Streamlined KYC Verification with IPV Verification

Amidst the constant evolution of the digital age and the simultaneous rise in fraudulent activities, financial institutions such as mutual fund companies face a myriad of challenges, ranging from breaches to intricate compliance complexities. The imperative for In Person Verification or  IPV verification arises from the crucial need to authenticate the identity of individuals and validate the accuracy of their submitted documents. IPV verification is a process used by financial institutions and other regulated entities to verify the identity of individuals presenting KYC documents, minimizing the risk of identity fraud, money laundering, and other illicit activities.

What is IPV?

In-Person Verification (IPV) is a method used by financial institutions and other regulated entities to verify the identity of individuals presenting KYC documents in person. It involves physically meeting the individual and visually confirming their identity against the information provided in their KYC documents, such as a passport, driver’s license, or Aadhaar card. IPV serves as a crucial step in the KYC process, ensuring that the individual’s identity is accurately verified before they are onboarded as a customer or client. Video KYC represents a revolutionary approach to remote digital in-person verification, offering users a swift and secure means to complete their KYC verification without the need to visit physical locations.

IPV SEBI Circular

The RBI initially introduced Know Your Customer (KYC) guidelines in financial services in 2002. These guidelines, along with Customer Due Diligence (CDD) policies, form an essential component of KYC and In-Person Verification (IPV) procedures, laying the groundwork for a robust anti-money laundering framework. To ensure a smooth and fraud-resistant KYC process, every SEBI Registered Intermediary (RI) is required to gather and validate Proof of Identity (PoI) and Proof of Address (PoA) from investors.

The Prevention of Money Laundering Act, 2002 (PMLA), enacted on 1 July 2005, aimed to curb the illicit use of investment vehicles to conceal unlawfully acquired wealth. Following its implementation, SEBI mandated that all intermediaries assisting clients with investments, including mutual funds, adhere to KYC policies. Additionally, intermediaries were required to develop and enforce anti-money laundering measures in line with regulatory guidelines.

SEBI issued a circular titled “Clarification on Know Your Client (KYC) and Use of Technology for KYC” on 24th April 2020, introducing amendments to the existing digital KYC protocols, following RBI’s guidelines for video KYC (VCIP). The focus of the circular was primarily on leveraging technological advancements to enhance online KYC procedures. With the introduction of new regulations for Video In-Person Verification (VIPV), SEBI’s digital KYC process has become more expedited and streamlined.

Since 1 January 2011, KYC compliance has been obligatory for all investors, irrespective of the invested amount. This encompasses various transactions such as new/additional purchases, switching transactions, and registrations for Systematic Investment Plans (SIPs), among others. As part of the Know Your Customer process mandated by SEBI, all investors are required to undergo IPV verification when opening a Demat or trading account. This prerequisite applies primarily to Non-Resident Indians (NRIs), persons of Indian origin, and sailors, regardless of their current place of residence. Many fund houses offer IPV verification through video chat or recording, ensuring compliance with regulatory standards.

How to Do IPV Verification Online?

To conduct Video In Person Verification (VIPV) according to SEBI guidelines, the process unfolds through several straightforward steps:

  • Online KYC Form Submission – The customer accesses the RI’s website, app, or digital platform and completes the online KYC form, entering all necessary details and uploading requisite documents.
  • Initiating IPV Verification with Consent – An authorized official of the Registered Intermediary begins the IPV process upon receiving the customer’s consent to initiate a video call.
  • Document Submission – The customer uploads Official Verified Documents (OVDs) during the video call.
  • Real-time Video Interaction – The VIPV process takes place in a real-time environment facilitated by a clear and encrypted video call.
  • Identity Verification – The customer displays their ID and address proofs, KYC form, and signature. AI technology verifies the authenticity of documents, including Aadhaar, through UIDAI’s authentication mechanism.
  • Facial Recognition and Liveness Detection – Facial attributes are matched with the customer’s ID proof photo, and liveness is confirmed through AI-powered capabilities, followed by random questions and responses during the video call.
  • Secure Video Recording – The entire interaction is securely recorded with date and time stamps for verification purposes.
  • KYC Approval/Rejection – Following the completion of In-Person Verification, an official reviews and approves/rejects the KYC application based on the verification process conducted.

Who Needs to be KYC Compliant?

KYC compliance is mandatory for individuals and entities engaging in financial transactions or investments regulated by SEBI. This includes investors, traders, brokers, mutual fund investors, and other market participants.

  • Individual Investors and Non-Individual Entities – Any individual or non-individual entity intending to make investments is obligated to undergo KYC and IPV verification.
  • Guardians Acting on Behalf of Minors – Guardians investing on behalf of minors are also subject to KYC compliance requirements.
  • Power of Attorney (PoA) Holders – Individuals acting as Power of Attorney (PoA) holders, making investments on behalf of others, must fulfill KYC obligations.

