Documentation, KYC and Compliance for Individual Forex Transactions
CDD for retail forex
KYC is risk-based, not a single form. For individuals, collect passport, PAN and Aadhaar as applicable, verify identity and address, understand purpose and source of funds, screen against sanctions and PEP lists, and refresh KYC periodically. Form A2 is the remittance application cum declaration; purpose codes drive reporting.
Documentation by purpose
- Education: admission or fee letter with institution details.
- Medical: hospital estimate or invoice.
- Travel: ticket, visa or itinerary.
- Gift or family maintenance: relationship and declaration.
- Employment or emigration: visa or contract. PAN is mandatory for LRS; a bank account is required; third-party remittances are generally not allowed unless a permitted exception applies.
Worked example
A customer wants to remit USD 15,000 as a gift to a relative abroad. Confirm LRS availability, obtain PAN, A2 declaration, the gift purpose code and a signed relationship declaration; screen names; check the financial-year aggregate and TCS. Do not demand a visa or ticket - the purpose is gift, not travel.
Traps
- Using Form A1 for an individual outward remittance; A2 is the retail form.
- Accepting a generic family purpose code without a declaration.
- Skipping sanctions screening because the amount is small.
- Treating KYC as one-time.
- Allowing a friend to fund a third-party remittance.