Forex Audit

Presentation on Audit of Foreign Exchange Transactions
t WIRC ICAI
K.Parameswara Faculty in Foreign Exchang
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Volume of forex transactions

Volume of transactions per day USD 3.2 Trillion
Trade related 1.5% Misc 0.5% Capital transfer 8.0% Balance90% relating to Indian forex market around USD 10 bn.
INTRODUCTION TO FOREX AUDIT

Impact of liberalization Decentralization of exchange control administration Deregulation of interest rates Freedom for current account remittances Freedom for the forex market to operate Introduction of sophisticated new products Competition among banks
ISSUES INVOLVED ..
REGULATORY
Proper exercising of delegated authority by the Authorised Dealers REGULATIONS TO BE KEPT IN MIND
FEMA 1999 RBI guidelines FOREIGN TRADE POLICY 2004 2004-09 FCRA 1976 ICC (Paris) guidelines
REVENUE LEAKAGE
Import transactions
Advance remittance for imports Establishing import Letter of credits Handling import payments
Under their own letters of credit Under collection
Arranging trade credits
Import transactions
Obligation of importer
To use forex for any of the permitted purposes To submit documentary evidence within the prescribed time limit for having used forex for permitted purposes
Obligations of the AD
Concept of KYC norms Ensuring end use
Import transactions
Identification of importer customer - check the transactions Check the necessity for import Importability of the consignment If restricted Requirement of licence handling of a licence
Endorsement / value / expiry date
Issues to be checked
ystem of recording of import bills received by the branch crutiny of documents received under import LCs Recovery of appropriate interest wherever banks nostro ccount is debited for payment of import bills under LC With holding tax wherever applicable Crystallisation of bills under LC Reporting to RBI - non receipt of BOE
within three months from date of remittance plus grace period of three months - BEF...
To check.
Importers application
Underlying contract FEMA declaration Form A-1 need not be forwarded to RBI to be 1 kept at branch to be verified by the auditors Transaction for value below USD 500
Bill of entry non-submission above submission USD100,000 to be reported to RBI

100% verification of BOE by audit system
BILL OF ENTRY
Document released by customs giving full details of the import. In bond / ex-bond BOE Name of the importer may be different Relate the remittance with invoice and consignment details System of providing acknowledgement to the importer for having received BOE by the branch
ECB Vs Trade Credits

Trade credits and ECBs MC dated 1st July 2008 Can be suppliers credit or buyers credit
If it is import of capital goods
Maturity period less than 3 years Interest at LIBOR plus 200 basis points Transaction value up to USD 20 mn can be approved by AD Maturity period up to one year Interest at LIBOR plus 200 basis points Transaction value up to USD 20 mn
Import of any goods
EXPORT TRANSACTIONS..
ROLE OF AUTHORISED DEALER
Extending credit facilities at concessional rate of interest Extending non fund based facilities Collection of export payments
EXPORT TRANSACTIONS..
FUND BASED FACILITIES
EXPORT FINANCE
PRE AND POST SHIPMENT FINANCE
STAGES
PROCESSING OF CREDIT LIMITS DISBURSEMENT FOLLOW UP LIQUIDATION
EXPORT FINANCE
PROCESSING
CAUTION LIST OF RBI SPECIFIC APPROVAL LIST OF ECGC COMMODITY EXPORTABLE COUNTRY RISK - RCC BUYERS RISK (CREDIT REPORT ON THE BUYER)
EXPORT FINANCE PRE SHIPMENT

DISBURSEMENT
Notification to ECGC within 30 days about the sanction details Documentation Compliance of sanctioned terms Basic documentary evidence for disbursement of loan
Export order or letter of credit PC running account..special features
Quantum of finance Period of finance at concessional interest rate..

FOLLOW UP / MONITORING
ECGC PREMIUM INSURANCE WHEREVER REQUIRED SUBMISSION OF STOCK STATEMENT PHYSICAL INSPECTION OF STOCKS OVERDUE PACKING CREDITS
UPTO 180 + 90 DAYS (stimulus package BEYOND 270 DAYS UPTO 360 DAYS BEYOND 360 DAYS

LIQUIDATION at concessional interest rate
with the same export proceeds with substituted export shipments with any other export proceeds
Under the following cases concessional interest rate restricted up to the level of export under the particular export order
with local funds With EEFC funds
PC Running account facility

Submission of export order within a reasonable time FIFO At the time of applying interest, list down all the overdue shipments and charge overdue interest for the overdue period
FEMA on export of goods and services

Time limit for presentation of documents Time limit for realisation of export proceeds Extension wherever warranted Reduction in invoice value Change of buyer Write off Advance remittance for exports Export of software Remittances relating to exports
Resident accounts.
Individuals
No restrictions except acceptance of foreign currency and travellers cheques beyond permissible limits
Organisations
FCRA 1976
NON-RESIDENT ACCOUNTS RESIDENT

ISSUES RELATING TO
INELIGIBLE PERSONS ALLOWED TO OPEN ACCOUNTS INELIGIBLE CREDITS ALLOWED REPATRIATION OF FUNDS ABROAD

NON-RESIDENT INDIANS RESIDENT
PASSPORT AND VISA WHETHER CURRENT ? DECLARATION - date of arrival in India for permanent settlement (incorporated in the application form) REMITTANCES
FOREIGN CURRENCY AND TRAVELLERS CHEQUES with / without CDF TRANSFER FROM ANOTHER NON NON-RESIDENT EXTERNAL ACCOUNT.

Repatriation (AP DIR 67 dt 13.01.03 & 62 dt 31.01.04) OPERATIONS BY POWER OF ATTORNEY HOLDERS LOANS - maximum ceiling on amount
To account holders To third parties In India or abroad
TDS Wherever applicable In-operative accounts
LAST BUT NOT LEAST

UNDERSTANDING A TRANSACTION
IMPACT OF THE TRANSACTION
WHETHER EXTERNAL OR INTERNAL PRECAUTIONS TAKEN BY THE BRANCH TO SAFE GUARD THE INTEREST OF BANK SYSTEMS IN THE BANK WHETHER ADEQUATE
EMERGING TRENDS RESPONSIBILITY OF THE AUDIT SYSTEM
Thank you ..
K. PARAMESWARAN karthikeyap@gmail.com 09820601546

Forex Audit

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Forex Audit

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Presentation on Audit of Foreign Exchange Transactions

K.Parameswara Faculty in Foreign Exchang

Volume of forex transactions

INTRODUCTION TO FOREX AUDIT

Arranging trade credits

Bill of entry non-submission above submission USD100,000 to be reported to RBI

ECB Vs Trade Credits

If it is import of capital goods

Import of any goods

ROLE OF AUTHORISED DEALER

EXPORT FINANCE PRE SHIPMENT

Quantum of finance Period of finance at concessional interest rate..

EXPORT FINANCE PRE SHIPMENT

EXPORT FINANCE PRE SHIPMENT

PC Running account facility

FEMA on export of goods and services

NON-RESIDENT ACCOUNTS RESIDENT

NON-RESIDENT ACCOUNTS RESIDENT

NON-RESIDENT ACCOUNTS RESIDENT

TDS Wherever applicable In-operative accounts

LAST BUT NOT LEAST

EMERGING TRENDS RESPONSIBILITY OF THE AUDIT SYSTEM

K. PARAMESWARAN karthikeyap@gmail.com 09820601546

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