Money laundering is one of the major menaces in any country’s economy. Financial institutions and the government are constantly on the watch for such illegal activities. Mandating KYC formalities for banking or investment transactions is an effective way to prevent this.
The primary objective is to ensure that the deposits/investments are made in the name of a real person and not fictitious one. It also helps to curb black money. Hence, Know Your Customer procedure is something that all mutual fund investors have to adhere to via a KYC Registration Agency (KRA). A SEBI-registered entity, KRA holds investors’ information in a single database that all fund houses and intermediaries can access. CAMS, NSE, and KDMS are few agencies many investors are familiar with.
As mentioned above, KYC is mandatory if you want to invest in mutual funds. SEBI & AMFI made this a rule in 2012. You need to do it only once (in the initial stage) before the intermediaries such as mutual fund companies, brokerages or distributors. Prior to 2012, it was compulsory to deposit the PAN copy to make investments of Rs. 50,000 and above in one financial year. Now there is no need to submit your PAN Card separately.
SEBI later announced a common Know Your Client process to add uniformity and consistency across SEBI-registered intermediaries. It became easy for these Portfolio Managers, Mutual Fund Companies, Venture Capital Funds and Stock Brokers among others to curb duplication of KYC documents. This makes it easier for investors to comply with it.
The mutual fund, if invested well, is one way to build your wealth faster. As a diligently monitored investment scheme, Know Your Customer is the first step to mutual fund investment. You may be already KYC-compliant though. It is now very easy to check your KYC status online. You can go to the official website of CDSL Ventures Limited and enter your PAN number to check if you are KYC compliant or not. If you are, there is no need to do it again.
Investors need to submit the following documents along with their Know Your Client application form and a passport size photograph.
a. ID Proof:
PAN Card, Driving License, Passport copy, Voter ID, Aadhaar Card or bank photo passbook.
b. Proof of Address:
Recent landline or mobile bill, electricity bill, passport copy, recent demat account statement, latest bank passbook, ration card, Voter ID, rental agreement, Driving License or Aadhaar card
The mutual fund industry has nominated and authorized CDSL Ventures Limited to conduct the Know Your Customer procedure. You can complete the process either offline or online.
i. Download the KYC application form from the CDSL Ventures website and fill in the details.
ii. Sign and submit a physical copy of the form to the specified authorities or intermediaries through whom you wish to invest in mutual funds.
iii. Attach the photocopies of ID proof, residence proof and a passport size photo along with the form.
i. Create an account on the KRA’s official website and fill in your personal details.
ii. Provide your registered mobile number along with their Aadhaar Card number and verify using OTP.
iii. Upload a self-attested copy of e-Aadhaar and accept the consent declaration terms for the eKYC.
If you have the Aadhaar Card, you can opt for Aadhaar-based KYC. You may request an official from the fund house or agency to visit you at home or office to collect the details. Submit a copy of your Aadhaar to the fund house or broker or distributor, and they will map your fingerprints on their scanner and link it to the Aadhaar database. By matching the fingerprint to that in the database, your details there will pop up. This means that they have validated your KYC before proceeding with your mutual fund investment.
To do your Know Your Consumer process manually, an investor needs to visit a KRA for the paperwork or at least send the documents by post. This can be tedious and will take at least 7 working days. However, you may complete your KYC online with ClearTax Invest, which will take only two minutes. The entire investment process itself will take only 7 minutes. The company will not use the information you provide for any other purpose.
In short, KYC should precede your mutual fund investment and is an important criteria. Do this once as a first-time user and you will be KYC-compliant for all your future mutual fund transactions.