Non-resident Indians (NRIs) may soon find it easier to invest in alternative investment funds and register themselves with other entities such as brokerages that are regulated by the International Financial Services Centres Authority (IFSCA), which oversees the GIFT City in Gujarat.
In a consultation paper floated on July 10, the IFSCA has proposed allowing a video-based customer identification process (V-CIP) for NRIs from certain jurisdictions. Currently, only resident Indians are permitted this facility.
What is CIP?
It is part of the customer due diligence process (CDD) that is done when onboarding individuals or even legal persons such as businesses or legal arrangements, and the beneficial owners of such legal arrangements. The CIP includes collecting the name, unique identity number (such as from a passport), legal domicile and current residential address if it is a person; trading name, tax identification number and place of registration in case it is a business or any other legal entity; and terms and connected persons in case of a legal arrangement.
What is the process now for NRIs?
Currently, NRIs have to go through an offline verification process which includes examination of original identification documents and the certification of a copy of these documents by authorised officials.
The authorised officials include an authorised executive of a bank located in a jurisdiction compliant with rules of the Financial Action Task Force (FATF), notary public, a court magistrate or judge, lawyer and embassy or consulate general of the country where the non-resident individual lives.
What is being proposed?
The IFSCA is proposing allowing V-CIP, which will allow the regulated entity such as brokerages or exchanges who want to onboard the NRI to conduct the CIP through an online interaction.
V-CIP basically involves conducting an audio-visual interaction with the customer, which is "seamless, secure, live, informed and consent based audio-visual interaction".
NRIs from which jurisdiction will benefit?
The paper proposes that NRIs from the US, Japan, South Korea, the UK (excluding British Overseas Territories), France, Germany, Canada, the UAE and Singapore be allowed to avail this option. The NRIs should, however, fall within the low-risk category, which is determined based on various factors including the product or service provided by it, and its jurisdiction.
Why isn't it currently allowed?
There is a risk of people faking their identity using AI tools, and their place of residence by using spoofed IP addresses.
To address these concerns, the consultation paper proposes various measures including a V-CIP infrastructure/application that is capable of preventing connections from a spoofed IP address; video recordings that contain live GPS coordinates (through geotagging) of the customer along with the date-time stamp; and the application having face liveness/spoof detection as well as face matching technology with a high degree of accuracy. It also proposes AI technologies with randomness and anti-deep fake and anti-fraud checks.
The ultimate responsibility for customer identification will rest with the regulated entity, according to the paper.
