2. Outline of Presentations
• NRB Directives on Trade Related to Import
• Letter of Credit (LC)
• TT/DAP/DAA
• Policy/Procedures/Circulars
• Import from India
• Import from other countries
• Exchange facility for Payment of service rendered from Third Countries
• ACU transaction
• Foreign Exchange Facility (NRB Forex Directive No 7)
• Opening of Foreign Currency Account and operation
• Foreign Exchange facility-Migration, Foreign Education, Passport, etc.
• Foreign Direct Investment/Loan
• Repatriation/Remittance
5. Payment Methods: Export & Import
• Prepayment/Cash in Advance:
Importer must pay the exporter
in cash before a shipment is
made.
• Open Accounts: Goods are
shipped and delivered before
payment is due.
• Documentary Collection:
Exporter hands over the task of
collecting payment for goods
supplied to his or her bank,
against the shipping documents
• Documentary Credit(Letter of
Credits): Importer’s bank
guaranteeing to an exporter that
the payment will be received on
time and for the correct
amount.
6. Open Account : Basically trade with India
• Directives 1.11(cha)
• No need to issue bibini.4(ga)
• Commercial invoice with credit term
• Proof of already imported goods
• Transport document shipment/delivery made
• Pragyapan Patra of imported good under the same CI
• In case of credit term of more than 90 days, beneficiary claim of
payment showing invoice and amount
• Endorsement with originals (including Pragyapan Patra and tax
paid receipt) and copies to be kept in office record after providing
exchange facility.
7. Documentary Collection: DAP and DAA
• DAP ceiling is USD.100k or equivalent, URC 522
• Firm/company registration and tax documents are to be obtained
• Documents to be obtained through banks and FIs
• Goods price, freight charge and insurance cost should be shown separately
in
case except CIF term
• Bi.Bi.Bi.4 to be issued obtaining margin of 2% or 10%
• Payment under such provision reported NRB on monthly basis
• Goods or food and beverage required to obtain pre approval form
government authority are to be obtained and all details of exporter,
importer, price and quantity of invoice to be matched with approval letter.
(Annex 1.17)
• Payment to be made based on evidence of goods entered in Nepal by
verifying returned Bi.Bi.Ni.4. Pragyapan Patra and tax paid report etc; DAA
8. Letter of Credit: NRB Directive
Letter of Credit:
•Irrevocable, incoterms. Payment terms,
•Performa invoice, indent or contact paper;
•Performa invoice should include; goods name, brand model, country of
origin, unit price, total amount, incoterm, payment term,
importer/exporter detail address, EXIM code, Harmonic code
LC to import from India and other countries
From India:
• In INR: -more than INR.50 Million
• In USD: -specified goods of specified harmonic code number (167 good) by
specified exporter and importer.
Other country:
• In convertible currency, No value limitation and not restricted goods by GON
9. Import: Custom-wise Provision
Bi.Bi.Ni. form no.3:
• 3 copies; 1 copy to be reported to NRB at the time of issuing LC
• Full value of LC
• Forecasting the FCY liability and import related information
Bi.Bi.Ni. form no.4:
• 4 copies; 1 copy to be reported to NRB
• At the time of sending payment or releasing goods from custom
• Full Invoice (commercial) value goods
• Inflow of goods and outflow of foreign currency.
• To be reported in 90 days, if not returned from custom to LC issuing bank
10. Import: Custom-wise Provision
Custom Margin :
•2% for industry and 10% for trading firm
•Used for custom duty at the time of sending payment of releasing goods from custom
purpose
•Mandatory of LC,TT,DAP,DAA
•Forecasting the FCY liability and import related information
Custom cheque:
•Issued at the time of sending payment/releasing goods form custom
•Included along with Bi.Bi.Ni.4
•Major information are to be mentioned in the reverse of cheques.
•Sufficient balance to be mentioned to debit the margin account.
•The features of cheque are to be complied with other wise Rs.500 fine to be charged.
