In-Person Verification ( IPV ) of KYC Documents

IPV stands for In-Person-Verification. It is used to verify an individual's identity by meeting them in person and confirming their KYC documents. In this article, let’s understand what IPV is, the history of IPV, the records required, and much more. 

What is IPV

We often hear about bogus bank accounts and issues related to duplicate PAN, ID, and so on. Biometric locks on Aadhaar could counter this to a large extent. Mutual fund companies, too, face similar issues, and they have come up with something even better – getting the investor to verify in person (IPV). IPV refers to In-Person Verification, a new prerequisite for mutual fund investors. 

To do this, your AMC will re-validate the KYC info you submitted online. You must meet the official representative from the fund house or distributor in person and present all the original documents.

In simple words, your passport photo affixed to the corner of the mutual fund form won’t be enough anymore. They need to know that a real person has applied.  

IPV In Detail

The Prevention of Money Laundering Act, 2002 (PMLA), came into effect from 1 July 2005. This Act was designed to ensure that no one could use investment tools to park their ill-gained wealth. Soon after the Act came into effect, the SEBI (Securities and Exchange Board of India) mandated that all intermediaries helping their clients with investments (including mutual funds) should adopt the Know Your Customer (KYC) policy. 

Additionally, intermediaries needed to formulate and implement policies in accordance with the guidelines on anti-money laundering measures.

Since January 1, 2011, KYC compliance has been mandatory for all investors. This is irrespective of the amount invested and includes the following transactions:

1. New / Additional Purchases
2. Switching Transactions
3. New registrations for SIP/ STP/ Flex STP/ FlexIndex/ DTP
4. Any SIP/STP/trigger-related products launched after the act comes into effect.

As a process in which a Depository Participant verifies and validates your documents, SEBI has mandated all investors to undergo IPV. If you are planning to make investments and open a Demat account or trading account, this is the first step.

Now every AMC and distributor insists on personal verification before activating an investment account with them. This rule principally applies to NRIs, People of Indian Origin and Sailors, regardless of their current place of residence. Many fund houses also allow this verification via video chat or recording.

How to Get Your IPV Done

To carry out IPV, the investors must produce the original copy of their ID and residential proof that they have submitted electronically to the fund house. Earlier, investors had to appear in person at the office, or someone would visit them at their workplace or home. However, the process is now more straightforward, as you can conduct a live authentication via video conferencing (such as Skype) at a pre-agreed-upon time. 

For this, you must have a fast internet connection. The officer might ask you questions regarding your documents. If they find the answers contradictory or a mismatch of documents, they can cancel your application.

IPV Authorization

Only the following entities have the authorisation to carry out IPV. You can visit the nearest office in person with the required documents.

1. KYC registration agency (KRA)
2. The AMC
3. Mutual fund agent
4. Mutual fund distributor
5. MF’s registrar
6. Transfer agent like CAMS or Karvy Computer Share Private Limited

The fund house will deem your KYC complete only after the In-Person Verification. You can invest in other mutual funds with this, as you need to do the IPV only once.

Why Add IPV to Regular eKYC?

E-KYC (Know Your Customer) is a value-added feature that many fund houses offer today to streamline the application process. Investors can access it and upload the necessary documents from the comfort of their home or office. As mentioned above, only SEBI-approved KRAs, such as CVL and CAMS, may complete e-KYC.

Most of these agencies have launched apps to do instant authentication, either using biometrics or OTP. There is an upper cap of Rs . 50,000 per investor per mutual fund for OTP verification.

Who Needs to Be KYC Compliant?

Since the IPV is part of the KYC process, let’s examine the categories of investors who need to be KYC compliant. The list includes:

1. Any individual(s) or non-individual(s) making an investment
2. Guardians investing on behalf of minors
3. Power of Attorney (PoA) holder(s), when making investments through PoA

Individuals who become investors due to an operation of law, e.g., transmission of units upon the death of the original investor. In this case, the claimant (s) will need to be KYC compliant before such transfers can occur.

Rules Set by SEBI for IPV

1. Conducting IPV of its clients is a mandatory process for all intermediaries.
2. The intermediary is responsible for collecting and maintaining confidential records of all customer details.l
3. Only the IPV performed by an SEBI-approved intermediary will be considered.
4. Once a KRA record is updated, all other intermediaries can access the details, eliminating the need for multiple verifications and data duplication.

Conclusion

IPV (In-Person Verification) plays a crucial role in ensuring a robust identity verification process to verify the person’s identity. It is mainly used for personal loans and credit card loans. Occasionally, when making investments, you may also need to complete an IPV.