What changed
RBI issued this circular to reinforce earlier warnings from April 2011 and February 2011 about overseas forex trading through electronic portals. It highlights that residents are being lured with guaranteed high returns and that margin payments are being collected through bank accounts and credit cards. The circular clarifies that any resident collecting or remitting such payments faces FEMA contravention proceedings.
What it means for you
Banks must treat any margin payment for online forex trading as a red flag and ensure strict KYC/AML compliance. Allowing such transactions could expose the bank to regulatory action for facilitating unauthorized forex dealings. This circular also puts the onus on banks to educate customers and card companies about the illegality of these schemes.
What you must do
- Review all credit card and account transactions for patterns indicating margin payments to online forex trading portals.
- Alert your KYC/AML teams to flag accounts opened by individuals or proprietary concerns for collecting margin or investment money for forex trading.
- Communicate the circular's contents to all branches and card-issuing companies, advising them to block such unauthorized payments.
- Warn customers through notices or advisories that participating in these schemes violates FEMA and may lead to legal action.
Who it affects
AD Category-I banks, Card-issuing companies, Bank branches handling margin collection accounts, Customers and residents tempted by online forex trading offers
What exactly is prohibited under this circular?
Residents are prohibited from making margin payments or investments for overseas forex trading through electronic portals using credit cards or bank accounts. Any collection or remittance of such payments outside India violates FEMA, 1999.
What should a bank do if it detects such transactions?
The bank should immediately stop the transaction, report it to the RBI under FEMA provisions, and ensure the account is flagged for KYC/AML review. The customer may be liable for contravention proceedings.
Does this circular apply to all forex trading platforms?
It applies specifically to overseas forex trading through electronic or internet portals that lure residents with guaranteed high returns. Domestic forex trading under RBI guidelines is not affected.