11. Draft/TT: Cash in Advance
• In case of INR, Up to INR. 50 million
• In case of USD. USD up to 35,000.00 or its equivalent
• Performa invoice with HS code and name of custom point
• Draft/TT to be sent in the name of supplier only
• Limit is USD 35 thousand or equivalent convertible currency for
each time
• BCI report is not required for more than up to the limit of Draft/TT
• Next payment should not be sent to the same beneficiary without
ensuring that goods under previously sent TT have been shipped.
12. Draft/TT: Import by Draft/TT
• Multiple payment up to the ceiling of USD.35 thousand can be sent
under the condition that single shipment to be made.
• Self declaration form application to be received declaring that TT has
not been remitted in last 7 days and there is no goods remained to be
shipped from the same beneficiary
• Goods to be imported/entered within 90 days from the date of
payment made.
• Bi.Bi.Ni.3(ka) to be obtained and Bi.Bi.Ni.4(ka) to be issued
• Security margin to be obtained
• No credit payment and must be sent TT before shipment.
13. Import from India: Under Global Tender
• Can be paid in convertible currency for goods and service import
• IGST free tax invoice is not required
• Freight and insurance can be paid in convertible currency imported
by entity applying public procurement act 2063.
• Import by Agriculture Input Company, National Seed Company and
National Trading Corporation from Indian party under global tender,
seeds/fertilizer manufactured and shipped from third country can
sent payment as convertible currency to Indian firm/company
14. Import: Other Provisions
Goods Vs. Services
• Open Account, Cash in Advance, Documentary collection and LC
• LC for import of goods and services
Global Tender vs. Other
• No restriction on currency, BCI,
From India vs. Other Countries
• Currency, payment mode, payment ceiling
Government Entities vs. Others
• Flexibility in currency, regulatory recommendation, limit and restriction, custom point,
custom margin, BCI, Service LC approval for GON Project.
Industrial vs. Trading Purpose
• Credit term(Usance/sight), FCY Loan, Margin of 2% and 10%
• Import from India in USD.
15. Import: Services (Required Documents for Payment)
▪ Registration certificates,
▪ Tax paid documents
▪ Audit report
▪ Agreement and invoices
▪ Board decision and commitment letter
▪ Work completion documents
▪ Regulatory body recommendation, if applicable
▪ Request letter
▪ Any, other relevant documents
16. Import: Services (Payment)
Convertible Currency;
•Bank can provide exchange facility up to USD 3 thousand based on relevant documents.
•Recommendation from regulatory body is mandatory for service payment of USD.3-10
thousand by Bank
•Service payment more than USD.10 thousand can be made after obtaining approval from
foreign exchange department along with recommendation for concerned regulator
•Prior approval from department is required to obtain service from abroad for more than
USD 50 thousand
Indian Currency;
•INR.100k bank itself with relevant supporting documents
•INR.100k to 3000K Bank itself with recommendation from regulator
•Above Irs.3000K by NRB along with recommendation letter
•If there is no recommendation form regulator for above 100K, by NRB
17. Export Provision
Export Provision: Cash in Advance; Advance Payment Received/APC
•APC to be issued by banks based on PI, agreement and other supporting
document along with advance received details
•To be issued by FCY receiving banks
•Proceeds of APC and CAD can applied for FCY account operation provisions
•APC to be issued in the currency of export invoice under convertible currencies,
irrespective of FCY currency receive
Letter of Credit
•To be certified by LC receiving bank (for custom purpose) under negotiation or
collection of export documents
•Export LC can be advised to another banks
Documentary Collection: CAD
Open Account: No
18. Export Provision: Export Incentive
Export Incentive:
•Export Incentive working procedure issued by GON.
•To be provided on the basis of same guidelines
•Incentive is 3% for value added of at least 30% and 5% for Value added of at least
50% on specified goods
•Exporter to submit application along with export related required documents to
commercial banks
•Commercial banks verify the documents and request for reimbursement to NRB
•NRB makes the reimbursement through Export Incentive account within 7 days.
•The amount in the account is deposited by MOF.
