Fema a civil law, RBI alone can compound offences, says ED
The Enforcement Directorate (ED) of India has clarified that the Foreign Exchange Management Act (FEMA) is primarily a civil law, with the Reserve Bank of India (RBI) serving as the sole authority for compounding offences. The ED drops investigations once the RBI settles these cases, except for serious crimes like money laundering.
Why it matters
This provides legal clarity for corporations operating in India regarding the regulatory process for foreign exchange compliance.
NEW DELHI: ED Thursday reiterated that Fema is primarily a civil legislation that through Section 15 provides for compounding of contraventions to facilitate voluntary compliance, reduce litigation and ensure expeditious disposal of cases, except those involving serious crimes like money laundering, terror financing and affecting country’s sovereignty and integrity.“In all cases, Reserve Bank of India (RBI) is the competent authority to compound eligible contraventions,” the agency said.The role of ED, which is the designated agency to investigate all violations of Foreign Exchange Management Act after recommendation from RBI, is to issue a no-objection certificate to the central bank with regards to compounding of offences.The clarification came as RBI ordered closure of another Fema case by allowing compounding of offences against pharmaceutical firm Apothecon Pharmaceutical.“RBI has also issued master directions on compounding of contraventions…
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