Does the term KYC get you shifting in your seat? Don’t worry! The term ‘Know Your Documents’ (KYC) may sound intimidating but that’s where we come in. Let’s simplify a few unresolved doubts and concerns!
Here are some things nobody tells you about KYC documents.
What are KYC documents?
KYC documents are important for anyone in the world of payments, banks and business. KYC is a reference to the regulated bank practices that are carried out to verify customers’ identities.
Companies use KYC documents to process, verify, collect, and classify a customer’s identity.
What is E-KYC?
E-KYC is the online procedure of getting your KYC registered. Yes, there is an online KYC procedure to avoid the physical effort of downloading the form and going to a branch. Electronic KYC (E-KYC) is possible for anyone with a valid Aadhaar card.
There are two main methods to use for e-KYC; biometric and OTP.
To use the e-KYC service, you have to authorise the Unique Identification Authority of India (UIDAI), to release your identity or address through biometric authentication to the respective bank branch or the business correspondent (BC) who helps you with this process.
The UIDAI then transfers your data online to the bank/BC. The information you provide through e-KYC will then be considered as an officially valid document and a valid process for verification.
How does KYC stop Money Laundering?
In a world increasingly being run by online transactions, money laundering is an immense risk.
Thanks to India’s effective KYC programme, this risk is handled through the clear and foolproof identification of a customer. The process of KYC allows companies to
- Know who they are doing business with
- Keep a track of all business clients
- Protect individuals who can be privy to financial crime practices
What if your KYC registration is rejected?
What process do you take up in case you received an email stating that your KYC registration has been rejected?
You might be a little surprised to see this question here, but more often than we think, KYC registrations do get rejected.
These three reasons are usually why:
1. A blurry or old photo.
The photo is your ID. This could be a driver’s license, a passport, a government-issued photo ID. You need to make sure the photo is clear and recent for the verification to come through.
2. Name Mismatch
The name used in the KYC registration is different from the ones in your legal documents. As Indians, we are prone to getting a little confused with our family name and our surname. Make sure you use the name that is present in all your legal documents only.
3. Incorrect ‘proof of address’
Check your address proof in all your legal documents and use only that for your ‘proof of address’ documents.
Do you have to complete KYC in order to invest in mutual funds?
Yes! If you are investing in mutual funds for the first time, you need to comply with the KYC norms – although just once.
The Prevention of Money Laundering Act requires first-time investors to comply with KYC registration rules to track the legality of funds used for investments.
Complete your KYC process by downloading the KYC form, available on the websites of all the fund houses.
There are three ways you can complete your KYC process:
Download the forms and other required documents and visit a nearby KYC branch.
A paperless process you can do online.
Follow these steps:
- Choose the fund house you want to invest in
- Visit the website and register your KYC details
- Enter your PAN details and choose the option that states that you are not KYC-compliant
- Give the required personal information like mobile number
- Enter your OTP after receiving it
And you are done. Your KYC is now complete.
Note: You can only invest up to ₹50,000 per fund house each year, with this method.
If you have your Aadhar number, and you want to invest more than ₹50,000, you will have to complete the process with an in-person verification.
Usually, a distributor is present to help you with this method.
- Scan your fingerprint to their separate fingerprint mapping device.
- Enter a few basic personal details
- After your fingerprint matches, your Aadhar photo pops up on the mobile phone screen
The photo is proof that your KYC is approved and you can invest in mutual funds.
Note: There is no limit on the amount you wish to invest here.
What is a KYC review?
KYC regulations set by the government require financial institutions to regularly review their entire book of clients and customers. While financial institutions ideally take a risk-based approach to review customers and clients, this method can vary depending on the region.
There are 3 tiers of customers who are reviewed depending on risk tolerance and regulatory guidance.
- High-risk customers: they are reviewed on a bi-annual or annual basis.
- Medium risk customers: they are reviewed annually or bi-annually.
- Low-risk customers: they are reviewed every 3-5 years.
What is a KYC remediation?
Know Your Customer (KYC) remediation is very important for any company that wants to protect itself from corruption, money laundering and terrorist financing.
Remediation fundamentally involves correcting a legal problem where a company could possibly be at risk. This will help clients whose bank account needs to be changed, who legally changed their passport details, updated proof of address etc.
Bonus: All businesses need to adhere to KYC compliances, and the process is not as tedious as it may seem. If you are looking to understand what basic KYC documents your business would need to produce when approaching a payment gateway or a bank, Instamojo has the answers for you.
The free online store on Instamojo allows you to easily update your KYC details in 2 minutes!
Watch this video to know more!