The ‘Know Your Customer’ or KYC can be best defined as a standardized format or process that can be used to obtain the key information of an investor including his/her identity and the address.
As far as the requirements in Mutual funds and investments are concerned, there are multiple mutual fund KYC form variants depending upon whether the applicant is an individual/organisation (HUF, Institution, etc.) or is seeking a fresh KYC for new investor or updating existing KYC information with new data.
In the following section, we will discuss the general format of a KYC Form, using the CAMS KYC form as the general template.
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KYC – Know Your Customer
With the emergence of digital revolution, most financial activities and processes have moved from being paper-heavy to completely or largely digital paperless. However, this also has led to authorities being extra vigilant in preventing illegal transactions.
In order to prevent the misuse of online financial facilities, regulatory authorities such as the Reserve Bank of India and the Securities and Exchange Board of India came up with compliance requirements such as Know Your Customer (KYC).
- KYC is at present a mandatory compliance requirement for various financial institutions including but not limited to banks, NBFCs, mutual fund houses and various securities market intermediaries operating in India.
- At present, KYC rules mandate that a separate KYC Form of the applicable format be filled out in the case of both individual investors as well as institutional investors.
- Based on the type of KYC application form being filled out, one or more fields available in the form will vary however the basic information captured is remarkably similar irrespective of investor type.
- Nowadays, an online KYC registration form is also available and the fields that need to be filled out in the online form are also almost exactly the same as the original paper KYC document.
Why Know Your Customer Form is required?
A KYC form may have to be filled out by an individual investor or a non-individual investor (HUFs, institutional investors, etc.) in a number of cases. The following are some of the major instances.
New Investor Registration:
From all the existing reasons, New investor registration is the most common and important factor which requires the filling of a KYC form. The new investors, individuals or organisations are required to fill out and submit a new KYC form and also provide the relevant KYC documents in order to validate the application.
- The information filled out by the investor is initially collected by the 3rd party financial institution or fund house and subsequently passed on to the one of the KRAs – KYC Registration Agencies (CVL KRA, CAMS KRA, etc.) operating in India.
- The organization initially collecting the information is by law required to verify the key details of the registration as per the SEBI mandate and only then the Know Your Customer information can be passed on to a KRA such as CAMS KRA or CVL KRA.
- Further, the KRA subsequently uploads the data from the KYC document to a central database.
- The inclusion of the new KYC information on a centralized database ensures that going forward if the investor decides to invest with a different 3rd party securities intermediary or fund house, fresh KYC document will not have to be submitted.
- The benefit from this is twofold – while the elimination of fresh KYC form submission requirement multiple times reduces the hassle faced by the investor, it also reduces the duplicate effort due to multiple KYC requests of the same investor which freeing up organizational resources for other activities.
At present, a majority of new investors are opting for the much more streamlined online KYC registration completed through Aadhaar card and Aadhaar database. However, a paper-based KYC form can also be used by the investor seeking to get registered for mutual fund investments at a later date.
Moreover, it is important to note that the completely online system does have a limitation of transaction limits as per current rules, while the paper system allows investments to be made without any limits whatsoever.
Key details of both paper-based KYC form and the Aadhaar-based mutual fund KYC registration system have been mentioned in later sections of this page.
Change Details Registration:
Investor details may change from time to time and these details need to be updated on the KYC website to ensure the accuracy of the investor information available.
Some of the key KYC document data that is liable to change overtime includes – Name (legal name change e.g. after marriage), change of address, change of phone number/email id, change of registered bank account and so on.
What is the process involved in getting KYC done when there is any change in details?
In such cases, the data needs to be updated on the centralized database by replacing the old data with the new one. This necessitates the filling out of a new KYC form, which is similar to a fresh KYC documents, however, only the field which requires update is to be filled out in this case. After the details of the updated information are filled out, the KYC form may be submitted with either a KRA or a registered broker/3rd party financial institution operating in India.
