KRA Validation activity

Validation of Existing Non- Aadhaar KYC

records by KRAs
 Validation of Existing Non-
Aadhaar KYC records by KRAs
SEBI vide its Circular dated August 11, 2023 had advised
regarding validation of all KYC records. Further with the Ref. no.
SEBI/HO/MIRSD/SECFATF/P/CIR/2023/169 dated October 12,
2023 from November 30, 2023 to December 31, 2023
In this regard, SEBI vide its email dated December 28, 2023 has
informed that considering the representations from Industry
Bodies and to facilitate the investors, the said deadline date has
been further extended from December 31, 2023 to March 31,
2024.
 What is the guideline ?
 Every KRA will undergo with a process of validation for the below details in KYC
of any individual :
1] PAN / Aadhar linkage
2] Name
3] Mobile/Email Validation
4] Address
 As per the current scenario , of above mentioned details currently KRA are able
to validated PAN/Aadhar, Name ( as per IT records) , Mobile/Email records in the
KRA. But for address , as of now the same is only able to validate with the Aadhar
as document.
Currently from the KRA side , Email/Mobile validation activity is already
implemented.
KYC which has been processed with Aadhar as an OVD , the same after due
validation will be with status “ KYC Validated”
For Non-Aadhar OVD cases , as the address will not be able to get validate ,
hence for the same the KYC status will be as “ KYC Registered”
Apart from any other documents which are under Non-OVD , status of the said
KYC would be “ On Hold”
 What are Official Valid Documents (OVD)
Officially valid document (OVD) defined as per Rule 2 (d) of Prevention of Money-
Laundering (Maintenance of Records) Rules, 2005 (PML Rules):
The passport
The driving licence
Proof of possession of Aadhaar number
The Voter's Identity Card issued by Election Commission of India
 Job card issued by NREGA duly signed by an officer of the State Government
The letter issued by the National Population Register containing details of name
address
Any other document as notified by the Central Government in consultation with
the Regulator.

Source - SEBI/HO/MIRSD/SECFATF/P/CIR/2023/169 October 12, 2023 ( point number 14)

 Impact of the guideline
 For the KYC wherein the same has been processed with Aadhar as an OVD , the status
would be “ KYC Validated” . With this validated KYC , the transaction can be carried out
across in industry without any further additional requirements

 For the KYC wherein the same if processed as Non-Aadhar but OVD documents , the status
of the said KYC will be as “KYC Registered” . With this status there will be no impact on the
ongoing transaction , but as due to it will not be allowed for portability hence client will need
to undergo for KYC process when he approaches different intermediary .

 Failing to the Validation of KYC , the KYC which are processed with Non-OVD documents ,
going forward it will convert to “ On-Hold” . And this may impact on the investment like –
New Purchase/SIP, Ongoing SIP Installments, Switches, Redemption , Brokerage payout on
hold , Dividend payout on hold.

 Further it would be suggested to process the KYC with Aadhar as an document to further
get the same as – “ KYC Validated” so that there is seamless processing

 Also for the KYC which are processed as Non-Aadhar but with valid OVD , further the same
are suggested to process for modification ( online/offline ) and submit the aadhar as an
document to get the same “ KYC Validate”
*KYC Validated – No Impact on ongoing txn. , Also no requirement of new KYC to be submitted
for fresh transaction .

*KYC Registered – No Impact on ongoing txn. , Due to portability will not happened so need to
submit fresh KYC accordingly if new transaction done in new AMC

*KYC Hold – Ongoing txn may suspend , not allowed to do new transaction , redemption payout
on hold , brokerage on hold , etc…
The data for the same , has already been uploaded for the FB
Registered client in the partner desk under
( as on 31st Jan,2024)

Customer Care -> KYC/Aadhar FATCA Status ->KYC validation pending

Further into the same , it would be suggestion that for all RI
Individual KYC , the same should be modified to Aadhar Based
documentation so that the KYC status can get modified to “KYC
Validated”

