Digital KYC

Digital KYC is not "upload your documents online". It is an in-person process that happens to be recorded digitally.

The customer and an authorised officer are in the same place, the customer holds the original document, and the officer's app captures a live photograph of the customer and of the document, stamped with the location, the officer's identity and the time. The customer then signs with an OTP on his own phone, and the officer signs a declaration with an OTP on his.

It exists for the situation where an electronic, digitally signed document is not available and Aadhaar cannot be verified offline — so the proof has to come from what the officer saw.

Definition. Under the PML Rules, digital KYC means capturing a live photo of the client and the officially valid document or the proof of possession of Aadhaar (where offline verification cannot be carried out), along with the latitude and longitude of the location where the photo is taken, by an authorised officer of the reporting entity. The IFSCA Guidelines adopt the same definition with "client" read as customer and "reporting entity" as regulated entity.

When it is used. Rule 9(15)(d): where the customer submits an OVD, or proof of possession of Aadhaar where offline verification cannot be carried out, verification is through digital KYC. For a notified class of entities, until a notified date, a certified copy plus a recent photograph may be taken instead where no equivalent e-document is submitted.

The procedure (Chapter 3, section 3.3), in essentials:

• KYC only through the entity's authenticated application, accessed by login and password or Live OTP or Time OTP
• The customer visits the officer or vice versa; the original OVD is with the customer
• Live photograph only — no printed or videographed photo; white background; no other person in frame
• Watermark with CAF number, GPS coordinates, officer's name, unique employee code, date and time
• The original document photographed placed horizontally, captured vertically from above, no skew or tilt
• QR code details may auto-populate the CAF
• OTP to the customer's own mobile = customer signature; a family member's number may be used if recorded, but never the officer's number
• Officer's declaration signed by OTP to his registered mobile, with his live photo
• Transaction or reference ID generated and given to the customer
• Officer checks document data, photo match and mandatory fields; CAF digitally signed, printed, signed or thumb-impressed by the customer, scanned and uploaded

For Indian nationals in the IFSC (Chapter 6, section 6.3.3.4) the regulated entity obtains Aadhaar number (if voluntarily submitted to a bank or notified entity) or proof of possession of Aadhaar or an OVD or its equivalent e-document; the PAN or its equivalent e-document; and other documents on nature of business and financial status as required.

Illustrative.

Mr Karan Joshi, an Indian national, opens a USD account with Sabarmati Bank (IFSC Banking Unit). His Aadhaar card is an old print without a verifiable offline QR; he has no DigiLocker documents.

Why digital KYC. He has produced proof of possession of Aadhaar where offline verification cannot be carried out, so Rule 9(15)(d) points to digital KYC.

At his office in Ahmedabad, 11:42 on 16 April.

The error caught. A trainee had first tried to use Ms Rana's own mobile for the customer OTP because Mr Joshi's phone battery was dead. The app rejected it: the officer's registered number may never be used as the customer signature.

Initial deposit. USD 15,000 arrives by wire from his own bank account, not in cash — no cash transactions are permitted in the IFSC domain.

Chapter 3 (PML Rules, 2005), section 3.3, carries the full digital KYC procedure (A to M) and Rule 9(15) says when it applies; the definition and the IFSCA substitution of "customer" and "regulated entity" are in the footnote there. Chapter 6, section 6.3.3.4, applies it to Indian nationals under the IFSCA Guidelines. Expect detail questions: background colour, what the watermark contains, whose mobile may be used for the OTP, and when digital KYC rather than offline verification applies.

• Digital KYC is face-to-face. The customer visits the officer or the officer visits the customer; it is not a self-service upload.
• Live photo only — printed or videographed photos are not accepted; the background is white.
• The watermark has five elements: CAF number, GPS coordinates, officer's name, employee code, and date and time.
• Never the officer's mobile number for the customer's OTP signature; a family member's may be used if clearly mentioned in the CAF.
• It applies where offline Aadhaar verification cannot be carried out, or an OVD is produced — where an equivalent e-document is submitted, the digital signature is verified and a live photo taken instead.
• The IFSCA list for Indian nationals asks for PAN or its equivalent e-document; the PML Rules' list for individuals also allows Form No. 60. Do not assume the Form No. 60 alternative from the Rules appears in the IFSCA section.