COMPOUNDING OVER CRIMINALITY: THE 2024 OVERHAUL OF FEMA'S SETTLEMENT MECHANISM AND THE EROSION OF DETERRENCE A Critical Analysis of Section 15 of the Foreign Exchange Management Act, 1999

Abstract

The Foreign Exchange Management Act, 1999 (FEMA) replaced an older law called FERA. The authorities would bring criminal charges against anyone who violated the strict regulations which FERA established. FEMA distinguishes itself through its practice of imposing monetary penalties which function as punishment for regulatory violations. The RBI and ED can resolve particular cases under Section 15 of FEMA through payment of specified settlement amounts. The Foreign Exchange (Compounding Proceedings) Rules, 2024 became official through new rules which entered into effect on 12 September 2024. The new regulations replaced the previous set of rules which dated back to 2000. The RBI issued new instructions which became effective on 1 October 2024. The research investigates these new regulations which have been established. The new rules enable people to submit their applications through the internet while they can request higher monetary amounts and the authority decides penalties through different methods. The paper investigates whether these modifications actually make the process more efficient and quick or they reduce the severity of penalties. The research studies the Sanjay Jhunjhunwala v. Reserve Bank of India court decision as part of its investigation. The new rules simplify the process yet the system continues to experience a fundamental issue. People seem to believe that buying things will end their punishment because they can purchase their way through their offenses.