Clarification on Know Your Client (KYC) Process and Use of Technology for KYC
Summary
This circular clarifies the Know Your Client (KYC) process and permits the use of technology for online verification. It outlines specific digital methods such as eSign, DigiLocker, and Video In-Person Verification (VIPV) for SEBI registered intermediaries. The document also mandates compliance with Anti-Money Laundering rules and directs stock exchanges to monitor implementation.
Text
Know Your Customer (KYC) and Customer Due Diligence (CDD) policies are the foundation of an effective Anti-Money Laundering process requiring every SEBI registered intermediary to collect and verify Proof of Identity and Proof of Address.
Provisions under the Prevention of Money-Laundering Act, 2002 and relevant SEBI circulars remain applicable, and the intermediary must obtain express consent before undertaking online KYC.
eSign service facilitated under the Information Technology Act is accepted to forward documents after digitally signing them.
An 'equivalent e-document' is defined as an electronic equivalent issued by the authority with a valid digital signature, including those in the Digital Locker account.
The eSign mechanism of Aadhaar is accepted in lieu of wet signatures, and cropped signatures affixed on online KYC forms under eSign are valid.
Investors fill online KYC forms and submit documents via App/website; details like name, address, mobile, email, and bank details are captured online.
Mobile and email are verified through One Time Password (OTP) or other verifiable mechanisms, preferably using numbers seeded with Aadhaar.
Aadhaar is verified via UIDAI; intermediaries must ensure investors redact/blackout Aadhaar numbers where authentication is not required and shall not store the number.
PAN is verified online using the Income Tax Database.
Bank account details are verified by Penny Drop mechanism or API using bank details from cancelled cheques.
Any Officially Valid Document (OVD) other than Aadhaar shall be submitted through DigiLocker or under eSign mechanism.
Officially Valid Documents include passport, driving licence, Aadhaar proof, Voter ID, NREGA job card, and National Population Register letter.
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Source: SecMarx — Clarification on Know Your Client (KYC) Process and Use of Technology for KYC. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.