•The list of goods for export incentives are periodically updated by
•MOICS and mentioned in the annex 1 and 2 of working procedure.
19. Forex Facilities: Passport
Bank shall provide exchange facility to Nepalese citizen travelling
abroad
on the basis of valid passport issued by the GON & confirm Air Tickets.
Exchange Facility:
•USD 1500 or equivalent for passport holder
•USD 500 or equivalent for children having no separate passport
•USD 200 or equivalent for each passport holder going for foreign employment with
approval from DOL
•USD 1000 against the travel documents issued by GON for each person.
•Traveler can get FCY on every visit
•The Limit of passport facilities shall not be applied for the official/government visit.
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20. Forex Facilities: Passport
• Up to USD 500 for every visit subject to maximum USD 1K in every FY for travelling by land
having VISA (China and SAARC countries except India)
• Endorsement by respective authority is compulsory while providing passport facilities
• PANis compulsory for providing exchange facility more than
USD.5000 for health, education and migration.
Settlement Expenses for Immigration Visa:
• USD 5000 for first time travel as immigrant visa.
• It also applies to children having no separate passport
• Does not apply for those who obtained such visa staying in abroad or not received such
facility at first time visit to abroad.
• Need copies of confirmed ticket, valid passport and visa
20
21. • If insufficient P
. Facility apply to FEMD : PAN, Need Amt.
• Trade Promotion: Up to $5000/visit
• No Limit for official/formal visit : PSE, BFIs….
• Encouraging up to $500 cash rest card/Draft
• Things to be considered while providing PF
• Application according to Annex 7.1
• passport facility Record into Passport
• confirmed Air Ticket, Visa,
• must be verified with original
• Xchange Facility only from BFIs
21
Forex Facilities: Passport
22. • Institution NO FCY earning and FCY Account : Can be provide, as per demand based on written request to
employee of BFIs, Govt. Corporations, NGOs
• Application according to Annex 7.6
• Having FCY Account :
Forex Facilities: Training, Meeting etc.
22
FC Earning
(Yes)
Maximum days/FY Hotel & food
Exp./Day
Ent'ment, casual exp./Visit
A/C Status A/C (Y)* A/C (N) A/C (Y) A/C (N) A/C (Y) A/C (N)
0-3 lakh 90 45 450 300 1000 400
3-7 lakh 90 550 1500
Above 7 lakh 90 650 2000
3-5 lakh 55 350 500
5-7 lakh 65 400 600
7-10 lakh 75 450 700
Above 10 lakh 85 500 800
* If require balance is not in account, eligible as A/C (N)
Note: Facility is not allowed to exceeding the earning of Current or previous FY
23. FCY Payment to India through commercial Bank :
•International org., NGOs, commissions having FC Accounts can pay
for services taken from India in FC.
Repatriation of VISA charge:
•CBs have authority to repatriate Visa charge collected in NPR upon
request of Embassy
Exporters’ FC amount to be deposited in their FC account :
•Branch/Contact/Exhibition office or stall for Exporter as necessitate
amount and account opening for collected (sales) amount
Foreign Employment Entrepreneur:
•Visa Charges and commission payment with proper dox
Forex Facilities: Others Arrangements
24. Forex Facilities: Firms/Companies - Nepal
Abroad Export Import Orgn.
Recommendation as Tax paid in previous year
Min 10 Lakh: "Ka"
• Tra.Exp upto $10K for only 1 person
Min 5 Lakh : "Kha"
• Tra.Exp upto $ 7K for only 1 person
Min 2.5 Lakh: "Ga"
• Tra.Exp upto $ 5K for only 1 person
Firm, coy, person : Misc Purpose
•Max 10K by Draft/TT
•Documentary Evidence
•Beneficiary must firms, co.
•Not allowed for capital a/c
•BFIs self expense, member, services
•Medical Treatment up to 10K/p.a.
•Satellite Lease up to 100K/p.a.