Further the KYC can be modified online through the Fundzbazar

Platform and Physical too.
Other Regulatory
Updates
 Validation of KYC
SEBI has mandated that KYC records of all existing client (who have used Aadhaar or other OVD)
shall be validated. KYC records where Aadhaar has been used as OVD at the time of initial KYC -
KRAs have sent email with a link to validate the Aadhaar.
For investors without email ID- must revalidate KYC by submitting physical KYC modification
request. KRAs would verify PAN (including PAN Aadhaar linkage), Name, Address, Email address
and Mobile Number. KYC status where all the attributes mentioned above are verified with official
databases would be updated as ‘KYC Validated’. KYCs, where any of the attributes mentioned
cannot be verified with official databases would be updated as ‘KYC Registered’.
SRI (SEBI Registered Intermediary) who is onboarding a new investor with the KYC status as
Registered would need to, perform a re-KYC and submit a modification request with all
supporting documents to the KRA for getting the KYC “Validated/Registered”. If the modification
request is put ‘On Hold’ / ‘Rejected’ by KRA, the SRI shall not allow them to transact further in the
securities market till the KYC status gets ‘Registered’ or ‘Validated’. Partners can refer to CVL KRA
communique no. 176, 182 & 184 for the detailed process of KYC validation.
 NPO (Non-profit organization)
Reference to PML Amendment dated Mar 07,2023, If the Trust, Society or companies as defined in
amendment is an NPO, then it must get itself registered in the DARPAN Portal of NITI Aayog
https://ngodarpan.gov.in . This has been made mandatory as per PML amendment dated March 07, 2023,
requiring the financial institutions, intermediaries to get the NPO entities registered in DARPAN before allowing
transactions.
Completing the NPO Darpan Registration process is necessary for making investments and other financial
transactions. “Non-profit organization” means any entity or organisation, constituted for religious or charitable
purposes referred to in clause (15) of section 2 of the Income-tax Act, 1961 (43 of 1961), that is registered as a
trust or a society under the Societies Registration Act, 1860 (21 of 1860) or any similar State legislation or a
Company registered under the section 8 of the Companies Act, 2013 (18 of 2013).
New accounts / folios will not be created for NPOs by the Mutual Funds, without such registration. MFs/RTAs
need a declaration from the NPOs along with the DARPAN registration certificate.
 All applicable Trusts/Societies/ Section 8 companies should submit the details in the NPO declaration form.
Other Trusts/Societies who do not fall under the new NPO definition should confirm that they are not falling
under the said NPO definition by submitting the NPO declaration form .
NPO declaration and NPO registration in DARPAN are required from existing as well as new investors who are
Trusts, Societies and Section 8 Companies.
 UBO (Ultimate Beneficial Ownership)

As per revised guidelines the controlling ownership interest % has been revised from 25% OR 15% to 10% for
Corporate/Trust, to consider as an UBO.
 If no individual is identified as UBO, basis the above threshold, then details of Senior Managing Official
(SMO) should be provided as UBO.
 The following UBO details are now made mandatory. a) PAN of UBO b) Country of Tax Residency of UBO c)
TIN (Tax Identification Number) d) UBO’s Date of Birth e) UBO PEP (Politically Exposed Person) information. f) %
of Controlling / Beneficial interest g) UBO KYC status as validated.
 Transactions will not be allowed unless UBO/SMO PAN is KYC Complied
 You can visit any of the KRA websites and check the KYC status of the UBO. E.g. visit the link for CVL KRA
(https://www.cvlkra.com/ ) . Go to KYC Inquiry > Search KYC > Enter PAN No > Verify CAPTCHA > Submit.
Wherever PAN is not applicable for UBO or SMO (E.g., If the UBO / SMO is a foreign national), TIN must be
provided.
The NPO / UBO declaration need not be submitted separately for each fund. These declarations are required
at MF RTA level (i.e., CAMS and Kfintech) separately. Once these are submitted to RTA, it will get updated for all
MFs serviced by that RTA.
 PAN verification for all new folios
AMCs are mandated to validate PAN with Income Tax to ensure valid and correct PANs are stored
in the investment. For this, AMCs push PAN and investors name through UTITSL/NSDL for
validation of PAN at Income Tax. This process will undergo change effective April 1, 2024 , as per
Income Tax directives. According to the change AMCs have to ensure below information is
collected for all the holders, Guardian, POA and UBO, if not already available and passed for
validation:

a. Name as per PAN card / Name of the PAN Holder (Mandatory)
b. Date of Birth / Date of Incorporation – DD/MM/YYYY (Mandatory)
 c. Father/Mother Name
The above verification will be done for following scenarios and for transactions reported across
all platforms:
 1. PANs which are not validated
2. PAN related NCT requests
3. Transmission
4. Minor to Major updation request
 Other Regulatory requirements:
Income Slab: Income Declaration is mandatory; we would like to highlight that investment applications are
submitted with the assumption that the information will be updated from KRA. However, KRAs do not capture
this information and hence if income slab values are not available on the investment application form,
transactions will be liable for rejection.
Tax Identification Number (TIN) for all NRI Categories TIN is mandatory, wherever investor has declared the
country of tax residency other than India in FATCA/CRS Declaration.
 Overseas address for all NRI Tax Categories: Overseas address is mandatory on the application form.
IFSC Code: IFSC code is mandatory for all folios. This also enables to complete the bank account verification
and third-party validation through penny drop mechanism.

 AMFI Declaration for joint holders - Declaration / confirmation of the 1st holder / other joint holders that the
name of the mutual fund distributor has been added in their mutual fund folio(s) with their knowledge and
consent
Say example : ARN in your name ,Your wife has mf investment ,First holder is your wife , And second holder
is you, Since you are MFD AMC want confirmation from first holder that she is fine being u as second holder