foriegn exchange ppt-final

8/11/2019 Foriegn Exchange Ppt-final

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2014

LEG L SPECTS OF

BUSINESS L W

PRESENT TION

ON

FOREIGN EXCH NGE

ND PREVENTION OF

MONEY L UNDERING

01-05-2014 AURO UNIVERSITY 1


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Foreign Exchange means foreign currency and

includes-

Deposits, credits, and balances payable in any foreign currency; Drafts, travellers cheques, letters of credit or bills of exchange,

expressed or drawn in Indian currency but payable in foreign currency;

Drafts, travellerscheques, letters of credit or bills of exchange drawn

by banks, institutions or persons outside India, but payable in Indian

currency.



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Foreign Exchange Regulations Act

(FERA) was introduced in the year 1974 with an object of having

stringent controls to conserve foreign exchange and utilize these scarce

resources in the best interest of the country.

With the liberalized economic environment and increased flow of

foreign exchange to India the draconian provisions of FERA were

needed to be reviewed. Therefore, FERA was repealed and Foreign

Exchange Management Act, 1999 (FEMA) was passed.

FEMA has been brought into force from 1stJune 2000.


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The preamble to FEMA reads as under:

An Act to consolidate and amend the law relating to foreign exchange

with the objective of facilitating external trade and payments and for

promoting the orderly development and maintenance of foreign

exchange market in India.

Extent and application:

The Act extends to the whole of India. Also, the Act has extra

territorial jurisdiction, and it also applies to-

All branches, offices and agencies outside India owned or controlled

by a person resident in India; and

Any contravention committed outside India by any person to whom

this Act applies.


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Objectives

Tofacilitate external trade and paymentsTo promote the orderly development and maintenance of

foreign exchange market


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Power to arrest: section 35 of FERA empowered the enforcement officers to

arrest a person, if they had reasons to believe that the person was guilty of

FERA violations. FEMA provides such power of arrest only in the followingcases: Where the accused person fails to pay the full payment of penalty

within 90 days from service of notice on him. And, where the accused person

fails to furnish the security for his appearance before the Adjudicating

Authority, the Adjudicating authority may, in his discretion. Order that the

accused person be detained in the custody of an officer of the AdjudicatingAuthority.

Compounding of offences: all the offences under FEMA are compoundable

whereas compounding was not permissible under FERA.


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Appellate authorities: there was only one appellate authority underFERA whereas in FEMA, there exists two appellate authorities, viz.,

Special Director (Appeals) and Appellate Tribunal.

Right of legal assistance: the accused has a right to take the assistance

of a legal practitioner or a chartered accountant under FEMA. Under

FERA, even a friend or a relative of the person could represent the

accused person before the Adjudicating Authority.

Role of RBI: Reserve Bank of India has been portrayed as a facilitatorunder FEMA instead of a regulator of foreign exchange under FERA


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Indian citizen leaving India for pursuing higher studies outside

India- determine his residential status

Q: Mr. Naik is an India citizen. He has been residing in India since birth. He left

India on 25thFebruary 2001 for pursuing business management in America for 2years. He comes back on 24thFebruary 2003. What is his residential status for thefinancial years 2000-01, 2001-02, 2002-03, and 2003-04?

Ans: Financial year 2000-01, Mr. Naik resided in India for the whole year in thepreceding financial year. Mr. Naik is a person resident in India for the financial

year.

Financial year 2001-02, he resided in India for more than 182 days in the presentfinancial year 2000-01. Therefore, he is a person resident in India for the financialyea 2001-2002.

Financial year 2002-03, Mr. Naik did not reside in India at all in the presentingfinancial year 2001-02. Therefore, he shall be a person resided outside in India.

Financial year 2003-04, Mr. Naik, resided for less than 183 days in the presentingfinancial year 2002-03. Therefore, he shall be a person resident in India.


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Penalties for contravention:

When levied Where any person contravenes any provisions of the Act, rule,regulation, notification, direction or order issued under the Act.

Where any person contravenes any condition subject to which anauthorization is issued by the Reserve Bank.

Amount of penalty:

Where the amount involved in contravention is quantifiable, the penalty maylevied upto three times the sum involved in the contravention.

Where the amount involved in contravention is not quantifiable, the penaltyupto rupees 2,00,000 may be levied.

Where any contravention is continuing one, further penalty not exceedingrupees 5,000 per day may be levied.

Penalty payable upon adjudication Penalty shall become payable only uponadjudication section 14.


