New Delhi: As part of efforts to combat money laundering, the capital market watchdog will start keeping a tab on mutual fund (MF) investments made by bureaucrats and politicians.
Starting 1 January, all new and existing MF investors will need to make these disclosures in line with revised “know your customer” (KYC) requirements. This will also apply to members of Parliament (MPs), members of the legislative assembly (MLAs) and members of the legislative council (MLC). The compliance regime is being implemented by fund houses at the direction of the Securities and Exchange Board of India (Sebi).
The measures come against the backdrop of the storm that the government has weathered over allegations of corruption in the allocation of mobile spectrum and preparations for the Commonwealth Games, among others.
KYC norms currently only require investors to disclose broader occupation details such as whether they are in public or private sector service, involved in business or agriculture, or if they are professionals, retired or housewives. The new KYC norms are being implemented to meet Prevention of Money-Laundering regulations.
Recently, the Reserve Bank of India (RBI) asked banks to be extra careful while dealing with customers who could be “politically exposed persons” (PEPs).
RBI said banks will need to maintain a high level of monitoring for PEPs, though it has termed as “low-risk” those customers who are salaried employees and work in government departments, government-owned companies, regulators and statutory bodies. The new KYC norms being implemented by the fund houses will also make it mandatory for all investors to furnish their Permanent Account Number (PAN), provided by the tax department, next year onwards irrespective of the size of the investment. Currently, individual investors need to quote PAN only for investments of Rs.50,000 or more, though non-individual investors are required to quote it for all amounts.
All fund houses have been asked by the Association of Mutual Funds in India, an industry grouping, to comply with the new KYC norms, which include collecting additional details such address proofs and photographs.