•Aero engine parts repair: 100K advance
payment
•Fuel for Nepalese Airlines: 100K Draft/TT,
Swift
25. Forex Facilities: Leasing of Machinery & Tools/ Lead
Organizer operating misc. program/Tour Package
Leasing of Machinery & Tools
and Lead Organizer Program
Machine lease
(India): Up to INR
100K annual
Lead organizer get
xchange facility to
operate program in
abroad
Amount for Nepal
program can’t
repatriate
Evidence of
remitting fund must
be presented
Reco. from related
regulators
Agreement
between parties
Package Tour
Tour operator:1000 on behalf
of client
Mansarobar, Tibbet: Max $ 500
• Min. IC 1 lkah remit from Indian Tourist
• Min. IC 50K expensed as hotel invoice
26. Exchange facility for Immigrant Visa
• Settlement Expenses to Nepali Citizens
• Up to $5000 per person
• Only for first (initial) time
• Plus Passport Facility
• Child w/o passport also available $ 5000
Types of visa
• Immigrant visa (USA & CANADA)
• Visa highly skilled migrant program and Visa Settlement-AF (UK)
• Permitted to remain in Australia indefinitely visa (AUSTRALIA)
26
Forex Facilities: Immigrant Visa
27. Forex Facilities: Higher Education
Other Countries
•NOL
•Dox, Beneficiary
Institution
•Tuition Fee and Living
expenses, Accommodation
if not disclose, as per
prescribed
•Visa and insurance charge
for dependant
•Draft/Swift/TT
•Cancel Draft/TT if Visa
India:
• FCY in case of int'l quota- Fee
• If parents having FCY account can be debit up to education
fee and accommodation
• Otherwise IC
• Accommodation in IC
Country Annual $
Bangladesh , Pakistan 2500
China, Malaysia, Thailand, Philipines 4000
Singapore, South Korea 6000
Canada, USA, Aus, European Countries 8000
Others 5000
28. Cash & Exchange and NG and offices
Nepalese citizens cash limit
•up to $1500 (with source:
income from foreign
employment, business or
exchange change saving)
•Cash hold or deposit in
account
•Exchange up to cash $3000
• 1500, 3000, 5000???
•Exchange of Gift and Tips up
to $500
X'change Facility to NG & Office
• With valid document
• Charges, Member fees
• Repair, Ad, lease payment
• Transport, Vsat, Postal,
• Legal and consulting
• Techinal services
• PPA
• Re-insurance premium
29. • Travel, treatment, study and pilgrim purpose as per Bi.Bi.ni.6(INR)
• Cash up to INR 25K but to be encouraged to use instrument card or TT
• For medical treatment purpose, cash up to INR 50K can be provided based on recommendation
from registered doctor of Nepal.
• Additional amount more than INR 25K can be provided based on relevant documents, application
and by payment instrument only.
• Treatment expenses in the name of hospital and tuition fee in the name of education institution,
Amount to be remitted in the name of institution except personal expenses.
• One time facility for one person and previously provided exchange facility related documents to be
furnished for providing next facility to same customer
• Exchange facility can also be provided to close relatives or family member in case of
medical
treatment or study purpose.
29
Forex Facilities: INR transaction Facility
30. • To be issued from respective account
• To be issued for using the specified limit only
• Cannot be used for capital nature expenses
• Can be used for 15 thousand in one day to the extent of 1 lac
in a month
• Can be added to card for additional amount based
on substantiated document
• Regular withdrawal having suspicious nature of more than 1
lac every months to be reported to NRB after blocking
that cards.
• Abnormal transaction of card to be reported to NRB
after blocking those cards
• Exchange facility should not be provided for capital
related transaction like buying Indian company’s insurance
policy, real estate, capital market instruments'
• Not provided exchange facility to open account in Indian BFIs
• Not allowed to repay loan, interest, investment return or
dividend without prior approval form NRB
is limited to 1 lac for single or multiple
transactions. This limit is not applied for medical
and hotel related expenses.
•Need to issue Indian currency purchase and
sales receipt.(ICPR/ICSR)
•Not allowed to carry, hold and transact for
Irs.200,500,1000 and 2000 notes.
