By: ARVIND SALVI. 2015 Slide 1 Foreign Exchange Management Act, - PowerPoint PPT Presentation

PRESENTATION ON CONTRAVENTION AND PENALTIES UNDER FEMA , 1999. By: ARVIND SALVI. 2015 Slide 1

Foreign Exchange Management Act, 1999  FEMA came into force with effect from June 1, 2000.  The objective of facilitating external trade and payments for promoting the orderly development and maintenance of foreign exchange market in India.  There is a paradigm shift from objective under FERA viz. controlling /conversation of foreign exchange for utilisation of economic development of the country.  With this shift in objective in mind there was also a shift in dealing with the issue relating to penal provisions. Slide 2

FEMA : Architecture & Mechanism Passed by the Parliament – the Legislature Current Account by the Act – FEMA Government Rules – Current A/C AP Dir Circulars Notifications to APs Regulations- Capital A/C Notified in the All procefural aspect Gazette – by the of Forex transactions Executive by the RBI. [ Master Circulars for Capital Account by guidance . ] the RBI 3 Slide 3

Compliance under FEMA..  Compliance means, compliance of the provisions of FEMA 1999, any rule, regulation, notification, direction or order issued in exercise of the powers under this Act.  Three stages of compliance :- - Before undertaking the transaction; - While undertaking the transaction; and - After undertaking the transaction. 4 Slide 4

Penal provisions….  Governed by Chapter IV viz. Contravention and penalties. - Sec 13: Penalties. - Sec 14: Enforcement of the order of the Adjudication Authority. - Sec 15:Powers to Compound contravention RBI / DoE [A.P(Dir ) No. 56/2010)]. - Sec 49: Sunset clause [ FERA violations] . 5 Slide 5

Legal Position :  Section 13 – Contravention of  Act  Rules,  Regulations,  Notifications,  Directions or  Orders Slide 6

Penalties – (prescribed under Sec.13)  Up to thrice the sum involved in such contravention where such amount is quantifiable.  Or up to two lakh rupees where the amount is not quantifiable.  And where such contravention is a continuing one, further penalty which may extend to five thousand rupees for every day after the first day during which the contravention continues. Slide 7

Methods to deal with contraventions...  Compounding ;  Adjudication ;  Appeals ;  FERA contraventions : Sun set clause;  Contraventions by Authorised Persons . Slide 8

Compounding of Contravention What does it mean ? Settle an offence committed by the contravener through imposition of a monetary penalty without going in for litigation after the contravener acknowledges voluntarily having committed the contravention.. Slide 9

Legal position contd..  Powers to compound (Section 15) - any contravention under Section 13 may, on application made by the person committing such contravention, be compounded within 180 days from the date of application by –  Directorate of Enforcement.  Reserve Bank of India. Slide 10

Powers to compound…. RESERVE BANK :  Sec.3 – Dealing in Foreign Exchange  Sec.4 – Holding of foreign currency  Sec.5 – Current account transactions  Sec.6 – Capital account transactions  Sec.7 – Export of goods and services  Sec.8 – Realisation and repatriation of FE  Sec.9 – Exemption from realisation & repatriation  Sec.10.6 – Mis-utilisation of FE DIRECTORATE OF ENFORCEMENT :  Sec.3(a) i.e Hawala transactions. Slide 11

NOT COMPOUNDABLE..  If an appeal under Sec. 17 or 19 of FEMA filed;  The contravention is not quantifiable;  A contravention has been finally adjudicated and disposed off by the Adjudication Authority;  Contraventions related to any transaction without proper approval or permission form the concerned Govt. or any Statutory Authority : the requisite approval not obtained;  A contravention, prima facie, involves money laundering, security, etc., & needs investigation. Slide 12

Detection of contravention  Voluntary disclosure;  Information from Ads;  Analysis of data;  Market Intelligence;  RBI’s inspections;  Others – Media reporting / complaints. Slide 13

Compounding Process -  Receipt of application;  Receipt of fees;  Examination by RBI;  Calling for additional documents, if required;  Opportunity of personal hearing;  Passing of Compounding Order;  Payment of penalty; and  Issuance of Certificate for payment of penalty. Slide 14

Examination by RBI contd..  The compounding application is disposed of on merits , upon consideration of records and submissions made by the applicant in the application as well as during the personal hearing and at the absolute discretion of the Compounding Authority.  Compounding Authority acts under the supervision of the Governor of the RBI . Slide 15

Benefits -  Comforts to citizens and corporate community.  Mandatory personal hearing .  Minimum transaction cost.  Time-bound disposal (180 days).  Simple and hassle-free procedure.  No proceedings or further proceedings initiated or continued.  Absolutely transparent. Slide 16

COMMON CONTRAVENTIONS..  ECB : - Draw down without LRN; - allowing draw down under auto route from unrecognised lender, to ineligible borrower, for non-permitted end uses.  ODI : - Second & subsequent remittances with- out obtaining UIN form RBI to JV/WOS; - Non-submission of APR, copy of share certificate to Ads.  FDI : - Delay/non-filing of Inflow, FC-GPR, FC- TRS or other reporting returns to RBI. Slide 17

QUESTIONS?? Slide 18

THANK YOU Slide 19