MoF notifies new rules for compounding under FEMA

On 12-9-2024, the Ministry of Finance notified the Foreign Exchange (Compounding Proceedings) Rules, 2024. The provisions came into effect on 12-9-2024.

Key Points:

1. The following can form the Compounding Authority under these rules:

   • Director of Enforcement;

   • an officer of the Directorate of Enforcement not below the rank of Deputy Director or Deputy Legal Adviser;

   • an officer of the Reserve Bank not below the rank of the Assistant General Manager.

2. Compounding authorities of Reserve Bank to compound various contraventions: where the sum involved:

   • Does not exceed Rupees 60 lakh– officer not below the rank of Assistant General Manager.

   • Does not exceed Rupees 2 and a half crore– officer not below the rank of Deputy General Manager.

   • Does not exceed Rupees 5 crore- officer not below the rank of General Manager.

   • Above Rupees 5 crore- officer not below the rank of Chief General Manager.

3. Compounding authorities of Directorate of Enforcement to compound various contraventions: where the sum involved:

   • Is Rupees 5 lakh or below– Deputy Director;

   • Is more than Rupees 5 lakh but less than Rupees 10 lakh– Additional Director;

   • Is Rupees 10 lakh or more but less than Rupees 1 crore– Special Director;

   • Is Rupees 50 lakh or more but less than Rupees 1 crore- Special Director along with Deputy Legal Adviser;

   • Is Rupees 1 crore or more– Director of Enforcement along with Special Director.

4. In case any contravention is compounded before the adjudication of such contravention, no inquiry will be initiated or continued.

5. When the compounding of any contravention is made after making a complaint, the compounding authority will, in writing, give notice to the Adjudicating Authority, and the person in relation to whom contravention is compounded will be discharged.

6. Exceptions to compounding:

   • where the amount involved is not quantifiable;

   • where the Directorate of Enforcement is of the view that the proceeding relates to a serious contravention suspected of money-laundering, terror financing or affecting the sovereignty and integrity of the nation;

   • where the Adjudicating Authority has already passed an order imposing penalty;

   • Where the compounding authority believes the contravention involved requires further investigation by the Directorate of Enforcement to ascertain the amount of contravention.

7. Payment of the amount compounded will be done electronically or through online mode payment within 15 days from the date of compounding order of such contravention.

8. Every Compounding Order should contain the provisions of the Act/ Rules/ Regulations/ Directions/ Requisitions/ Orders under which contravention has taken place.

9. Any compounding application pending, on 12-9-2024, will be governed by the provisions of Foreign Exchange (Compounding Proceedings) Rules, 2000.