•Exchange, carry and holding of IRs up 100
denomination notes are not banned.
•Nepalese citizen are not allowed to keep and
carry IC while going and coming from abroad
except India
•IC related transaction(cash, TT and credit card)
are not allowed to other people except with the
citizens of Nepal and India
•Exchange facility should not be provided for
any purpose against the prevailing law.
•Commercial bank branches located in the
boarder area can open nostro account in Indian
bank of boarder area to smoothen the payment
mechanism and reduce the use of physical cash
30
Forex Facilities: Debit, Credit cards
• Upper limit for Pos or other payment instrument
31. FCY Bank Account: Domestic
FCY Account Opening
•Eligibility: All having source of FCY (Donation,
Gift!).
•Account Types: Current, Savings, Call, Fixed
(Special: Foreign Institutions & NRN).
•Allowed FCY: All 20 currencies, IC!
•KYC, AML/CFT, FERA, FIRA.
•Cash deposit above $5K: Customs
declaration!
•Tourists: Visa period.
•Joint account: Yes. One of them to have FCY
source.
•Yuan: Special Case! (Interchangeability,
except Yuan -> Other CFCY).
•Licensed entities (Money Changers, Remittance
Companies etc.): Only up to validity of license.
•Remittance Companies: Also INR account!
• CFCY account balance up to 15 days.
• INR account balance up to 7 days.
Withdrawal/Debiting the Account
•Payment in CFCY to payee, except Nepali
(in NPR) & Indian (INR).
•Restriction in Yuan account: Payment in
other CFCY.
•Withdrawal of cash CFCY:
• Diplomats: allowed.
• Employees of diplomatic missions: $500 per
month.
• Others: $500 for foreign visit only. For
more, approval by BM.
•Service purchase ceiling to Nepali: $15K
p.a.
•FCY earners visiting abroad: $15K p.a.
•Nepalis earning FCY by working in
international organs: $15K per time or
$20K p.a.
32. FCY Bank Account: Domestic
CFCY Fixed Deposit Account
• Foreign institutions & NRN.
• Tenor: Minimum 2 years.
• Currencies: USD, EUR, GBP
, AUD and CAD.
• Return of principal & interest: Same currency & same country, but
withdrawal allowed also in NPR.
• Repayment only after maturity, but prematurity allowed after 2 years.
• Minimum deposit: $10K.
• KYC, AML/CFT
, other legal provisions
33. FCY Bank Account: Abroad
BFIs (also called Agency/Nostro): NRB's approval
•Approval: Currency, name of bank, credit rating etc.
•INR and CFCY.
•Interchangeability except CFCY to INR (selling CFCY to
buy INR).
•INR: Current account only.
•Indian Bordering Towns: BFIs & Money changers in
bordering towns: Nostro a/c in INR with
• Indian banks of bordering town, with NRB's
approval.
• Deposit through instruments only.
• Withdrawal: Cash also allowed for the purpose of
public, but should promote use of instruments.
• Transport, Security & Insurance for bringing cash
in
Nepal: Own responsibility!
• Provincial Offices also allowed to maintain the
Firms, Companies and
Institutions:
•With approval from NRB.
•Currency: FCY.
Eligibility:
•Remittance companies.
•Foreign outlets of Nepali
companies: For revenue
collection.
•Industries/enterprises for
exhibitions: For revenue
collection (But bring in to Nepal
within 30 days or return)
34. FCY Bank Account: Abroad
and Transaction Chinese Yuan
Nepali Citizens:
•FERA, 2019: During foreign stay,
bring in Nepal within 35 days of
return.
• Currency: FCY.
• If wish to continue after
returning to Nepal, notice to NRB
within 35 days.
•Nepali visiting abroad allowed
up to visit period.
• But exchange facility from Nepal
being the only source: Bring in
within 30 days of return.
• Though a/c can be opened in
Nepali BFIs from such funds.
BFIs:
• BFIs allowed open a/c with Chinese banks in Yuan: NRB's
approval
• Sell CFCY -> Buy Yuan -> Deposit in Yuan a/c in China.
