Understanding the Implications of FFMC License Cancellation

An FFMC licence: what is it?

The main purpose of the “fledged money changers,” which are authorised by the Reserve Bank of India, is to exchange money inside the nation. Purchasing foreign currency from foreigners entering the country and reselling it for approved purposes is their main duty. To put it simply, the main duty is to convert foreign currency into Indian rupees and vice versa. It is against the law to trade forex without a current FFMC License issued by the RBI. Anyone operating such a business without the required licensing might face penalties.

Concept of Cancelling an FFMC License 

In compliance with section 10(1) of the FFMA, 1999, the Reserve Bank of India has the authority to revoke the licence that Full Fledged Money Changers have been given under specific circumstances. 

For the reasons listed below, the Reserve Bank of India has the authority to cancel the FFMC licence:

1. If the revocation is in the best interests of the public at large.

2. If the licensee violates the rules that govern the license.

Reasons for the Cancellation of the FFMC License

1.Poor bookkeeping practice

When FFMC’s firm grows, it will inevitably encounter large customers and financial difficulties; in these cases, accounting is essential to guaranteeing smooth daily operations. To maintain transparency and clarity, the licence holder’s books must be audited and conventional bookkeeping methods must be regularly followed.

The RBI is able to examine the FFMC’s books of accounts and other relevant documents in accordance with the Foreign Exchange Management Act of 1999. Consequently, every FFMC license holder must maintain an account book in which they record all transactions and agreements made in a controlled manner. Thus, the possibility of the FFMC Licence Cancellation may increase if this requirement is not met.

2.Variation in Exchange Rates

The RBI determines the currency rate that both Indian and international nationals can use with FFMC Licencee.

However, if a registered FFMC holder employs odd or unusual means to manipulate the current exchange rate in order to boost earnings, the RBI will cancel or revoke the holder’s license.

3.Violation of the Rules and Regulations

The Foreign Exchange Management Act, 1999, and the Reserve Bank of India both give guidelines and directives for an FFMC’s proper functioning, as well as penalties for noncompliance. An FFMC’s licence might be revoked and they could face steep fines if they alter their company operations or operational structure in any way that does not comply with the RBI’s established rules and guidelines.

Several circumstances can also lead to the termination of an FFMC licence, including the following:

• Failure to implement the Concurrent Audit method.
• Incapable of managing the updated foreign currency rates on the chart display.
• The licence holder neglected to maintain the core members’ list on file.
• If FFMC fails to adhere to the payment guidelines specified in the relevant laws.

How to Prevent FFMC License Cancellation

1. Display the exchange rate chart: FFMCs must display the exchange rate chart that is accessible to the public. The chart shows the conversion rates for foreign currency notes and the different currencies of traveller’s checks. 
2. Preventing the accumulation of counterfeit currency: Before FFMC accepts phoney foreign currency notes from customers, management must provide their approval. 
3. Execute Employee Training Procedures: The FFMCs must conduct employee training courses that include the regulations and policies concerning money-changing activities. Assuring transparency inside the organisation is the main objective of this training. 
4. Maintain Transparency via Frequent Financial Audits: Whenever the FFMC’s or licensed money changer’s income exceeds the designated level, a frequent financial audit must be conducted in order to restore transparency and integrity. 

Reapplication after the cancellation of the FFMC licence

The Reserve Bank of India has conducted rigorous checks on those who have been given the opportunity to reapply for an FFMC licence.

However, the conditions prohibit reapplication.

• If the Reserve Bank of India cancelled your licence for the public’s good, you are not permitted to reapply.
• You will not be eligible if you have ever attempted to get the licence through a sale.
• If the RBI cancelled your full-fledged money changer licence in India because of your unethical actions, allowing you to reapply would be considered against the public interest.

The reapplication is permitted under certain conditions.

• The Reserve Bank of India will not have any issues with your reapplication if you submitted your previous FFMC licence on your own.
• If reasonable explanations are provided, the RBI can approve a reapplication.

Required documents for reapplying

• Application of a prior FFMC licence
• FFMC licence number formerly held
• The reason behind the FFMC licence cancellation
• Notification describing the FFMC License cancellation
• The same paperwork was turned in for a new FFMC licence.

Conclusion

To start functioning as a full-fledged money changer, one must get a licence from the Reserve Bank of India. However, you must adhere to all laws, rules, and guidelines set by the RBI in order to receive an FFMC licence.

Read Related Blog post- Full-Fledged Money Changers (FFMC)