MUTUAL FUND FRAUD
By Abhishek Anand
TO OVERCOME frauds and mitigate money laundering, the Association of Mutual Funds in India (AMFI) has instructed mutual fund companies not to accept third-party cheques from 15 November — albeit with a few exceptions.
Third-party cheques are those, whereby payment is made from an account other than that of the beneficiary — the investor. AMFI recently told the mutual fund industry to accept third-party cheques only in cases where investments are made by parents or relatives on behalf of a minor; an employer invests on behalf of employees; or a custodian on behalf of a client, including a foreign institutional investor.
In the rest of the cases, customers submitting cheques issued by others will no longer be able to invest in mutual funds. And they will be required to provide details of their bank accounts — those from which payments are made, and the ones in which their mutual fund holdings will be redeemed.
Says AMFI Chairman AP Kurian: “To save their skin, fraudsters invariably use someone else’s cheques. AMFI has also proposed to extend the KYC (Know Your Customer) norms to investments as low as Rs. 1. Currently, these apply only for those above Rs. 50,000.
