Blog Article

What Is KYC?

The process of identifying a customer service user or investor based on personal information such as proof of residency, address, PAN, photograph, etc is KYC or Know Your Customer. This information helps service providers, banks and regulators in deterring identity theft, fraud, money laundering, risk, etc. The eKYC process has several advantages over the KYC process which has been covered in our article How Does eKYC Verification Work? Tokens, password and pin based, public key, symmetric key, SMS based, biometric, digital identity authentication, etc are some of the methods employed for electronic authentication. A large component of e-authentication that helps increase additional transactional security is multifactor authentication.

eKYC Compliance

Any formal market, such as stock, mutual funds, banks, etc. regulated by the Government (Central or State) has a mandatory KYC or Know Your Customer process. To be eKYC compliant means to comply with KYC norms for identity verification and validation. eKYC compliance is based on Aadhaar verification in India. The Government is also making Aadhaar eKYC verification mandatory for all important service offerings (such as PAN, telecom provider, voters ID, Post Office account, etc.). Which means Aadhaar will become the norm for obtaining any other document in India. Non-compliance can lead to restricted use of services or goods, limited facilities and cancellation of accounts.

How To Check If You Are eKYC Compliant?

You may already be eKYC compliant and you need to check online before applying for eKYC or KYC again. To check your eKYC details online, log on to the KRA website and type in KYC details such as PAN or Aadhaar to check eKYC compliance status. If you are eKYC or KYC compliant, then no further action needs to take place because it means that you have filed your eKYC documents correctly.

There are two ways to be compliant, namely:

1.Aadhaar-based eKYC

The eKYC facility can be used by individuals that are non-compliant and need to complete the Know Your Customer formalities. An individual can enter his or her Aadhaar number on the KRA website. After entering the OTP provided on the Aadhaar-registered mobile and Aadhaar number, you become eKYC compliant.

2. Aadhaar-based eSign

The Aadhaar-based eSign can be used to obtain a e-signature from a customer for the purpose of identity verification and authentication. A customer can affix his or her electronic signature on an electronic document for identity validation and eKYC verification which is done after the eKYC norms have been fulfilled. LegalDesk.com provides eSign services that enable individuals to electronically sign documents from anywhere and at any time.

eKYC Compliance Process

1. Register for Aadhaar
   Aadhaar is a 12 digit number that is collected to stores biometric and personal data of our every citizen of our country (over 1 Billion people). This identification service is provided by the Unique Identification Authority of India (UIDAI), which is a Central Government Agency. An individual will be required to visit an Aadhaar center at least once for card registration, application for the same can be done online. As more services come under the purview of Aadhaar, it makes sense for everyone to hold an Aadhaar card.
2. Fingerprint biometric or OTP
   For identity verification, a one-time password (OTP) will be sent to the Aadhaar registered mobile number. A fingerprint biometric scanner can also be used to verify the thumbprint of an individual or a retinal scanner for the iris, thereby verifying the identity of an individual. An OTP is more convenient though in case an individual may not have fingerprint scanning devices or capabilities, and half the time the fingerprint does not identify an individual accurately.
3. Multiple parties signatures if required
   An individual can get multiple parties to sign a document electronically, irrespective of their location. The individual can share the document with the respective parties and their eSign can be affixed to the electronic document. As mentioned earlier, this is made possible through eSign. An individual needs to be above the age of 18 to be able to electronically sign documents in India.
4. Download or share
   The document can be downloaded and saved for later use after all the concerned signatures are placed on the electronic document. Further, the electronic copies of the signed document can be shared with innumerable persons as per the need arises.

Periodic Update Of eKYC Details

Different companies, entities and banks have varied policies for eKYC compliance based on risk perception and what is stipulated by the Reserve Bank of India from time to time by way of official notification.

Some of these institutions require periodic updating of eKYC details based on risk perception to be eKYC compliant. KYC update norms are similar to the KYC or eKYC process done in opening a new account. KYC updates for bank account customers are required to be done at least once in two years for high-risk customers, once in 8 years for medium-risk customers and once in 10 years for low-risk customers. Customers perceived as low-risk need not be physically present while submitting updated KYC details such as a change in an individual’s residential address. Minors, however, are required to compulsorily provide an updated photograph upon attaining majority.

If a person fails to provide KYC documents at the time of the periodical update, then the bank has the option to close the account and in the case of telecom companies, limited or discontinued services altogether. Banks can impose partial freezing on a customer’s account giving the customer the option to close the account and withdraw the remaining balance within a stipulated time-frame. All the account holders can revive accounts through submitting KYC documents.

In-person Verification

In-person verification is the verification of an individual’s identity while that individual is physically present for such verification. It is time-consuming and a hassle for the parties involved, though such verification is more secure. In-person verification is not required to be carried out under the following circumstances (as per the SEBI circular on KYC requirements issued in 2016):

1. When identity verification is done through biometric authentication such as a fingerprint scan or an iris scan.
2. When identity verification is carried out through OTP on an individual’s Aadhaar enabled mobile number and the amount invested by an individual does not exceed INR 50,000 per financial year per mutual fund.

It is important to note that for all non-bank account holders (or walk-in) customers that are non-compliant with KYC or eKYC norms need to produce proof of identity and address while purchasing products worth INR 50,000 and above (to be compliant).

How Can We Help?

SignDesk.com is an online portal that enables companies to allow customers to electronically sign documents. LegalDesk.com provides eSign services to individuals as well as businesses and organisations. If you are looking for smarter solutions to improve your business, our eSign API might sound interesting to you. Contact us for a quote or further details.