KYC stands for “Know Your Customer”. It is a process through which financial institutions, banks, and other organizations verify the identity of their customers and assess their risk profile. The purpose of KYC is to prevent identity theft, money laundering, terrorist financing, and other financial crimes. KYC is compulsory when you are going to deal with any government regulated activities
KYC typically involves collecting and verifying personal information about a customer, such as:
Name and address
Date of birth
Identification documents (e.g., PAN, Aadhaar)
Proof of bank account (e.g., cheque / pass book / bank statement)
Financial history (e.g., credit reports)
By performing KYC, organizations can ensure that they are doing business with legitimate customers and reduce the risk of financial crimes.
In the context of mutual funds, KYC is an essential process for investor onboarding and is typically conducted by the asset management company or its authorized distributors. It helps ensure that investments are made in the name of genuine investors only.
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