KYC is an industry-wide initiative and as the name indicates, it is a process through
which the mutual funds verify the identity and gain an understanding of their customers
& their financial dealings.
Over the last few decades, wrong and unlawful elements have manipulated the financial
system to fund criminal and unethical activities. In the past, lack of personal
verification during account opening has led to criminals opening fictitious accounts
and trading through those accounts for illicit purposes.
Consequently, government and regulators have developed a set of guidelines to prevent
and uncover such acts. As per the Prevention of Money Laundering Act, 2002, every
financial institution, bank and SEBI registered intermediary is required to gather
KYC information from customers for whom they are opening an account, making an investment
or handling a money transfer.
Information required for KYC compliance
- Completed KYC form
- Passport size photograph
- Proof of identity
- Proof of residence
- If you are an NRI, a copy of the passport needs to be provided along with the overseas
address proof
- If you are a new investor a mandatory In Person Verification (IPV) is required at
the time of submission of the KYC request.
Submission of KYC documents
SEBI has created a set of independent record keeping bodies called KYC Registration
Agencies (KRAs) to maintain an electronic record of investors and their KYC status.
As a customer, you need to submit your data and documents only once to any one of
the five KRAs (CVL | NSDL | CAMS | NSE (DotEx) | Karvy). Once you submit the KYC
form and required documents to one of the KRAs, you can track the status of your
registration through the KRA website. Once you have completed the KYC process, you
can open an account with any other mutual fund without having to go through the
process again. Thus, KYC is just a one-time requirement.
The cost of non-compliance
KYC is a mandatory requirement and non-compliance comes at a cost. No fresh investment
be it a purchase, SIP registration or renewal will be accepted without the completion
of the KYC formalities. In fact, non-compliance might even result in freezing of
accounts