FFMC License - Full Fledged Money Changer

Authorised Money Changers play a pivotal role in the transactions concerning Foreign Exchange. The Reserve Bank of India grants approval to the banks in the form of Licenses to deal in activities of foreign exchanges. The said license is granted to only those banks which are well equipped to carry out foreign exchange transactions in India.

Also, it shall be noted that other than banks, certain financial institutions are granted authorisation by the apex bank to undertake prescribed types of foreign exchange transactions that are incidental to their main business.

In order to work as an authorized money changer in India, one needs to apply for a valid fully fledged money changer license which is issued by the Reserve Bank of India and if any person or organization found to be operating money changing activities without the appropriate license will be liable to be penalized as per the laws. For obtaining this license in India, it is mandatory that the company is registered under the Companies Act, 2013.

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 the money changing activities in India need to follow these guidelines as well as the provisions mentioned in the Foreign Exchange Management Act, 1999.

The eligibility criteria for companies to obtain the Fully Fledged Money Changer license are:-

• The company has to be registered with the Registrar of Companies under the Companies Act, 2013.
• The minimum net owned fund (NOF) of the company need to be Rs. 25 lakh for a single branch license. For a multiple branch license, the minimum net owned fund of the company needs to be Rs. 50 lakh. It is essential that the FFMC maintains this minimum NOF on a continuous basis. Apart from this for the fully fledged money changer the requirements related amount required for the particular branch also have to be satisfied.

  Single Branch Rs. 25 lakhs

  Multiple Branch Rs. 50 lakhs

  Note: The Net Owned Fund (NOF) is calculated by subtracting the investments of the company from the owned funds. Investments can include a share of its subsidiaries, the book value of debentures, bonds, outstanding loans and even advances made to and deposits with its subsidiaries and companies in the same group in excess of 10% of the owned funds. Owned funds, on the other hand, is derived by subtracting accumulated balance of loss, deferred revenue expenditure and other tangible assets from the sum of paid-up equity share capital, free reserves and credit balance in P&L Account.

• It is also essential that the main activity which is mentioned in the object clause of the company needs to be money changing activity.
• Finally, there should be no ongoing case against the company with the Department of Enforcement or Department of Revenue Intelligence.

In India, the framework for Fully Fledged Money Changer is regulated by the Reserve Bank of India as per Section 10 of the Foreign exchange Management Act, 1999. It is mandatory for a license holder to comply with the directions & guidelines issued by the RBI. The fully fledged money lender License holder shall not engage in any transaction which is not in conformity with the authorization terms. RBI may at any time revoke the FFMC license if it is in the public interest.

• Inspection of Documents

  Reserve Bank of India is empowered to inspect the books of accounts and other documents of the fully fledged money changer as per FEMA, 1999. For carrying out the inspection, full assistance and co-operation shall be provided to the investigating authority. However, if the entity fails to produce books of accounts, or any other document or fails to answer any question asked by the authority then it shall be considered a contravention of the provisions.

The application form for the Fully Fledged Money Changer license needs to be downloaded from the website of RBI. Along with the required supporting documents, the application form needs to be submitted to the Foreign Exchange Department of the Reserve Bank of India at the regional center under the purview of which the registered office of the applicant falls.

• First and foremost, a company has to be formed as per the requirements of the Companies Act, 2013.
• Documentation & Arrangement of the entire necessary documents for filing of Fully Fledged Money Changer license application as per RBI guidelines;
• Submission of FFMC license application along with the necessary documents with the concerned department of RBI;
• Reply in case of resubmission;
• Liaison with the RBI until the license is obtained;
• After the vigilant inspection by the RBI, Fully Fledged Money Lender License is obtained.

There are certain requirements which need to be fulfilled in order to obtain Fully Fledged Money Changer license in India-

• Application for license shall not be considered if DoE (Directorate of Enforcement) /DRI (Directorate of Revenue Intelligence) had initiated any case against the applicant company or its directors/promoters;
• The decision of the Reserve Bank of India shall be binding on the applicant company in relation to the approval of the FFMC license;
• After obtaining the Fully Fledged Money Changer license from the Reserve Bank of India, a copy of registration under Shop and Establishment, rent receipt or any other documentary evidence shall be submitted by the applicant;
• Once the license is obtained by the Reserve Bank of India, business should be commenced within a period of six (6) months and such commencement of business shall be informed to the concerned Regional Office of the RBI.

For these entities in India, it is required to maintain following registers in respect of the money changing activities:

These documents need to be kept up-to-date, cross-checked and the balances shall be verified on a daily basis whereas transactions which are outside the purview of money changing activities shall not be blend together. Separate registers need to be maintained in case of more than one establishment.

The Reserve Bank reserves the right to revoke the license granted to an AMC at any time if it is in the opinion of the Reserve Bank of India that:

• It is in public interest to do so or;
• The AMC has failed to comply with any condition subject to which the authorization is granted or has contravened any of the provisions of the Foreign Exchange Management Act, 1999 or any rule, regulation, notification, direction or order made there under.
• The Reserve Bank also reserves the right to revoke the authorization of any of the offices for infringement of any statutory or regulatory provision.
• The Reserve Bank may at any time revoke any of the existing conditions of a money changer's license or impose new conditions.

To obtain the franchise license from the existing FFMC there is a requirement of two things such as:

• An entity with the physical place of business and
• Minimum Net Owned Funds of 10 lakhs INR;

If the above-mentioned requirements are fulfilled, the Franchise agreement will be executed. Franchisee agreement will describe the tenure which shall be decided by the FFMC and the commission and fees payable to the franchise as mutually decided between the parties.

While conducting the due-diligence of the Franchisees, following things must be considered:

• Description of the Franchisee along with its existing business activities;
• Check on minimum Net Owned Funds (NOF) requirements as prescribed;
• Municipal certification including registration under Shop and Establishment act, in the favour of Franchisees;
• Verification of the physical office of the Franchisee from where the restricted money changing activities will be carried on;
• Certificate from the local police authorities in the favor of the Franchisee to carry out the activities;
• Declaration regarding non-involvement in any criminal case;
• Copy of PAN of the Franchisee, its directors, its shareholders;
• Passport size Photographs of the Directors, shareholders and other KMP of the franchisee;
• Personal visit at least once a year.

For setting up an additional branch to carry out the money changing activity prior approval of RBI is required. For this purpose, a written application shall be submitted to the regional office of the RBI where the registered office of the company is situated. The main purpose of setting up an additional branch is that adequate money exchange facilities shall be provided in the remote areas of tourist attraction.

For setting up additional branch following documents are required:

• Copy of latest audited accounts accompanied by a certificate from Statutory Auditor, clearly specifying the position of Net Owned Funds(NOF) as on date;
• Bankers Report;
• A declaration specifying non-pendency of any proceedings with the Directorate of Enforcement (DoE)/ Directorate of Revenue Intelligence (DRI) or any other enforcement authorities against the applicant company or its directors;
• Declaration confirming the effectiveness of the proper policy framework on KYC/AML/ CMT;
• Declarations regarding internal control systems including internal/external audit;
• A copy of registration under Shop and Establishment, rent receipt or any other documentary evidence of the place of business of additional branch.