The provisions of the Prevention of Money Laundering Act 2002 (PMLA) make it mandatory for all market participants to comply with the Know Your Client (KYC) norms. The starting point for KYC is your registered PAN card and you cannot do KYC without having a PAN card. You can do your KYC with any SEBI registered intermediary (broker, DP or mutual fund). Typically, there are two types of KYC. There is the normal physical KYC where all the documents have to be presented at the intermediary office in person for verification. The second method is e-KYC wherein the entire KYC process is based on your Aadhar. The e-KYC process is very simple and is entirely online. Purely with an e-KYC process completed, you can invest up to Rs.50,000 in mutual funds. However, if you want to invest beyond that then you need to do physical KYC and also in-person verification (IPV).
Who all need to get their KYC done?
Any existing investor in mutual funds or a person who proposes to invest in mutual funds needs to get their KYC process completed.
In case of joint applications in mutual funds investment, each of the applicants needs to ensure that they are KYC compliant.
In case of investment in the name of the minor, the designated guardian of the minor needs to be KYC compliant
In case of investments through a Power of Attorney, the holder of the Power of Attorney also needs to be KYC compliant
If a person becomes an investor in units by operation of law i.e. inheritance of units, transmission of units or transfer via gift, the recipient will have to become KYC compliant for the purpose of remaining a legitimate investor.
The process of e-KYC..
This is the simplest and the most efficient form of KYC, which is entirely electronic. The following is the process for doing your e-KYC..
The first step is to provide your PAN details. The system will automatically check if the PAN details are correct and if the KYC has already been done earlier.
The second step is the most important step. Here you are required to provide the details of your Aadhar. Ensure that your Aadhar has a registered mobile number attached and it is the same as the one used in PAN. Once you submit your Aadhar details, the UIDAI (the body that issues Aadhar) will send you a one-time password (OTP) to your mobile. You will have to submit this OTP number on the e-KYC screen to authenticate your Aadhar number.
The e-KYC system will also ask you for some additional information and once you submit the data will be sent to the CVL database for cross verification. Based on this data, the KYC Identification Number (KIN) will be generated. Based on this KIN, you can start investing in mutual funds. Remember, this KIN generated based on OTP authentication is good enough to invest up to Rs.50,000 in mutual funds. If you want to invest more than that then you need to visit the office of CAMS to complete the in-person verification (IPV).
The process of physical KYC registration..
The following are the steps to become KYC compliant via physical registration..
The first step is to download the KYC application form from the website of CVLINDIA.com. This form is also available on the website of all the mutual fund AMCs as also of the registrars like CAMS, Karvy, Sundaram and Templeton.
The next step is to provide the Proof of Identity. Remember, the proof of identity has to be provided in addition to the PAN card which is a basic requisite anyway. You can provide your passport, election identity card, pension card or driving license as proof of identity. Additionally, some other documents are also being accepted with proper attestation of a gazetted officer.
The third step is to provide the Proof of residence. This has to be distinct from the proof of identity. Apart from the normal government documents, you can also provide your sale deed, lease agreement, bank statement or telephone bill or electricity bill as an address proof. All address proofs must be self-attested.
An important step in the KYC process is the In-Person verification (IPV) which can be completed by visiting any SEBI registered intermediary, NISM/AMFI certified distributors who are KYD compliant and certain scheduled commercial banks.
The last step in the process is to submit your KYC form with the requisite documents at the nearest Investor Service Centre. Upon receipt, the KYC acknowledgement is issued and the database of CVL is accordingly updated.
KYC is an important part of the investing process. In case you are not KYC compliant, your application is likely to be rejected or even your existing units can be frozen. It behoves upon you as an investor to complete the KYC process at the earliest.