7 ways investors can prevent misuse of KYC documents - Business2Business

Know Your Customer (KYC) norms help financial institutions identify customers entering the securities market. Once you complete the Know Your Client (KYC) process through a SEBI registered intermediary like a broker, DP, mutual fund, etc, you need not undergo the same process again when you approach another intermediary.

In 2002, the Reserve Bank of India directed all banks to implement "Know Your Customer" guidelines for all new accounts. Furthermore, the provisions of the Prevention of Money Laundering Act of 2002 (PMLA) and the KRA Regulations (2011), have made it mandatory for all market participants to comply with the KYC standards. In this regard, CDSL Ventures Ltd (CVL) has put in place the necessary infrastructure to manage KYC in accordance with regulations.

As a result, all investors are now required to provide a copy of their PAN card (which acts as proof of identity) and to prove the address only once with any broker they do business with.

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However, looking at the possible recent instances of money laundering, frauds, etc, it is time for investors to be aware.

Here are 7 ways investors can avoid misuse of their KYC documents:

1) Investors must write the date and purpose of the submission on any document and sign them while submitting for KYC.

2) Moving on to the next step, it can also be clearly defined and written "Do not use for any other purpose" in the documents provided.

3) Depositories provide a platform for investors to directly reconcile their holdings with the one shared by DPs. The monitoring of balances ensures that investors' holdings are guaranteed.

4) In the era of the new millennium, many investors keep a lot of information on their mobile phones. In such cases, you must ensure that the information is password protected. In the event of loss or theft of mobile phones, access to data can be guaranteed to be restricted.

5) Make sure your mobile phone number/email ID is up to date with your Demat accounts so that you are informed of all updates and modifications. There are many financial institutions, including depositors, that provide these services.

6) Monitor your Demat account periodically. Dormant accounts may be targets of fraud. Therefore, investors must continue to operate and monitor their Demat accounts to prevent them from being inactive or dormant.

7) Digital acceleration in funding is expected to increase with the introduction of Aadhaar-based eKYC, especially during Covid. The Aadhaar-based eKYC will simplify the process, reduce overall client uptime, and make the entire process very secured.

Source: Economics Times

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