Demat account:  6 ways to prevent KYC misuse

Demat account: 6 ways to prevent KYC misuse

Demat Account is an account that is used for holding shares and securities in an electronic format. Knowing the standards of your firm (KYC) allows financial institutions to recognise clients entering the stock market. Once KYC is done through a SEBI-registered intermediary such as broker, DP, mutual fund, stock exchange etc., when you approach another intermediary, you do not have to follow the same phase again.

In 2002, all banks were directed by the Reserve Bank of India to enforce KYC guidelines for all new accounts. In addition, provisions of the Money Laundering Prevention Act , 2002 (PMLA) and the KRA Regulations (2011) made it compulsory for all market participants to comply with KYC requirements. In this regard, in compliance with the regulations, CDSL Ventures Ltd (CVL) has built the requisite infrastructure to manage KYC.
As a consequence, all investors are now allowed to send a copy of their PAN card (which serves as proof of identity) and proof of address to each of the intermediaries they deal with only once.

Nevertheless, it is time for investors to be aware of potential recent cases of money laundering, fraud, etc.

Here are 7 ways investors can avoid their KYC documents from being misused:
1.Investors shall write down and sign the date and intent of the submission on any document at the time of the submission to KYC.

2. Owner can clearly state and write on the documents being submitted ” Not to be used for any other purpose” and sign it.

3. Depositories provide investors with a forum for explicitly reconciling their assets with the holdings shared by DPs. Monitoring balances ensures that the holdings of investors are secured.

4.Ensure that your mobile number / email Id is updated with your Demat accounts so that you are aware of all updates and changes. There are a number of financial institutions that offer such services, like depositories.

5. regularly track your Demat account. The targets of fraud may be inactive accounts. In order to prevent them from being inactive or dormant, investors should also continue to operate and track their Demat accounts.

What is an Demat account

A Demat Account or Dematerialized Account provides an electronic format for the facility to hold shares and securities. Shares are purchased and kept in a Demat Account during online trading, thereby enabling easy exchange for users. All the investments an investor makes in stock, government securities, exchange-traded funds, bonds and mutual funds are kept in one position by a Demat Account.

The Demat Account is an account used in an electronic format to hold shares and securities. A dematerialized account is the full form of Demat ‘s account. The aim of opening a Demat account is to keep shares purchased or dematerialized (converted from physical shares to electronic shares), making it easy for users to exchange shares during online trading.

In India, Free Demat account services are offered by depositories such as NSDL and CDSL. These facilities are supported by intermediaries, depository members or stockbrokers, including Angel Broking. Each intermediary can have Demat account charges that differ between a depository and a stockbroker according to the amount kept in the account, the form of subscription, and terms and conditions.


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