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Regulation and management of foreign

exchange:

Restrictions on dealing in foreign exchange and foreign securities-

Restrictions on dealing: No person shall deal in or transfer any foreign

exchange or foreign security to any person not being an authorized

person.

Restriction on payment: No person shall make any payment to or for

the order of any person resident outside India in any manner.

Restrictions on receipts: No person shall receive, otherwise through an

authorized person, any payment by order or on behalf of any person

resident outside India in any manner.


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Adjudicating Authority:

The appropriate Adjudicating Authority deals with the process bywhich a contravention of any provision of the Act, rule, regulation,

notification, direction or order issued under the Act. The centralgovernment has been empowered to appoint the AdjudicatingAuthority who shall hold the inquiry in the manner prescribed underthe Act.

Duties of the Adjudicating Authority:

Every Adjudicating Authority shall endeavor to dispose of thecomplaint within 1 year from the date of receipt of the complaint. Ifthe complaint is not disposed of within 1 year, authority shall recordthe reasons for the same.

The Adjudicating Authority shall give a reasonable opportunity ofbeing heard to the person against whom a contravention of the Act isalleged.


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Consequences of failure to pay penalty:

Imprisonment: if any person fails to make full payment of the penaltyimposed on him within 90 days from the date of service of notice on

him, he shall be liable to civil imprisonment.

Term of imprisonment

Where the demand raised in the penalty order exceeds Rs. 1 Crore, the

imprisonment may extend upto 3 years.

In any other case, the imprisonment may exceed upto 6 months.

Release of defaulter on payment:

The defaulter shall be released, where the amount mentioned in the

warrant has been paid to the officer in charge of the civil prison.


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01-05-2014 AURO UNIVERSITY 1501-05-2014 AURO UNIVERSITY 15

CASE:

The Enforcement Directorate has filed cases under the ForeignExchange Management Act against Yoga guru Baba Ramdev and

a multitude of trusts run by him.


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G:\AURO Block-4\LAW\FEMA violation case registered against

Ramdev.mp4
http://g/AURO%20Block-4/LAW/FEMA%20violation%20case%20registered%20against%20Ramdev.mp4http://g/AURO%20Block-4/LAW/FEMA%20violation%20case%20registered%20against%20Ramdev.mp4http://g/AURO%20Block-4/LAW/FEMA%20violation%20case%20registered%20against%20Ramdev.mp4http://g/AURO%20Block-4/LAW/FEMA%20violation%20case%20registered%20against%20Ramdev.mp4http://g/AURO%20Block-4/LAW/FEMA%20violation%20case%20registered%20against%20Ramdev.mp4http://g/AURO%20Block-4/LAW/FEMA%20violation%20case%20registered%20against%20Ramdev.mp4http://g/AURO%20Block-4/LAW/FEMA%20violation%20case%20registered%20against%20Ramdev.mp4http://g/AURO%20Block-4/LAW/FEMA%20violation%20case%20registered%20against%20Ramdev.mp4http://g/AURO%20Block-4/LAW/FEMA%20violation%20case%20registered%20against%20Ramdev.mp4http://g/AURO%20Block-4/LAW/FEMA%20violation%20case%20registered%20against%20Ramdev.mp4http://g/AURO%20Block-4/LAW/FEMA%20violation%20case%20registered%20against%20Ramdev.mp4http://g/AURO%20Block-4/LAW/FEMA%20violation%20case%20registered%20against%20Ramdev.mp4


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What is Money Laundering?

Money Laundering is the process of taking dirty funds and

converting it into cleanfunds.

Smuggling, Drug trafficking, Illegal arms sales, Computer

frauds, corrupt practices, tax evasion etc.


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Effects of ML:

First and most obvious effect is it increases

corruption and crime

Money Laundering Depresses Growth

Money Laundering Diverts Capital Away from

Development


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Stages of Money Laundering


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G:\Money laundering.mp4
http://g/Money%20laundering.mp4http://g/Money%20laundering.mp4http://g/Money%20laundering.mp4http://g/Money%20laundering.mp4


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The Prevention of Money Laundering Act came into force w.e.f.1stJuly,2005.

The Act was amended by the prevention of money laundering

(Amendment) act 2009 w.e.f. 1stJune,2009.

Further it amended by the prevention of money laundering act

(Amendment) act 2012 w.e.f. 15thFeb,2013

This Act extends to whole of India including the state of Jammu

& Kashmir.


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Object of this act

It is an act to prevent Money Laundering and to provide for

confiscation of property derived from, or involved in, money

laundering and to punish those who commit the offence of money

laundering.


