Who is an authorized person under Foreign Exchange Management Act, 1999? Discuss the powers and duties of the authorized person.

 Who is an authorized person under Foreign Exchange Management Act, 1999? Discuss the powers and duties of the authorized person.

Authorized Person under the Foreign Exchange Management Act, 1999 (FEMA)

Under FEMA, 1999, an "Authorized Person" is an individual, institution, or entity authorized by the Reserve Bank of India (RBI) to deal in foreign exchange or foreign securities. This includes authorized dealers, money changers, offshore banking units, and others permitted by RBI. These entities play a vital role in facilitating foreign exchange transactions and ensuring compliance with FEMA regulations.

Powers and Duties of an Authorized Person

Powers

  1. Dealing in Foreign Exchange:
    Authorized persons can buy, sell, and deal in foreign exchange as per the guidelines issued by RBI.

  2. Execution of Transactions:
    They are empowered to carry out international remittances, currency conversions, and forex trading.

  3. Opening Foreign Accounts:
    They can assist individuals and companies in opening and maintaining accounts in foreign currencies within regulatory limits.

  4. Providing Forex Services:
    Authorized persons can issue foreign currency travel cards, prepaid forex cards, and facilitate forex loans.

  5. Transaction Approval:
    They can approve specific transactions like current account transactions within permissible limits without prior RBI approval.

Duties

  1. Compliance with FEMA Guidelines:
    Authorized persons must adhere strictly to the regulations and guidelines issued under FEMA.

  2. Maintenance of Records:
    They are required to maintain accurate and complete records of all foreign exchange transactions and report them to RBI periodically.

  3. KYC Compliance:
    Authorized persons must ensure compliance with Know Your Customer (KYC) norms to prevent misuse of foreign exchange facilities.

  4. Reporting Obligations:
    They must submit periodic reports on foreign exchange transactions, including suspicious transactions, to the concerned authorities.

  5. Prevention of Malpractices:
    Authorized persons are responsible for preventing unauthorized transactions, money laundering, and other financial irregularities.

  6. Advisory Role:
    They guide customers regarding permissible transactions under FEMA and assist in regulatory compliance.

  7. Inspection and Audit Cooperation:
    Authorized persons must cooperate with RBI during inspections and audits and provide required information promptly.

Penalties for Non-Compliance

Failure to comply with FEMA guidelines can lead to penalties, suspension, or cancellation of authorization by RBI.

Conclusion

Authorized persons under FEMA play a crucial role in maintaining the integrity of India's foreign exchange system. By adhering to their powers and duties, they ensure smooth facilitation of foreign exchange transactions and compliance with legal frameworks, thereby contributing to economic stability and international trade.

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