Applicability of electronic documentation to kyc documents
APPLICABILITY OF ELECTRONIC DOCUMENTATION TO KYC DOCUMENTS
Features to be verified and documents that may be obtained from customers
Documents
Accounts of individuals
1. Photograph
Affix most recent colour photograph of size 30mm * 40mm & applicant has to sign across the photograph.
2. Identity Proof
List of documents that can be submitted as identity proof:
(i) Passport
(ii) PAN card- Self attested copy of the PAN card is mandatory. For all category of investors
(iii) Voter’s Identity Card
(iv) Driving licence
(v) Identity card (subject to the bank’s satisfaction)
(vi) Letter from a recognized public authority or public servant verifying the identity and residence of the customer to the satisfaction of bank
3. Proof of Address
List of documents admissible as Proof of Address:
Passport
Voters Identity Card
Ration Card
Registered Lease/ Sale Agreement Of Residence
Driving License
(Documents having an expiry date should be valid on the date of submission)
Utility bills like Telephone Bill (only land line), Electricity bill, Gas bill – Not more than 6 months old.
Demat Account Statement — Not more than 6 months
Bank Account Statement / Passbook — Not more than 6 months old
Proof of address issued by Bank Managers of Scheduled Commercial Banks/ Scheduled Co-Operative Bank/ Multinational Foreign Banks/ Gazetted Officer/ Notary public/ Elected representatives to the Legislative Assembly/ Parliament/ Documents issued by any Govt. or Statutory Authority
4. Proprietorship Firm
Proprietorship firm comes under the Individual Category. Investment application may be in the name of his firm but the applicant has to give his/her own PAN. Other requirements remain same as in case of Individual.
5. Non- Resident Indian
Submission of passport copy is mandatory. (Relevant pages of passport having details of Name, Photo, Date of Birth, and Validity Date & Address should be submitted). Also in case of NRI, overseas address is mandatory. (Out of permanent & correspondence address, one address must be that of overseas)
6. Merchant Navy NRIs
In case of Merchant Navy NRIs, Mariner’s declaration or certified copy of CDC (Continuous Discharge Certificate) is to be obtained.
7. Foreign Nationals
Foreign nationals are not allowed to apply, except persons within the definition of “Resident” as per FEMA rules or Persons of Indian Origin (PIO). In such cases appropriate proof must be obtained.
8. Care of Address
In case of “Care of Address”, proper supporting documents must be obtained such as relationship proof or lease/leave license agreement. Otherwise “Care of Address” in the name of third person / company is not acceptable.
Accounts of Non- Individuals
Documents to be obtained for non-individual, over & above POI & POA
1. Mandatory self certified true documents to be submitted.
i. Certificate of Incorporation
ii. Memorandum & Articles of Association
iii. Authorized signatories list with specimen signatures
iv. Board resolution for investment in Mutual Fund
2. Mandatory certified documents to be submitted.
i. Certificate Of Registration (for registered partnership firms only)
ii. Partnership Deed
iii. Authorized signatories list with specimen signatures
3.
Proof of Identity: – Self attested copy of PAN card in HUF name is mandatory.
Mandatory certified documents to be submitted- Deed of declaration of HUF or PAN in name of Karta AND Bank pass book / bank statement / Demat statement in the name of HUF.
4. Mandatory certified documents to be submitted.
i. Certificate of registration (for registered trusts)
ii. Trust deed
iii. Authorized signatories list with specimen signatures
5. Mandatory certified documents to be submitted.
i. Proof of Existence/Constitution document {Resolution of the managing body & Power of Attorney granted to transact business on its behalf are mentioned currently)
ii. Authorized signatories list with specimen signatures
6. Mandatory certified documents to be submitted.
i. Copy of constitution/registration documents.
ii. List of authorized signatories.
7. Mandatory certified documents to be submitted.
i. Certificate of registration with SEBI.
ii. Authorized signatories list with specimen signatures.
8. Mandatory certified documents to be submitted.
i. List of authorized signatories.
ii. Self-certification on letterhead. (It was copy of constitution/ registration documents earlier)
Features
Guidelines
Guidelines for Verification of KYC Application Form:
1. Identity Details
Name – The name in the application form should match with the name mentioned in the PAN card.
