KYC verification for mutual funds is becoming mandatory in major economic systems owing to a great deal of financial risk that is involved. More often than anticipated, money laundered through unofficial channels funnels into a mutual fund that can not only ruin the repute of the said mutual funds but can also invite multi million dollar monetary fines from financial regulators of the country. So for mutual funds, online KYC verifications are more of a compliance necessity that arises out of oversight concerns.
AML Compliance is performed in the wider context of KYC verifications by different methods but mostly it consists of a thorough vetting of the individuals or entities that are investing in any mutual fund. The criteria for KYC verification for mutual funds vary according to official guidelines put forward by financial regulators but mutual fund managers also ensure additional measures to remain on the safe said.
What is required for KYC verification?
Official documentation is of the essence when it comes to KYC verifications for mutual funds, whether the investment is being done by a single individual or by an accredited organization. In case of individual identity documents are required to verify the identity of the person. Additional documentation might also be required as for the source of income and proof of address apart from other evidentiary proofs.
In case of an organization or corporate entity that wants to invest in a mutual fund, the scope of documentation required for KYC increases a great deal. Not only complete management details will be required but in most cases, identity documents of higher management are also required to perform KYC verification for mutual funds. Registration details of the company with the relevant authorities are also required to complete the online verification process. All these are measures are necessary to adopt a uniform regime of transparency and trust among the fund managers and those investing in the fund.
How is KYC verification for the mutual fund performed?
Just like the kind of documentation required to perform a typical verification vary from one jurisdiction to another, same goes for KYC verification process. In some countries, there are watchlists issued periodically by financial regulators containing profiles of individuals and corporate entities that are considered a financial risk. Mutual fund managers are required to cross check with those watchlists every new customer that shows interest in their fund. Others require funds manager to perform a full scale vetting process regarding sources of income and actually perform due diligence before accepting investment from customers.
There is online identity verification software available at the moment that can perform similar actions of AML compliance and KYC verification for mutual funds at nominal prices. Real time results are available for each verification. Not only that but various modes of verifications are also available for mutual funds managers. For example, they can opt to perform batch checks for all of their previous customers that have invested in their fund. There are also screening options available using which mutual funds can put a list of customers on continuous monitoring so that whenever the name of a customer pops on a watchlist, real time alert is forwarded to the management of the mutual fund.