• Purchase of Yuan allowed: Not only from Chinese but from
others too (also
• by licensed entities along with BFIs).
• Such purchased Yuan can be sent to deposit in Chinese banks
(BFIs).
• Settlement between Nepali & Chinese traders also in Yuan.
• Account in Yuan (in Nepal): Export income, loan & FDI in
Yuan.
• Education exchange facility to Nepali also in Yuan.
• Yuan a/c holders in Nepal: Payment in Yuan as per prevailing
laws.
• No conversion of Yuan into other CFCY.
• Yuan cards: Payment in NPR & settlement through Yuan a/c in
China (BFIs).
❖ For e.g.: Chinese tourists cards -> payment in NPR ->
Customer's Yuan a/c debited in China -> Nepali bank's Yuan
a/c credit in China.
Others:
35. Overview of Foreign Direct Investment (FDI)
• According to Foreign Investment and Technology Transfer
Act (FITTA) 2075, FDI means
• Investment in shares of an industry;
• Investment through purchase of shares or asset;
• Investment through lease of airlines, ships, machineries
and equipment;
• Technology transfer i.e. licensing of foreign intellectual
property, franchising, management,
• advisory and market services;
• Investment in capital investment funds;
• Investment in secondary stock market;
• Investment by issue of securities in foreign stock markets;
and
• Re-investment of profits.
• Minimum amount for foreign investment approval is Rs.
50 Million.
35
Institutional Arrangement :
• Department of Industry (DOI),
• One Stop centre under DOI,
• Office of the Company Registrar,
• Investment Board of Nepal,
• Industrial Investment Promotion
Board,
• Nepal Rastra Bank,
• Ministry of Industry,
• Banks and Financial Institutions.
36. FDI Approval Process in Nepal & Role of NRB
• Obtain approval of DOI for foreign
Investment
• Incorporate the company at the Company
Registrar’s Office
• Register the Industry at DOI
• Registration at Inland Revenue Office to get
Permanent Account Number (PAN)
• Others, if applicable (such as
Trademarks/design/patents reg. in DOI )
• Obtain approval of Nepal Rastra Bank to
bring convertible currency to invest in
approved company ( only for Brown field
investment)
• Recording of Foreign Investment by
approved industry at Nepal Rastra Bank.
• Approval for Repatriation at Nepal Rastra
Bank. 36
Role of NRB
• Provide approval to bring convertible currency
to invest in approved company.
• Recording of Foreign direct Investment.
• Provide approval for Repatriation
• To provide suggestion to different regulatory
institutions on the matter of FDI
• Formulate, issue and implement different
policies, guidelines, rules, regulation related
to FDI.
37. FDI Approval Process in Nepal
Following amounts are entitled to be repatriated :
•Sale of the share of foreign investment as a whole or any part
thereof
•Amount received as profit or dividend from foreign investment
•Amount received as the payment of principal and interest on any
foreign loan
•Amount received under the agreement for the technology transfer in
such currency as set forth in the concerned agreement as approved
by the DOI
37
38. FCY Loans: Domestic
• Only through Commercial Banks.
• Eligible borrowers: Need of FCY loan &
source of FCY income (in general!).
• Manufacturing Industries:
• To import raw materials.
• Short term loan.
• Covered by export LC.
• Tourism, Export Industries,
Hospitals:
• For import purpose.
• FCY earning source.
• Carpet Industries:
• To import wools.
• Tenor: 6 months.
• TEPC recommendation.
• Repayment allowed in NPR.
Travel, Tours, Ticketing, Airlines and Cargo:
•Short term loan or overdraft.
•Tenor: 3 months.
•Finance A/R in FCY (source of FCY!).
Renewable (solar, hydel, wind) Energy Projects:
•Investment requirement in FCY.
•Import financing: Only through LC.
•Short term to medium term loan.
•Can be repaid in NPR i.e. without own source of
FCY.
Infrastructure Projects:
•Highways, cable car, railway, funpark, airport,
flyover, tunnel etc.