The rest of the process is the same in terms of the initial check by the institution accepting the revised KYC form, then once validated, the updated information is sent over to the KRA to be uploaded to the centralized database. However, in this case, a new record for the investor need not be created as only one or more fields need to be updated in order to comply with the SEBI-mandated KYC requirements.
In case, the updated data has not been validated by supporting documents, the institution that is initially accepting the filled out form is required to communicate the requirement of additional KYC document(s) to the investor. Till the time the updated data, along with supporting documentation has been provided by the investor, the information currently available on the database will be considered as the correct one.
Sections in the Paper-based CAMS KYC Form
CAMS KRA is one of the most recognized KYC Registration Agencies currently operating in India. Many mutual fund houses and 3rd securities exchange intermediaries such as brokerages have tied up with CAMS KRA in order to benefit from the company’s robust system. All of these partner companies use the CAMS KYC Form for fulfilling the KYC requirements as per SEBI guidelines.
The following are the key fields that need to be filled out on the KYC document at the time of new registration/update of existing information.
Identity Details:
In this section of the KYC document, the basic identity information of the investor is captured. The data that needs to be filled out here includes names, father’s/Spouse’s name, PAN with a self-attested copy of PAN attached, DOB, Gender, Citizenship, Occupation and Residential Status. Most of these fields are mandatory and supporting documents need to be provided such that they match the information filled out on the form.
Proof of Identity Details:
Apart from PAN, attested copy of an additional proof of identity document is required to validate the details such as name and other details mentioned in the previous section.
The acceptable documents in this section include most Government Issued photo identity proofs such as Voter ID, Driving License, Passport, Aadhaar, etc. and the ID card number needs to be mentioned in the relevant field of the KYC document.
Address Details:
This entry needs to match the one mentioned on the Aadhaar card or other identity proof document (except PAN card as it does not have an address printed on it). In case the correspondence address is the same as the communication address, there is no need to submit additional documentation with the mutual fund KYC form.
In case the correspondence address differs from the permanent address, the permanent address needs to be filled out here. The valid correspondence address needs to be provided in Annexure A1 mentioned later.
Contact Details:
At present, a wide range of information related to mutual funds are sent via email and SMS instead of physical letters sent to the mailing address. Therefore the CAMS KYC form contains sections where you can fill out contact details such as email id and mobile number (without zero).
In case you decide to change these at a later date, make sure you submit a revised form filled out with the correct details at a later date. Additionally, you can also provide home and office landline phone numbers in the relevant sections.
FATCA/CRS Information:
The FATCA or Foreign Account Tax Compliance Act is currently a mandatory requirement that all mutual fund houses and investors need to comply with in case they are planning to make investments in India.
The reason for the introduction of this section of the mutual fund KYC document stems from the fact that many Indians are now investing overseas while increasing number of overseas investors are making investments in India which necessitates further action to ensure transparency of income from international as well as national sources.
The FACTA law is designed to help the Indian Government accurately estimate the income of these investors and ensure that they pay taxes on such income. Some of the key information to be filled out in this section includes “Country of Jurisdiction of Residence” along with “Country Tax Jurisdiction Code as per ISO 3166”, “Tax Identification Number/equivalent of the relevant jurisdiction”, “Overseas Address for Communications” and so on.
This section need not be filled out by resident Indian investors making investments in India in case they do not have any investments/earnings from overseas locations.
Details of Related Person:
As per existing rules, individual investors can nominate another person to carry out mutual fund investment transactions on their behalf, however, such an individual usually needs to be a family member such as parents/guardian, sibling, spouse, children etc.
In case you are investing in a fund on behalf of your child, you will have to provide your details including KYC Number in this section along with your name and registered address. In case you have are not yet KYC compliant, you will need to provide a certified copy of one among the various acceptable Proof of Identity documents mentioned on the KYC application form.
