SAFEMA Tribunal sets aside ₹55,000 penalties for exchanging foreign currency with authorised money changer, affirming regulatory compliance.
The SAFEMA Tribunal has quashed penalties totalling ₹55,000 imposed on traders for exchanging foreign currency notes with an authorised money changer, holding that such activity falls squarely within permissible channels under FEMA, 1999. The Enforcement Directorate had alleged unauthorised dealing in foreign exchange under Section 10(1).
Clarification on Permitted Channels
The Tribunal noted that Regulation 4 of the Foreign Exchange Management (Foreign Currency) Regulations, 2000 permits resident individuals to sell foreign currency notes to Authorised Persons, including licensed money changers. Since the exchange occurred at a branch recognised by RBI and proper records were maintained, no contravention arose.
Where the transaction is conducted with an RBI-authorised entity, and there is no layering or structuring to evade reporting, the dealing cannot be treated as 'dealing in foreign exchange' contrary to Section 10(1).
Guidance for Traders and NRIs
The decision provides clarity for small businesses and NRIs converting travel surplus. Practitioners should ensure clients use RBI-listed agents and retain exchange receipts. The ED must demonstrate illicit intent or use of unauthorised hawala/money laundering channels before invoking penal provisions. Routine retail conversions are not enforcement priorities.
Citations
- FEMA, 1999, Section 10(1)
- FEM (Foreign Currency) Regulations, 2000, Regulation 4