•Import machines and payment of services abroad.
•Service payment: Approval from NRB
39. FCY Loans: Domestic
Exporters:
•Readymade garment, woolen carpets, pashmina,
handicrafts etc.
•Pre-shipment & post-shipment.
•Interest: LIBOR+1.25% p.a.
•Repayment in FCY, normally!.
•Pre-shipment: Repayment allowed in NPR in case of
no export.
•Post-shipment: In case payment could not be received
due to discrepancies in documents: repayment in NPR
(the short fall amount, else from a/c balances!).
•Also eligible for Deemed Export case.
Export refinance from NRB:
• LIBOR+0.25% p.a.
•Loan in multiple of $100K.
COVID-19 Special Provision: Repayment in NPR
for all!
FCY Bank Guarantee
FCY BG to Abroad:
▪To import goods and services.
▪Denominated in INR or CFCY.
▪Remittance companies: To
principals, prefunding, ≤ $200K.
▪Agency of foreign airlines.
▪Export of goods and services (BB, PB,
APG).
▪No BG shall be issued to borrow
foreign loans!
▪Monitoring by BFI regarding import
and export.
FCY BG in Nepal:
❖Issuance against counter guarantee.
41. Case 1: For Explanation
• “A” had established a network of companies/firms (corporate
entities) to facilitate money transfer and use the network as cover.
• Controlled / operated bank accounts in various jurisdictions
through these companies/firms.
• His family members and close associates handled these accounts
and were located in various jurisdictions.
• Source of this money was Narcotic Drug Trafficking, Tax Evasion,
Commercial/trade finance related Fraud and Smuggling.
• “A” and his associates devised trade mechanisms for laundering the
proceeds of crime.
• “A” and his associates utilized the services of banks, cash couriers,
Money Service Bureaus (MSBs), alternative remitters (hawala
operators) and various trade finance mechanisms to move funds.
42. • To remit part of the proceeds of crime to his home in India, “A”
while in Dubai, tied up with Indian Exporters Exporters (E1, E2 &
E3).
• The said exporters overvalued the exports and earned export
incentives. Under the Indian Law, such export incentives are also
Proceeds of Crime.
• Export goods were chosen depending upon whether such goods
were covered under the export incentive scheme.
• “A” in Dubai formed his associate companies (A1, A2 & A3), which
on paper acted as importers and then sold the imported goods at
lower (fair) value to the genuine importers. “A” opened L/Cs in the
name of A1, A2 & A3.
• Alternatively, “A” facilitated opening of L/Cs for importers I1, I2 &
I3 for commission and collected fair value of imports from the
importers but remitted the full L/C amount of higher value to E1,
E2 & E3.
43. • “A” also declared A1, A2 & A3 as notifying parties on
trade documents to facilitate payments by him to E1, E2
& E3 through open accounting for exports of goods like
Artificial Jewellery made to importers located in other
countries like Afghanistan.
• “A” forged documents for allowing exports of banned
goods like pulses from India. “A” antedated the contracts
to dates prior to the ban and imported such pulses into
Dubai for re-export to other parts of the world.
• He settled the differential amounts (profit on resale)
through alternative remittance system.
44. RED FLAGS
1.Movement of abnormally large sums of money in various
accounts of the individuals and companies which are not
related to the nature of their business.
2.Export Remittances Remittances received received from
third parties parties.
3.Settlement of accounts for trade between two countries
through a third country.
4.Overvaluation of export goods.
5.Introduction of notifying parties in trade documents
without adequate explanation.
46. Case for Practice
• The Beneficiary Y of a Letter of Credit presents documents to obtain
payment under the Letter of Credit.
• The Bank X refuses payment, because not all the documents listed in
the instruction have been presented.
• In particular, a” Receipt signed and proving delivery of the goods” was
listed as one of the documents to be presented, and was not
presented.
• The Beneficiary claims that payment is due in spite of the lack of this
document, because the delivery can be proven by other means.
• Is the Beneficiary entitled to obtain payment under the Letter of
Credit?
