What is KYC (Know Your Client)

Securities and Exchange Board of India (SEBI) has issued guidelines under The Prevention of Money Laundering Act, 2002 (PMLA) which requires Mutual Funds to follow enhanced Know Your Customer (KYC) norms.

The Prevention of Money Laundering Act, 2002 ("PMLA") created under the aegis of Financial Action Task Force ("FATF") forms the core of the legal framework put in place by India to combat money laundering required to be followed by banking companies, financial institutions and intermediaries by administering KYC and other reporting requirements such as suspicious transactions reporting, etc.

Full form of KYC is "Know Your Customer". KYC is a term commonly used for Customer Indentification Process. SEBI has prescribed certain requirements relating to KYC norms for Financial Institutions and Financial Intermediaries including mutual funds to 'know' their clients. This entails In-Person Verification (IPV), verification of identity and address, financial status, occupation and such other personal information as may be prescribed by guidelines, rules and regulation.

Effective January 01, 2011, KYC has been made mandatory for all category of investors who wish to invest in the schemes of Aditya Birla Sun Life Mutual Fund (formerly known as Birla Sun Life Mutual Fund) irrespective of investment amount for all transactions.

KYC is essentially required if the customer wants to carry out any kind of financial transaction. After the verification process, the customer gives the financial institution that has conducted the test information about their identity, address, and financial history. This can aid the bank in knowing that the money the customer chose to invest is not one so for any money laundering related purpose.

There are two types of KYC verification processes. Both are equally good, and it is simply a matter of convenience whether one chooses to opt for one type over the other. Both are as follows:

• Aadhar-based KYC: This verification process is done online, making it highly convenient for those with a broadband or internet connection. Here, the customer needs to upload a scanned copy of their original Aadhar card. If the customer wishes to invest in a mutual fund, with Aadhar based KYC the opportunity to do so is only up to ₹50,000 a year.

• In-Person based KYC: If the customer wishes to invest more in mutual funds per year, they will be required to carry out an in-person verification KYC which is done offline. To do so, the customer can choose to visit a KYC kiosk and authenticate their identity using Aadhar biometrics or can call the KYC registration agency to send an executive to their home/office to carry out this verification.

It is important to note that there isn't just one KYC process, rather there are 3 you can opt for:

• Online

• Offline

• Aadhaar-based Biometric Authentication

For the offline process, here are steps to follow.

• Download the KYC form

• Fill it in with your details, specifically Aadhaar or PAN

• Visit the nearest KYC registration agency office (KRA)

• Submit the form with attached ID and address proof

• Furnish biometrics if required 6. Collect the application number and track your application status online

While this process is quite simple, it does require legwork and can take longer too. Here, KYC verification can take up to 7 days. Alternatively, the Aadhaar-based biometric authentication KYC process can be quicker as it has a few in-person interactions combined with online provisions.

• CVL KRA

• NSDL KRA

• CAMS KRA

• NSE KRA (DotEx)

• Karvy KRA

To further clarify, the above category of investors shall include:

• their constituted Power of Attorney (PoA) holder, in case of investments through a PoA;

• each of the applicants, in case of investments in joint names; and

• Guardian in case of investments on behalf of minor.

• If an individual becomes an Investor due to an operation of law, e.g., transmission of units upon death of an investor, the claimant / person(s) entering the Register of unit holders of the Fund will be required to be KYC compliant before such transfer can take place.

SEBI, based on feedback from investors, found that though certain basic requirements have been prescribed for Customer Due Diligence (CDD) or Know Your Client (KYC) for various SEBI registered intermediaries such as Mutual Funds, Portfolio Managers, Collective Investment Schemes and Venture Capital Funds, no specific KYC format had been prescribed. As a result, these intermediaries used different KYC formats and supporting documents. Thus, in order to bring uniformity in the Know Your Customer (KYC) process in the securities market and develop a mechanism for centralization of the KYC records and also to avoid duplication of KYC Process across the intermediaries in the securities market; SEBI vide Circular No. MIRSD/SE/Cir-21/2011 dated October 5, 2011, SEBI (KYC Registration Agency) Regulations, 2011 and Circular No. MIRSD/ Cir-26/ 2011 dated December 23, 2011 introduced the concept of KYC Registration Agency (KRA) effective January 01, 2012.

Investors can submit the common KYC Application Form along with all necessary documents as prescribed in the KYC Application Form with any SEBI registered intermediaries including mutual funds. Aditya Birla Sun Life AMC Limited (formerly known as Birla Sun Life Asset Management Company Limited), being a SEBI registered intermediary is a point of service for processing KYC applications. KRA shall send a letter to the investor within 10 working days of the receipt of the initial/updated KYC documents from the Mutual Fund, confirming the details thereof.

Apart from KYC, it is mandatory for intermediaries including mutual funds to carry out In-Person Verification (IPV) of all its new investors. The IPV carried out by any SEBI registered intermediary can be relied upon by the Mutual Fund. Aditya Birla Sun Life AMC Limited and NISM/AMFI certified distributors who are KYD compliant are authorized to undertake the IPV for Mutual Fund investors. Further, in case of any applications received directly (i.e. without being routed through the distributors) from the investors, the Mutual Fund may rely upon the IPV (on the KYC Application Form) performed by the scheduled commercial banks.

Please Click here to read the addendum dated December 30, 2011.

Existing KYC compliant investors of the Aditya Birla Sun Life Mutual Fund can continue to invest as per the current practice. However, existing investors are also urged to comply with the new KYC requirements including IPV as mandated by SEBI.

Steps for KYC Verfication:

• Step 1

  Download and Fill-up the revised KYC form (effective January 01, 2012)
  For Individuals: Please Click here for (New) KYC Form
  For Non-Individuals: Please Click here for (New) KYC Form

• Step 2

  Attach the following documents:

  For Individuals and Non-Individuals:
  Documents evidencing Proof of Identity and Proof of Address
  (List of requisite KYC documents for individuals and non-individuals are mentioned in the revised KYC Application Form)

• Step 3

  In-Person Verification (IPV):

  Complete IPV from any of the following:

  • Any SEBI registered intermediary (including Aditya Birla Sun Life AMC Limited)

  • NISM/AMFI certified distributors who are KYD compliant

  • Scheduled Commercial Banks (in case of any applications received directly)

• Step 4

  Submit the KYC form along with necessary documents at the nearest Investor Services Centre or any other intermediaries of KRA's as mandated by SEBI. Upon receipt and verification of the above documents, a KYC acknowledgement will be issued to each applicant.

Please Note:

• Investor(s) must note that KYC compliance is mandatory at the time of submission of each subscription request with the designated Official Points of Acceptance.

• Applications by investors without valid KYC are liable to be rejected.

• We strongly recommend all our Investors to be KYC Compliant by completing the KYC formalities, in accordance with applicable KYC rules in force from time to time, at the earliest so they can continue to invest with us smoothly.