Finally, the form must be duly signed and dated by the KYC applicant with the place where it was signed prior to submission.
Annexure A1:
This section needs to be filled out in case the local/correspondence address differs from the permanent address of the investor. The correspondence address filled out in this section needs to be backed up with acceptable address proof documents.
Address proof documents acceptable for mutual fund KYC document include utility bills – post paid mobile, electricity, gas, etc.; bank/Post Office account passbook copy, etc. Unless such supporting documentation is provided, the permanent address in the earlier section of the mutual fund KYC form will be used as the correspondence address.
Annexure B1:
This annexure of the KYC application form needs to be filled out by existing KYC investors in case they want to add a new “Related Person” to act as their authorized representative or assignee for mutual fund investments.
Similar to earlier sections for related persons, details to be filled out here include Name, serial number of proof of identity document such as Aadhaar, Passport, Voter ID, PAN card etc. Copy of the document thus used also needs to be attached to the application form.
Also, applicant’s signature needs to be provided in case of both Annexure A1 and Annexure B1 along with date and place information to ensure the validity of the mutual fund KYC form.
Limitations of Paper-based Mutual Fund KYC
The main limitation of the original paper-based mutual fund KYC form is the fact that it was time-consuming.
- After the individual submits the completed KYC document, one or more individuals were required to go through each and every page of the KYC documents and accordingly verify that supporting documents provided were legible and acceptable as per the requirements of the established SEBI-mandated KYC procedure.
- Following the verification, if there were any mistakes in the paper CAMS KYC form, the investor was notified by the broker or KRA and a fresh application needed to be made, which would also undergo the same checks.
- Additionally, prior to the introduction of the centralized database, this procedure needed to be done every time an investor decided to make mutual fund investments with a new fund house or broker. Thus there were a high level of duplicate efforts involved in recording the same information from investors time and again.
Introduction of Aadhaar-based Online KYC Registration
Technology has introduced many changes in the redundant processes involved. This consequently extends to the way in which we get mutual fund KYC registration done in order to make new mutual fund investments.
Though the paper KYC system still exists, now investors have the option to opt for Aadhaar-based online KYC registration.
- The key requirement for an individual seeking to use this completely online KYC registration process is the availability of a valid Aadhaar card, which is slowly but surely becoming mandatory for various transactions in India.
- The new process uses UIDAI’s Aadhaar database to validate KYC data within seconds, making the process much smoother and a lot less time consuming than earlier.
- A prospective investor can avail the benefits of the new process from the convenience of his/her home or office and physical verification of KYC documents are no longer mandatory for new investors.
Investor can also check kyc status online by filling some unique details.
What are the benefits of the Aadhaar-based Online KYC Registration?
Some of the key benefits of the new procedure mutual fund KYC procedure are as follows:
- Faster processing times
- Errors are highlighted on the KYC form in real time allowing rectification prior to submission
- Allows investors to apply for KYC registration from the convenience of home or office
- Round the clock availability ensures further streamlining of the process
- Eliminates duplicate efforts for KRA as data gets synced with central database immediately
- Completely paperless hence an eco-friendly way to invest
The In-Person Verification of Online KYC Registration
The new online mutual fund KYC registration process does have a small limitation in the form of transaction limits.
For completely online KYC registration through a broker or a CAMS KYC form, an investor is allowed to invest only up to Rs. 50,000 per fund per year. In case an investor desires to make investments beyond this current limit, he/she has to carry out in person verification at one of the registered KRA centers that are located all over India.
On visiting the KRA center, the investor is required to carry his/her original valid Aadhaar card and then provide bio-metric verification via thumb imprint or retinal scan to get the in-person verification completed. Paper documents are not mandatory in this case however the individual investor does need to ensure that he/she has not locked bio-metrics on the UIDAI website for the process to work correctly.
Once the verification is completed and all other KYC form information is found to be in order, he/she can start investing beyond the online KYC registration investment limit of Rs. 50,000.