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What is the offence of Money Laundering?

Whosoever directly or indirectly attempts to indulge or

knowingly assists or knowingly is a party or is actually

involved in any process or activity connected with the

proceeds of crime including its concealment, possession,

acquisition or use and projecting or claiming it as untainted

property shall be guilty of offence of money laundering(Section 3)


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Activities responsible for money laundering:

Conversion or transfer of property knowing that the property is the result of a

committed crime in order to conceal the illicit origin of the property;

Assistance to any person involved in committing of such a crime in order to avoid

legal consequences of these activities;

Hiding or concealing the true nature, source, location, availability and movement

of derived ownership rights or property knowing that the property is the result of a

committed crime;

Gaining, possession or use of goods or things or values knowing at the time of

their receipt that they are the result of illicit trafficking of narcotics;


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Who can investigate a case of Money

Laundering ?

As per Sections 48 & 49 of the PMLA, the officers

of the Directorate of Enforcement have been given

powers to investigate cases of Money Laundering.The officers have also been authorized to initiate

proceedings for attachment of property and to

launch prosecution in the designated Special Court

for the offence of money laundering.


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What are the possible actions which can be taken

against persons / properties involved in Money

Laundering ?

Attachment of property u/s 5.

1. Imprisonment for a term not less than 3 years, it may extend up to 7

years and shall be liable to fine which may extend to 5 Lakh rupees. (It

may extend up to 10 years and In case offence is punishable under the

Narcotics and Psychotropic substances Act, 1985)

2. The prosecution or conviction of any legal juridical person is not

contingent on the prosecution or conviction of any individual.


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Cases:

1. HSBC to pay $1.9 billion U.S. fine in money-

laundering case

2. Hawaii to pay $1.3 million in money laundering

case3. HASAN ALI 8 billion money laundering case


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G:\AURO Block-4\LAW\Money laundering case- SC cancels HasanAli's bail.mp4
http://g/AURO%20Block-4/LAW/Money%20laundering%20case-%20SC%20cancels%20Hasan%20Ali's%20bail.mp4http://g/AURO%20Block-4/LAW/Money%20laundering%20case-%20SC%20cancels%20Hasan%20Ali's%20bail.mp4http://g/AURO%20Block-4/LAW/Money%20laundering%20case-%20SC%20cancels%20Hasan%20Ali's%20bail.mp4http://g/AURO%20Block-4/LAW/Money%20laundering%20case-%20SC%20cancels%20Hasan%20Ali's%20bail.mp4http://g/AURO%20Block-4/LAW/Money%20laundering%20case-%20SC%20cancels%20Hasan%20Ali's%20bail.mp4http://g/AURO%20Block-4/LAW/Money%20laundering%20case-%20SC%20cancels%20Hasan%20Ali's%20bail.mp4http://g/AURO%20Block-4/LAW/Money%20laundering%20case-%20SC%20cancels%20Hasan%20Ali's%20bail.mp4http://g/AURO%20Block-4/LAW/Money%20laundering%20case-%20SC%20cancels%20Hasan%20Ali's%20bail.mp4http://g/AURO%20Block-4/LAW/Money%20laundering%20case-%20SC%20cancels%20Hasan%20Ali's%20bail.mp4http://g/AURO%20Block-4/LAW/Money%20laundering%20case-%20SC%20cancels%20Hasan%20Ali's%20bail.mp4http://g/AURO%20Block-4/LAW/Money%20laundering%20case-%20SC%20cancels%20Hasan%20Ali's%20bail.mp4http://g/AURO%20Block-4/LAW/Money%20laundering%20case-%20SC%20cancels%20Hasan%20Ali's%20bail.mp4http://g/AURO%20Block-4/LAW/Money%20laundering%20case-%20SC%20cancels%20Hasan%20Ali's%20bail.mp4http://g/AURO%20Block-4/LAW/Money%20laundering%20case-%20SC%20cancels%20Hasan%20Ali's%20bail.mp4http://g/AURO%20Block-4/LAW/Money%20laundering%20case-%20SC%20cancels%20Hasan%20Ali's%20bail.mp4http://g/AURO%20Block-4/LAW/Money%20laundering%20case-%20SC%20cancels%20Hasan%20Ali's%20bail.mp4http://g/AURO%20Block-4/LAW/Money%20laundering%20case-%20SC%20cancels%20Hasan%20Ali's%20bail.mp4


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Thank you..

foriegn exchange ppt-final

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