Why complying with KYC (Know Your Customer) is important
Under the Prevention of Money Laundering Act, 2002 (PMPLA) the Securities Exchange Board of India (SEBI) issued guidelines that require investors to follow the KYC or Know Your Customer norms.
These guidelines were brought in with a key purpose to keep illegal activities, like money laundering, bribery and suspicious transactions, at bay. KYC requires you to submit details like address and identity proof that include your passport, driver’s licence, voter’s identity card, PAN card, Aadhaar number, NREGA card, utility bills, ration card, or letter from the employer, bank manager of a scheduled commercial bank or an account statement with a verified signature.
Without KYC compliance, it is impossible for you to open a bank account or even invest in a mutual fund scheme. KYC is mandatory for services like opening a bank account, demat account, trading account, mutual fund accounts, online investing in mutual funds or a bank locker. At times your bank may ask you to update your documents depending on case to case.
AMCs or Asset Management Companies are required to formulate rules and implement customer identification in accordance with the Prevention of Money Laundering Act, 2002 (PMLA). The rules and regulations get updated from time to time, but what remains the same is the process of KYC is free for investors.
Having said that, you have many options to submit the form, one being submitting it to the asset management company you are planning to invest in and the other being to submit it to a Registered Transfer Agent or RTA such as CAMS, Karvy, NSDL, NSE and CVL.You also have an option of an eKYC through your Aadhaar number which is then matched with your PAN number for cross verification. Through eKYC, your investments are restricted to ₹ 50,000 per year for each mutual fund for OTP-based eKYC. However, if you want to increase the limit you would need to follow a proper KYC process which requires you to submit a physical form along with your signature on it.