There have been some clarifications made regarding the ability of RBI to compound contraventions under FEMA, the ability of enforcement directorate to compound contraventions under FEMA, and delegation of powers to regional offices regarding the compounding of contraventions under FEMA.
Those individuals who contravene any of the provisions outlined in the Act or any laws, announcements, restrictions, orders, or advice published by the RBI while practicing the powers of the Act, or those individuals who contravene any situations subject to RBI permissions, shall be liable for as much as three times the amount involved in such a contravention.
There is a limit to the amount that can be refunded here of up to $2,000, where the said quantity can be quantified, up to a maximum of $2,500. If the amount cannot be quantified or the same behavior is continuous, the penalty may be increased to $5,000 per day after spotting the first day of the violation.
The term compounding in law refers to a kind or agreeable concession that can be made to avoid trial for an offense previously committed. Nevertheless, compounding is not considered intrinsic to the law; it only arises as a consequence of the apprehensive acts of law that were committed when the offense occurred.
Compounding power of the Reserve Bank
Compounding with respect to a certain contravention shall be limited to the amount that has been raised by such contravention exceeding a certain amount that can be quantified as a consequence of the contravention. Based on this amount, additional administrators of the RBI may compound the contraventions.
The following compounding authorities are selected for the director of enforcement based on the following criteria.
- Deputy director of the Directorate of Enforcement (DOE) will compound the contravention if the amount is less than 5 lakhs.
- A further director of the DOE may compound the sum of money involved in such a contravention if the amount mentioned in the contravention is greater than 5 lakhs and not more than 10 lakhs.
- Special Director (SD) of DOE compounds sums exceeding 10 lakhs but not exceeding 50 lakhs
- By SD with deputy legal adviser of DOE if the contravention involves a sum between $50 lakhs and $1 crore
- The DOE compounds violations exceeding one crore with SD from the enforcement directorate if the sum exceeds one crore.
Procedure for Compounding
- The individual has to report to the RBI with a compounding application as soon as he becomes aware of the violation. Besides submitting an application, he is expected to submit a demand draft (DD) for the sum of $5,000 in the name of the RBI and submit it to the RBI local office in order to determine which compounding authority is assigned to him based on the type of violation.
- Any data, document, or other article related to the compounding proceedings will be requested by the compounding authorities
- Within 180 days of filing the petition, the compounding administration shall pass an ordinance on compounding after providing an opportunity for all the impatients to learn more about the process.
- If the enforcement directorate believes that a proceeding initiated under rule 4 relates to a serious violation such as money laundering, terror financing, or affecting the sovereignty and integrity of the nation, then it is not permitted to go forward with the proceeding and the case will be remitted to other authorities for handling the contravention.
Compounding Payments
A demand draft in favor of the authority must be issued in 15 days from the date of the order of compounding of the contravention for which it has been compounded as stipulated in Sub-rule (2) of rule 8. Those who are unable to reimburse the whole amount of compounding with rule 9 within the specified time period will not be considered for compounding.