Guide on Xflow compliance

This guide will explain how Xflow provides a 100% safe and compliant channel to receive cross-border payments into India. At a high level, 

1. Xflow holds the necessary licenses and registrations to collect payments outside India on behalf of its customers. This collection infrastructure is provided by top-tier banks like JP Morgan Chase and licensed providers like Currency Cloud. 
2. The cross-border transaction is orchestrated over the correspondent banking network (bank-to-bank transfer). 
3. In India, the transaction is processed as per the RBI guidelines by Xflow’s partner bank, JP Morgan Chase, India, a fully licensed AD category I bank.
4. The compliance leg of the transaction is managed by Xflow, JPMC India and the beneficiary’s bank. 

This guide will provide a detailed explanation on how Xflow compliantly collects funds outside India, and moves the funds into India. 

Xflow provides its users with virtual account numbers to receive international payments from their buyers. We call them Xflow Receiving Account. These Xflow receiving accounts are held with top banks like JP Morgan Chase or licensed providers like Currency Cloud. These banks and licensed providers choose to work with Xflow on the back of Xflow’s licenses, registrations and the prevailing regulatory framework in respective jurisdiction. At Xflow, we largely divide the world between USD collection and non-USD collection. Let’s take a look at both. 

• Regulatory framework: Xflow is a Money Services Business (MSB) registered with FinCen in the USA. This registration allows Xflow to collect payments on behalf of its customers in India as payee - agent under state money transmission laws in the USA. 

• Requirements: To provide collection facility to an India entity Xflow must do KYC and KYB as per the US Bank Secrecy Act, and add you as the payee with its banking partner under the payer-agent framework.  

• Collection Infrastructure: Xflow’s USD collection infrastructure is built with JP Morgan Chase, USA, i.e. the USD receiving accounts provisioned for you are created on top of a collection account held with JP Morgan Chase, USA.  

Regulatory framework: For non-USD collection, in addition to our MSB registration in the USA, we also leverage our Canada MSB license. This allows us to offer local payment methods in major currencies like the EUR, GBP, CAD.   

Requirements: In addition to the onboarding requirements for USD collection, we collect additional KYC details about personnel involved with the business

Collection Infrastructure: For non-USD collection, we have partnered with Currency Cloud, a fully licensed entity that works with top banks like Barclays. 

As you can see, cross-border payments is not a one-shoe-fits all operation. We have to act in accordance with the specific currency and corridor requirements. The meta point is that, Xflow provides a safe, compliant and secure collection infrastructure built in partnership with best-in-class banks and licensed providers in some of the safest geographies like USA and Canada.  

Once you issue a withdrawal instruction to Xflow, we instruct our banking partner JP Morgan Chase USA to make the payout to your bank account in India. After receiving this instruction, 

1. JP Morgan Chase, USA converts the funds into INR and credits its Vostro account held with JP Morgan Chase, India, a AD Category I bank. The funds are moved over bank’s proprietary rails for speed and predictability instead of SWIFT network. 

What is a Vostro account? 

For facilitating cross-border transactions, the RBI allows AD Category I banks like JP Morgan Chase, India, to open a Vostro account for non-resident banks like JP Morgan Chase USA. Please refer to point (v) in this Export Master Directions set by RBI.

https://www.rbi.org.in/scripts/BS_ViewMasDirections.aspx?id=10395

“...export proceeds against specific exports may also be realised in rupees, provided it is through a freely convertible Vostro account of a non-resident bank situated in any country other than a member country of Asian Clearing Union (ACU) or Nepal or Bhutan….”

1. JP Morgan Chase, India debits this Vostro account and initiates NEFT to your bank account and provides all the details of the foreign inward remittance to your bank. This debit to the Vostro account represents a confirmation of foreign inward remittance. See this RBI circular (Part III)  https://www.rbi.org.in/scripts/FS_Notification.aspx?Id=10198

“(ii) Debit to the account of a non-resident bank is in effect an inward remittance in foreign currency.” 

Essentially your end-to-end money movement is orchestrated by Xflow Payments on completely compliant banking rails.

Once you have received the credit from Xflow in your bank, the compliance leg starts. This leg is owned by JPMC India and your bank but will be managed through Xflow. 

To begin with, irrespective of the nature of the transaction and your bank, JP Morgan Chase, India will issue a document that we refer to as Payment Advice, to you and your bank with all the details of the foreign inward remittance. This enables you and your bank to complete all downstream compliance like claiming GST refunds/exemptions and EDPMS closure. This document is available to you on Xflow Dashboard and will be emailed to your bank’s centralised inbox as well. In practice, you are expected to share this document with your relationship manager/branch. 

We have outlined compliance steps for each type of export transaction and provided FAQs based on thousands of transactions below:

Goods Exports:

Once your bank receives the foreign inward remittance from JPMC India, they are supposed to create the IRM (Inward Remittance Message). Then upon your instructions, they will knock-off your shipping bill against the IRM. At this stage, either your bank will issue the eFIRC or you can self-generate eBRC through the DGFT portal.    

SOFTEX Exports:

Once your bank receives the foreign inward remittance from JPMC India, they are supposed to create the IRM (Inward Remittance Message). Then upon your instructions, they will knock-off your SOFTEX against the IRM. At this stage, either your bank will issue the eFIRC or you can self-generate eBRC through the DGFT portal. Using this eFIRC or eBRC, you can claim GST refunds/exemptions.  

Services Exporter:

Once your bank receives the foreign inward remittance from JPMC India, they will directly issue an eFIRC or Credit Advice. Using this eFIRC or Credit advice, you can claim GST refunds/exemptions.