Long ago, fraudsters used to lay their hands on cheques and documents in transit and get them transferred in their names. Moreover, documents which got destroyed due to natural calamities such as fire, flood, earthquake, etc., posed problems — replacing them with duplicates was fraught with risk due to non-availability of the investors identity with the related financial institutions such as banks, NBFCs, public companies, MFs, et al. However, over time, advancement in technology presented a simple solution in the form of KYC (Know Your Customer/Client).
This enables the institution to verify the identity of its client to protect him from any fraudulent activity. It also enables the government to get hold of illegal intentions of the proponent intending to flout Prevention of Money Laundering Act Regulations. An excellent dream indeed.Unfortunately this dream has turned into a nightmare due to lack of proper planning for its implementation.
Current situation: Four years thereafter
When the remediation list is examined, this is what I find —
This is strange —
i) The investment is redeemed and the balance is nil.
ii) Investment was in capital gains bonds of NHAI or REC and even if these are redeemed.
iii) The investor has expired and the investment has already been transmitted to the next holder or the nominee. Yet, KYC compliance is called for.
Now comes the next colossal waste — Karvy, another R&T agent, needs the same KYC for the same investors and moreover those fund houses who have been managing KYC themselves need the same data for the same investors. There are some houses that manage their own R&T. They will also need the same action to be taken by their agents.
And finally horror —
a) I have been told by my bank that I should receive all the cheques received by me drawn in the name as appears in the KYC, which is my full name. Cheques received in my name styled a little differently, say, A. N. Shanbhag will be bounced, a) I have been told by my bank that I should receive all the cheques received by me drawn in the name as appears in the KYC, which is my full name. Cheques received in my name styled a little differently, say, A. N. Shanbhag will be bounced, unless, I attach a self-declaration stating that I am the same person.
b) Change of the old bank account number, especially after the core banking was effected, causes humongous harassment. If the last 5 digits are not the same as the old account number a fresh proof is required to convince that the old account really belonged to the investor even if this proof was already provided and accepted by the MFs. It may be difficult to provide such a proof for very old accounts. This essentially means that the banks and/or MFs are either unwilling to go through their old files to get hold of the data or have destroyed the very old files.
What is the remedy for the harassed investor?
I wonder whether SEBI issued their circular in haste without caring to know the ground realities. ?
Is this the Central KYC (cKYC)? Where has it vanished? Can India afford this huge waste emerging from trying to implement the Finance Minister’s dream in such a shoddy manner and turn it into a nightmare?
Hope the Finance Minister will take corrective action.
The authors may be contacted at wonderlandconsultants@yahoo.com
