owned Funds (NOF) needs;
  • certification from the municipality, including registration under the Shop and Establishment Act, favoring franchisees;
  • verification of the franchisee’s actual location where the limited money-changing operations will take place;
  • a document from the neighborhood police departments in the favor of the Franchisee to carry out the activities;
  • a statement that they are not connected to any criminal investigations;
  • a copy of the franchisee’s PAN and those of its directors and shareholders;
  • passport-size images of the franchisee’s directors, shareholders, and other KMP;
  • At least once a year, a personal visit.

What are the Fully Fledged Money Changer reporting requirements?

The entity must send a monthly consolidated statement in form FLM 8 to the relevant department of the RBI no later than the 10th of the next month for all offices for all sales and purchases of foreign currency notes.

Within 10 days of the end of the month, a monthly statement detailing transactions totaling at least US $10,000 (or its equivalent) must be filed to the regional office of the RBI;

The regional office of the RBI must receive a quarterly statement detailing any foreign currency accounts held in their names with AD Category-I banks that are maintained in India;

An annual statement detailing the amount written off during the previous year financial year should be submitted by all the AMC to the respective Regional Offices of the Foreign Exchange Department, RBI within one month of the financial year-end.

The that rules apply to the granting of a licence for opening a new branch

Prior authorization from the RBI is necessary for the establishment of a second branch to conduct money-changing operations. The regional office of the RBI where the company’s registered office is located must receive a formal application for this reason. The main reason for opening a second location is to ensure that sufficient money exchange services are available in tourist destinations’ outlying regions.

The following documents are necessary for the establishment of additional branches:

  • a copy of the most recent audited financial statements together with a certificate from the statutory auditor clearly stating the Net Owned Funds (NOF) situation as of the date;
  • Report on Bankers;
  • a statement stating that no legal action is pending against the applicant company or its directors with the Directorate of Enforcement (DoE), Directorate of Revenue Intelligence (DRI), or any other enforcement agencies;
  • a declaration attesting to the effectiveness of the right framework for KYC/AML/CMT policy;
  • internal control system disclosures, including internal and external audit;
  • A copy of the shop and establishment registration, a rent receipt, or any other documentation proof of the location of the second branch.
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