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Authorized Dealer Banks to Exercise Vigilance Against Unauthorized Forex Trading

The Reserve Bank of India (RBI) has advised Authorised Dealer Category-I (AD Cat-I) Banks to exercise heightened vigilance to prevent the misuse of banking channels in facilitating unauthorized foreign exchange (forex) trading.

 

The RBI had found instances of unauthorized entities offering forex trading services to Indian residents, promising unrealistic returns. These entities employed local agents to open accounts at various bank branches for collecting funds towards margin, investment, and charges and the transactions did not align with their stated purposes. Additionally, these entities enabled residents to remit funds in Rupees for unauthorized forex transactions through domestic payment systems.

 

To address this issue, AD Cat-I Banks were instructed to reappraise themselves of the various regulations, press releases, alert lists, etc. issued from time to time in this regard and report any accounts facilitating unauthorized forex trading to the Directorate of Enforcement, Government of India, for further action.

 

Banks were also advised to educate their customers to transact in forex only with authorized persons and on authorized electronic trading platforms. Banks were also expected to publicize the lists of authorized persons, authorized electronic trading platforms, as well as the ‘Alert List’ and relevant press releases issued by the RBI on their website.