By encompassing these categories, the KYC compliance framework ensures that all stakeholders involved in investment activities adhere to regulatory guidelines, promoting transparency and integrity in financial transactions.

KYC Verification Challenges for SEBI Intermediaries

SEBI-regulated intermediaries, such as stockbrokers, depository participants, and mutual funds, face unique challenges when onboarding and verifying new clients. One of the primary challenges is conducting in-person verification for clients who may be located in different geographic locations. Additionally, ensuring customer due diligence with SEBI regulations while efficiently onboarding clients poses a significant challenge for intermediaries.

  • Geographic Dispersion of Clients – SEBI-regulated intermediaries often encounter clients located in diverse geographic locations. Conducting IPV verification for such dispersed clients presents logistical challenges, as physical presence may be required.
  • Compliance with SEBI Regulations – Intermediaries must adhere to stringent SEBI regulations while onboarding new clients. Ensuring compliance with KYC and IPV requirements set forth by SEBI adds complexity to the onboarding process.
  • Complexity of Documentation – Verification procedures typically involve extensive documentation. Verifying and validating the authenticity of these documents while complying with regulatory standards is time-consuming and resource-intensive.
  • Technological Infrastructure – SEBI intermediaries require robust technological infrastructure to support digital onboarding processes. Implementing secure and efficient digital platforms for document submission, verification, and record-keeping is essential but may pose technical challenges.
  • Risk Management – Intermediaries assess and manage risks associated with client onboarding, including fraud and identity theft. Implementing robust risk management protocols to safeguard against fraudulent activities adds another layer of complexity to the onboarding process.

Addressing these challenges requires a multi-faceted approach encompassing technological innovation, regulatory compliance, client education, and risk management strategies. SEBI intermediaries must navigate these complexities effectively to ensure seamless and compliant client onboarding and verification processes.

The Advantages of  Leveraging IPV Verification Software

IPV verification presents a multitude of advantages for SEBI intermediaries.

  • Enhanced Security and Authenticity – IPV verification ensures a heightened level of security and authenticity in the KYC process, bolstering confidence in the accuracy of client information.
  • Compliance with SEBI Regulations – By adhering to IPV verification protocols, intermediaries maintain compliance with SEBI regulations and guidelines, fostering a regulatory-compliant environment.
  • Risk Mitigation – In person verification helps mitigate risks associated with identity theft, fraud, and financial crimes, safeguarding clients and intermediaries from potential threats.
  • Improved Due Diligence and Risk Management – Through IPV verification, intermediaries enhance their customer due diligence practices and bolster risk management strategies, ensuring robust safeguards against potential risks.

Explore Cutting-Edge Features of IPV Verification Software Solution

The subsequent points highlight the features of the IPV process that offer advantages to SEBI-registered intermediaries.

  • Paperless IPV Verification – Digitalization of KYC IPV verification minimizes drop-offs, ensuring a seamless customer experience and expediting processing times.
  • Audio-Visual Interaction Method – Incorporating audio-visual interaction within the IPV verification software ensures tamper-proof and efficient verification processes.
  • Facial Matching & Geo-tagging Integration – Advanced AI technology seamlessly integrates facial detection and geo-tagging features into the verification process, ensuring accuracy and smart monitoring.
  • Real-time Verification Mechanism – IPV verification software facilitates real-time authentication, facilitating swift and secure interaction between customers and officials.

Authorized Entities for IPV Verification  

Ensuring the authenticity of mutual fund investors and the validation of their documents through IPV verification is essential for compliance with regulatory standards. Several authorized entities hold the responsibility of conducting IPV verification.

  • KYC Registration Agency (KRA) – These agencies are tasked with registering and maintaining investor KYC records, including conducting IPV when required.
  • Asset Management Company (AMC) – AMCs oversee the management and operation of mutual funds, including verifying investor identities through IPV.
  • Mutual Fund Agent – Agents appointed by mutual fund companies to facilitate transactions and provide assistance to investors, including IPV verification.
  • Mutual Fund Distributor – Distributors assist in selling mutual fund products and may conduct IPV as part of the investor onboarding process.
  • Mutual Fund’s Registrar – Registrars maintain records of mutual fund transactions and may also be involved in IPV verification procedures.
  • Transfer Agent (CAMS or Karvy Computer Share Private Limited) – These entities handle investor transactions, including IPV verification, on behalf of mutual fund companies.

Seamless and Compliant IPV Verification on the SignDesk Platform

SignDesk is a SaaS-based software solution provider that offers a compliant IPV Verification solution , among other solutions. While SignDesk may not directly conduct IPV, it offers a smart platform or software that facilitates the IPV process in accordance with regulatory requirements. SignDesk’s innovative platform leverages cutting-edge technology to streamline and authenticate the IPV process. Through SignDesk, SEBI intermediaries can conduct IPV verification seamlessly, ensuring regulatory compliance and bolstering the security of financial transactions.

Experience seamless and compliant IPV verification with SignDesk’s AI-powered video KYC solution.