Father’s Name – Father’s name should be provided for married women also.
Date of Birth – DOB should be provided in dd/mm/yyyy format only. Also, as minors are not allowed to apply for KYC, it should be checked that the applicant age is not less than 18 years.
Nationality – Nationality should be provided in the space provided. Foreign nationals are not allowed to apply, unless they are Non-Resident Indian (NRI) or Person of Indian Origin (PIO). In such cases appropriate proof must be obtain.
Status – The status of individual can be either Resident Indian (RI) or Non Resident Indian (NRI). PAN will be mandatory document for all status of individuals (NRIs also need to submit PAN no. along with the proof of PAN document & copy of passport & details of overseas address & proof for the same.)Permanent Account Number (PAN)
2. Address Details
Guidelines for verification of Proof of Address (POA):
- Self attested copy of Proof of Address should be verified with the original. If original copy of documents has not been submitted for verification then Notarized/ True copy of the same should be submitted in original & not the photocopy/is.
- The proof of address should be on A4 paper size only and one-sided copy.
- If correspondence & permanent address are different then proof for the both are required.
- Take care to obtain all the relevant pages of POA where name & address are appearing on separate pages.
ALTERATION
If there is a major mismatch in the name appearing in the PAN card and name mentioned in the KAF then the investor should submit one additional document as proof of identity from the permissible list of document for proof of identity.
In case of change in name by the applicant, POI for the new name should be submitted and POA would be required if the applicant wishes to change any of the addresses
In case of converting the entire process into electronic form the applicability of electronic form has to be seen for each document and the same is based on the Information Technology Act, 2000. Regarding the same, the following are some of the relevant sections.
Section 3A deals with Electronic Signature.
This section was added by the amendment of 2009. A subscriber may authenticate any electronic record by means of an electronic signature or any electronic authentication techniques which are considered reliable and may be specified in Schedule II of the Act.
An electronic signature or any electronic authentication techniques shall be considered reliable if:
If the data authentication and the signature creation are linked to the signatory alone and no other person.
The signature authentication data or authentication data were at the time of affixing signature under the control of the signatory alone and the authenticator.
Any alteration to such e-signature after affixing it is detectable.
Any alteration to the information is detectable.
Other conditions as prescribed by the central government are fulfilled.
The central government may prescribe a procedure to ascertain whether or not the signature is authentic. The central government may be notification in the official gazette add or omit any electronic signature or electronic authentication technique and the procedure for affixing such signature from Schedule II.
Section 4 deals with Legal Recognition of Electronic Records.
The two legal impediments facing e-governance and e-commerce are the requirements of having recorded information in a tangible form and a handwritten signature.
S. 4 says that if the law states the above requirements, notwithstanding any other law, such requirements shall be fulfilled if such information or matter is rendered or made available in the electronic form and it is accessible so as to be usable for subsequent reference.
By accessible is it meant that such data should be readable and interpretable and the software needed for the same should be retained. By usable it covers not only human use but computer processing also. This provision stands good and has an overriding effect on all other laws.
The general rule that allows for an exception of this section is in case the document requires witnesses or if there is a need of registration. Therefore rule does not apply in case of the documents mentioned under Schedule II of the act and also to S. 25 of the Indian Contract Act as such kind of contract requires registration of the document.
Section 5 deals with Legal Recognition of Electronic Signature.
Electronic signatures are now given legal recognition under the IT Act. Affixing such a signature on an electronic document is the same in law as affixing a manuscript signature on paper.
The document is said to be as authentic if such e-signature is affixed in a manner as prescribed the Central Government. The word ‘signed’ in this provision shall be construed with its grammatical variations and cognate expressions.
This provisions covers a number of situations such as S. 25 (3) of the ICA which states that a promise shall have to be made in writing and signed by the person charged therewith, or his agent who is authorised in this behalf else such promise would be rendered void. But now S. 5 would authenticate the document with an e-signature.
Section 10A deals with the validity of contracts formed through electronic means.
