On November 5, 2019 the Securities and Exchange Board of India has issued an important circular in relation to eKYC authentication under Section 11A of the Prevention of Money Laundering Act, 2002 (“Circular”).
Paragraph 8 of the Circular states that the entities in the securities market „as may be notified by the Central Government‟ are now permitted to undertake Aadhaar authentication under Section 11A of the Prevention of Money Laundering Act, 2002. It is not clear who and how such entities will be notified by SEBI. Paragraph 16 of the Circular repeats this thought by stating that “Upon notification by the Central Government permitting the entities recommended by SEBI to undertake Aadhaar based authentication, the circulars for e-KYC using Aadhaar… shall stand modified…”
Paragraph 9 of the Circular states that such entities will have to be registered with Unique Identification Authority of India as a KYC user agency (“KUA”). Further, KUAs i.e. the SEBI- intermediaries using Aadhaar e-KYC will have to allow all SEBI-registered intermediaries (and mutual funds distributors) to undertake Aadhaar authentication of their clients for the purpose of KYC through them.
The process for Aadhaar KYC of investors to be followed by the KUAs has been elaborately listed in the Circular. Please note that the Circular only applies to KYC of the resident investors.