The section 10A was inserted by the 2009 amendment, according to this when in the formation of a contract the communications, acceptance or revocation of the proposals are expressed in electronic form or by means of an electronic record then such contract cannot be deemed to be non-enforceable solely on the ground that electronic form or means for used for the communications, acceptance or revocation of the proposals.
Most of the documents needed under the KYC guidelines can be submitted in electronic form due to the above mentioned sections of the Information Technology Act, 2000 but there are certain documents where the applicability of electronic form may not be possible. The areas of problem include:
Photograph:
The KYC guidelines ask for affixing a most recent colour photograph of size 30mm * 40mm on the form and applicant has to sign across the photograph. This may lead to some problem as incase of an electronic form only a scanned copy of the same can be affixed on the form.
Attested copies:
According to the RBI guidelines the copies of all documents should be accompanied by the original for verification by the POS. Incase of non-production of any document for verification, the copies should be properly attested by entities authorised to attest the copy as per the list of persons authorised to attest.
In case of the attested copy submitted only the original should be submitted, a photocopy of the attested document would not be acceptable as Proof.
List Of Entities Authorized To Attest The Documents. -Notary Public, Gazetted Officer, Manager of a Schedule Commercial / Co-operative Bank or multinational Foreign Banks (Name, Designation & Seal should be affixed on the copy)
This guideline could also be a problem as only a scanned copy of the attested copy can be electronically submitted and not the original attested document. When a document is electronically submitted only a scanned copy can be submitted not the original.
Even in case of Present and Permanent Address, Present address will be used for all correspondence. Permanent address for FII should be overseas address. Address proofs for both present and permanent address have to be provided and the guidelines provide for verification of the same with the original.
Trust:
The KYC guidelines also include opening of an account by a trust. Under the Information Technology Act, 2000 a trust is included under Schedule II of the Act. Schedule II of the act includes those documents to which the act does not apply. Hence, any documents related to a trust cannot be electronically submitted. This is because trusts are created under the Indian Trusts Act or the Bombay Trusts Act for charitable purposes. There are 3 parties involved in a trust and also requires a witness to authenticate the document created.
Authorised Signatories:
In case of an organisation like a company, the account is opened in the name of one or more persons on behalf of the whole organisation. Such person or persons are known as authorised signatories which can be through a power of attorney or a board resolution. Such authorisation document needs to be submitted as per the KYC guidelines.
A power of attorney is also included under Schedule II of the IT act and the act is not applicable to this kind of document as it requires the signature of 2 witnesses and thus a witness may not be compelled to first obtain a digital signature. Therefore, a power of attorney cannot be produced as a document electronically.
Mandatory self certified true documents
The KYC guidelines state that for a corporate body there are certain documents which need to be submitted as mandatorily self certified true documents. Hence, if such documents are electronically submitted then only the scanned copies of the same will be submitted and it shall defeat the purpose of the provision.
Verification:
According to the KYC norms set out by the RBI the self attested copy of Proof of Address should be verified with the original. If original copy of documents has not been submitted for verification then the Notarized or True copy of the same should be submitted in original and not the photocopy. Therefore the problem arises that the original or true copy cannot be submitted electronically and hence documents cannot be submitted in electronic form.
As per Schedule II, Information Technology Act does not apply to:
Negotiable Instruments other than cheques: this is because sometimes the value of the instrument may not be as much and hence obtaining an electronic signature for the same would be overburdening on certain persons.
Power of Attorney: IT act is not applicable to this kind of document as it requires the signature of 2 witnesses and thus a witness may not be compelled to first obtain a digital signature.
Wills: these are also documents which are required to be signed before witnesses and thus witnesses should not be compelled to obtain an e-signature.
Trusts: are created under the Indian Trusts Act or the Bombay Trusts Act for charitable purposes. There are 3 partied involved in a trust and also requires a witness to authenticate the document created.
Any document of conveyance or transfer of immovable property: this needs to be authenticated before witnesses and also needs to be registered with the Registrar.
Any other documents as stated by the Central Government: this is because it is the Government which in case of lack of infrastructural facilities provides them with the same and also because it is the government only which has a prerogative due to having good knowledge about the various sectors.
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